June 23 2008

Fueling a Furor

Donna Wiesner Keene

At a recent Senate committee hearing, Sen, Richard Durbin asked, "Does it trouble any of you when you see what you are doing to us?" The Illinois Democrat's question was aimed at U.S. oil executives, but would have been more appropriate if it came from millions of Americans and was directed toward Mr. Durbin and other policymakers.

Beyond the finger-pointing, it's important for Americans to understand that America's "big oil" industry did not place us in our current predicament. Congress and state legislatures - with the aid of special interests groups - are largely to blame.

The inescapable reality is that our nation needs and uses a lot of energy. And without policies that encourage increased domestic production of energy, fuel will get even more expensive.

Today, U.S. energy companies have very little influence on the price of oil, which largely determines the cost of finished fuel products such as gasoline and diesel fuel. Sadly, in part because of U.S. energy policy, worldwide oil production is determined largely by a limited number of companies from abroad.

Over the last three decades, progressive policymakers and activists have essentially blocked, banned or litigated nearly every conceivable means of new domestic oil production. The complex barriers set at the federal, state and local levels have ensured there has not been a new refinery or nuclear plant built in the U.S. in 30 years. More than 60 percent of inland federal lands and 85 percent of our coastal waters have prohibitions against production, and in some cases, even exploration. New coal generating facilities are being litigated out of consideration or failing to finance themselves with capital investments because of the likelihood of mandated emissions reductions.

In contrast, China, by way of Cuba, is now drilling closer to our shores than U.S. companies are allowed. Inland, vast deposits of oil shale have been identified in the Rockies and Western United States - estimated to be twice as large as the oil reserves of the Middle East - but restrictions are in place preventing any significant exploration.

While the United States restricts supply, global demand is at an all-time high. The result of these policies should be obvious. When increasing demand for fuel is placed against insufficient supplies, prices go up. When the majority of domestic oil and gas reserves are placed off-limits and we are forced to compete in an increasingly competitive global market for supplies, prices go up. When existing fossil fuels are penalized while alternative fuels that are not yet commercially viable are subsidized, prices go up. When arbitrary price controls and retaliatory trade measures are put in place, they create shortages ... and do we really want the Carter shortages all over again?

Unfortunately, Congress has once again missed the mark entirely as they try to pass legislation with the stated intent of bringing energy costs down. The playbook is getting entirely familiar. Once again a windfall profits tax on energy producers was voted on and defeated. A similar bill was passed in 1980 and quickly revoked after it produced less revenue than expected, decreased domestic production capability, and increased our reliance on foreign energy suppliers. Congress should not repeat this failed policy path.

Congress tried to revive another failed policy idea with a bill that claims to address "price gouging," which is legislative code for price controls. As we know from the 1970s, such laws would simply lead to supply disruptions, long waiting lines, and adverse economic consequences for all Americans.

Another congressional favorite has been the No Oil Producing and Exporting Cartels Act (NOPEC), which would require the United States to sue member states of the Organization of Petroleum Exporting Countries. The law states that nations would violate U.S. law if they "limit the production or distribution of oil, natural gas, or any other petroleum product ... when such action, combination, or collective action has a direct, substantial, and reasonably foreseeable effect on the market, supply, price, or distribution of oil, natural gas, or other petroleum products." Unfortunately, America's own citizens can't sue their government for the very same thing.

Casting scapegoats and villains won't address our energy challenges. Congress needs to quit passing the buck and embrace economic reality by crafting actionable public policies to help produce additional domestic energy supplies, both from alternative energy sources and traditional fossil fuels.

So, members of Congress, does it trouble any of you when you see what you are doing to us?

Donna Wiesner Keene is a senior fellow at the Independent Women's Forum and the chief executive officer of BrainTrain. She lobbied for the first successful energy deregulation bill in Maryland.

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