Those High Gas Prices
Whether we like today's high gasoline prices or not, according to Vice President Gore, they're good for us. In Gore's book, "Earth In The Balance", he claims that the internal combustion engine is the single greatest threat to mankind and the way to combat that threat is with higher fuel prices. Now that the OPEC cartel has managed to push oil prices from 1998's $10 a barrel to nearly $30, instead of Gore publicly thanking OPEC for helping to save the environment, he's calling for an investigation of "Big Oil" for price-gouging. That's standard for politicians - pointing fingers to divert attention away from the folly they created.
OPEC's supply restrictions no doubt account for part of the gasoline shortage problem but it's the Congress and the White House who've made us more vulnerable to our Middle East "friends" whom we fought a costly war to preserve their sovereignty. We're vulnerable because of restrictions placed on domestic oil exploration. Congress has refused to authorize exploration in a small section of the Arctic National Wildlife Refuge that in 1980 was specifically set aside by law for exploration. That site is estimated to contain 16 billion barrels of oil. The Clinton-Gore administration recently used its executive powers to lock up 43 million acres of government land in so-called roadless areas making oil exploration impossible. Plus, more restrictions have been placed on off-shore drilling. Just recently, the U.S. Supreme Court ruled that two oil companies that purchased oil and natural gas leases from the government, and later prevented from drilling, have to be compensated by the government. The bottom line is: U.S. oil is in plentiful supply. Our dependence on imported oil reflects the power that environmental groups have in Congress to stifle domestic oil production. That benefits OPEC immensely and I wouldn't be surprised if OPEC nations were major donors to environmental groups.
Another part of the problem is the 1990 Clean Air Act. Provisions of the Act allow the Environmental Protection Agency (EPA) to mandate the use of reformulated gas (RFG). The National Academy of Science reports that the benefits to the environment of reformulated gas were trivial. On top of that MTBE, a chemical used in reformulated gas is showing up in our water supplies as a cancer-causing contaminant. Requiring companies to produce RFG, increases manufacturing costs and the price we pay at the pump.
Some oil companies in some areas of our country blend their gasoline with ethanol, a corn derivative, as a means to meet EPA mandates. In 1999, for an equivalent amount of energy, ethanol was twice as expensive as gasoline. In addition, ethanol is extremely water-soluble and cannot be transported in pipelines.
Instead, it must be trucked, barged or railed to distribution sites where the finished product is then trucked to gas stations. That's more expensive. But what the heck! Congressmen from the farm states pushed for ethanol mandates to benefit their constituents. Whether it harms the rest of the nation is not much of a concern to them.
Another part of the high prices are federal, state and local taxes imposed on gasoline. The federal tax alone is 18.4 cents. State and local sales taxes can be as high as 30 percent of the selling price. That means that if gas costs 1.75 a gallon in your area, its pre-tax price might be $1.35. Your state legislators might pretend they feel your pain, but they love revenue. When gas prices are $1.00 a gallon, they extract 30 cents in tax revenues; when gas sells for $2.00, their take doubles to 60 cents.
Here's my bet: If Congress were to announce the ending of restrictions on domestic oil production, there'd be a fall in oil prices and the crumbling of OPEC.
Walter E. Williams
June 30, 2000
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