The most basic law of economics is that of supply and demand. When supplies shrink below the level of demand, prices rise. Likewise, when demand increases above the level of supply, prices rise. When shrinking supply occurs simultaneously with increased demand, prices rise exponentially.
In the 21st century, U.S. environmentalists have unnaturally reduced the supply of oil. By shutting down virtually all domestic drilling (offshore and in the Arctic National Wildlife Refuge) and creating a myriad of regulations that effectively make it impossible to add new oil refineries, they have reduced the world’s supply of oil. They refuse to allow alternative energy sources, such as nuclear energy, and have even prevented installation of wind turbines in an effort to protect birds.
While the world’s supply was being systematically reduced, two new world-class oil-consuming customers emerged: India and China. Their rapidly accelerating appetite has created a demand that would have been difficult to satiate even with unfettered supply. In a world with unnaturally restricted supply, the problem has exacerbated dramatically.
Since it is unlikely we will persuade either China or India to reduce consumption, and it is equally unlikely that environmentalists will allow increased supply, we need to get accustomed to $4-, $5-, and soon $10-a-gallon gasoline, with all of its attendant consequences. So as you walk to work in the dark (assuming you still have a job), don’t forget to thank well-meaning but short-sighted environmentalists who put ideology ahead of practicality and basic economics.
Americans are buckling under the high cost of gasoline, and everyone is eager to assign blame. President Bush is pointing the finger at environmentalists. He claims the best way out of this mess is to open even more public lands to drilling. Yet the Bush Administration has pushed this agenda for eight years, and all the numbers indicate that it has failed.
Between 1999 and 2007, the number of drilling permits issued for development of public lands increased by more than 361%. Companies can’t even keep up with their new opportunities: In the last four years the government issued 10,000 more permits than have been used.
Americans have not benefited from this land grab. In 1999 oil averaged about $24 a barrel. Now it is hovering around $140. And the plain fact is that America is home to 3% of the global oil supply. We simply cannot drill our way to cheaper oil prices.
So we could ruin the Arctic National Wildlife Refuge forever to get savings of a mere 3¢ to 4¢ per gallon—in five years. Or we could spend those five years encouraging Detroit to make more efficient cars and employing Americans in new clean-energy jobs.
We have solutions right now that can end our addiction to oil: plug-in hybrids, better-designed cities where we do not have to drive as much, and sustainable transportation fuels such as cellulosic biofuels. These solutions will not only make us less beholden to oil interests but also usher in a cleaner, more sustainable energy future for the U.S.
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