Feed on

bejing-gas-line.jpgWhat follows is my most recent reply to the continued uproar about high gas prices in my local paper. For a previous take, see here.

Dear Editor:

Shouldn’t someone do something about $2.60 gas? Just think of the horrible things this does. It’s encouraging greedy oil companies to increase their investments in petroleum production – and making extraction of hard to get oil (such as in oil shale and tar sands) economically viable. It costs more to make more – and make more we must.

One reason for the surge in gas prices is China ‘s (subsidized) demand for oil, but their increasing consumption of oil is helping to bring hundreds of millions of people out of wretched poverty. What else does this do? It encourages entrepreneurs to invest heavily and search more urgently for new technologies (e.g. hydrogen fuel-cell vehicles, more efficient solar electricity generation, bio-fuels research, etc.) – which are fast becoming economically viable alternatives to hydrocarbon fuels – and have the prospect of dramatically improving the environment we all live in. High gas prices have discouraged unnecessary driving, encouraged people to purchase more fuel-efficient cars and appliances, and have even encouraged the use of public transportation – speeding up our transition away from hydrocarbon fuel dependence.

Oil companies were just as greedy when oil was $10 per barrel as they are when it is $66 per barrel. Today it costs more money to bring a barrel of oil because of both the greedy oil companies and the American consumers. Oil companies have for decades refused to build refining capacity, have not worked to bring natural gas throughout the country, have not tried to process much other than sweet crude – all because it was not profitable for them to do so. Consumers and their elected representatives have caused excessive and disjointed regional regulation, allowed taxes to rise to exorbitant rates, have been vehemently opposed to the building of (admittedly very stinky) refineries in their backyards, have been equally opposed to the use of nuclear power (its potential is unimaginable) because of over-inflated fears, and consumers themselves continue to demand large quantities of hydrocarbon fuels despite the high prices. One reason for that is that due to our extraordinary prosperity, fuel makes up a much smaller share of our household budgets than it did 25 years ago.

The power of the people is already being heard in the millions of daily transactions that create economic order. $2.60 gasoline sends powerful signals to greedy, profit seeking entrepreneurs to boost the quantity of oil supplied (and its alternatives) and to self-interested, economizing consumers to reduce the quantity of oil demanded. The consequences of this spontaneous order are that we are investing in our future and ensuring a stable supply of energy for our children and grandchildren. No amount of planning can come close to doing better.

Michael Rizzo
Danville, KY

Credit for organization is due to Lynne Kiesling and the Coyote Blog.

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