Governments hamper and restrict the flow of oil

The United States House of Representatives votes to sue OPEC for restricting production to raise prices, but does nothing about their own gasoline taxes and ethanol subsidies, or about congressional restrictions on their own energy production, says Investor's Business Daily (IBD).

Gas prices can sometimes be restricted artificially, as it was last year when OPEC agreed to cut production by 1.1 million barrels a day, says IBD. But Democrats in Congress have done the very same thing by restricting production by an equivalent amount just by blocking recovery of known oil reserves:

Some 131 billion barrels of oil and 1,000 trillion cubic feet of natural gas are ready to be exploited in and around the United States, says John Felmy, chief economist at the American Petroleum Institute.

Much of these oil and gas resources – 78 per cent of the oil and 62 per cent of the gas – are locked up beneath federal land and coastal water, under places like the frozen tundra of Arctic National Wildlife Refuge and the Outer Continental Shelf.

Government taxes and subsidies only make matters worse, says IBD:

While oil companies make a profit of 13 cents a gallon on gasoline – profit that is ploughed back into the search for more – the federal government makes 18.4 cents.

Then added are the state and local taxes; California's various governments, for example, make 40.2 cents; San Francisco collects a local sales tax of 8.5 per cent.

Ethanol, producers of which receive a 51-cent-a-gallon subsidy, also produces less energy than it takes to make it and less than an equivalent amount of gasoline.

Source: Editorial, The No-Drill Sergeants, Investor's Business Daily, May 24, 2007.

For text: http://www.ibdeditorials.com/IBDArticles.aspx?id=264812750773522

For more on Energy Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=22

FMF Policy Bulletin/ 29 May 2007