Commentary

Vapors at the Pump

By Stephen Moore
This article was published in the Washington Times, April 2, 2004.

Last week, John Kerry released his plan to reduce gasoline prices at the pump. Of course, the Massachusetts Democrat is new to the issue of reducing driving costs, because he spent his entire Senate career voting for higher gas taxes and more automobile regulations, like fuel efficiency standards, that drive up the cost of owning a car.

Moreover, Mr. Kerry has voted consistently against domestic oil production, which would lower the world price of oil and reduce American dependence on Middle East oil.

But clearly Mr. Kerry has hit on a jackpot political issue, especially as we enter the spring and summer, when travel rises across the country. On the West Coast, higher gas prices have particularly annoyed motorists. In California, where the “Left Coasters” spend seemingly half their lives in traffic jams on the San Diego Freeway and cars are like exoskeletons, gasoline prices have risen to $2.29 per gallon.

Nationwide, premium gas now sells at $1.89 a gallon, and this summer prices could easily shoot up well above $2 a gallon.

Are we running out of oil? Is the Club of Rome’s famous dire prediction of severe energy shortages finally coming true? The media seem to think so. One major publication recently complained our energy sources are “running on empty.”

But the doomsayers are all wrong. First, gasoline prices are still historically cheap. Gas at $2 a gallon seems expensive, but we need to adjust for inflation to determine whether today’s price is out of line with past pump prices.

When energy and gas prices are measured correctly, we find that, although the price has risen than 20 percent in recent weeks, gasoline remains affordable in historical terms. The current “record high” price is quite moderate by historical standards. And in real terms, we had higher retail gasoline prices as recently as 1985, and significantly higher prices from 1979 to the mid-1980s.

Winston Churchill once said that to see the future, you have to understand the past. Let’s look at the long-term trend on gas prices. Gasoline pump prices have been steadily declining since the 1920s, with the obvious exception of the 1970s, when we faced an OPEC embargo and gasoline lines.

In 1920, the real price of gas (excluding taxes) was twice today’s. If today’s price of gasoline relative to wages were comparable to 1920, we would pay nearly $10 a gallon.

The same is true, by the way, for the cost of oil — slightly cheaper today, adjusted for wage growth, than 50 years ago and 5 times cheaper than 100 years ago: Human innovation always finds new oil sources and technology cuts drilling costs.

Still, we’re all annoyed that gas prices have spiked upward so quickly this year. Who is to blame?

First, environmental extremists are responsible for blocking offshore oil drilling and drilling for new oil in Alaska. Drilling for oil in Alaska would substantially combat the monopoly of the Organization of Petroleum Exporting Countries (OPEC).

The oil reserves in Arctic National Wildlife Reserve (ANWR) are thought to be the most oil-rich untapped reserves on the planet, and we are prevented from drilling there. With a small portion of the money from the oil, we could create a wildlife refuge in every state. With gas and home heating prices high right now, Congress should vote immediately to begin drilling in Alaska for economic and national security reasons.

This brings us to OPEC. The U.S. has an ideal opportunity to protect U.S. manufacturers and consumers from the monopolistic pricing schemes of OPEC member nations. Iraq soon again will be one of the five top petroleum producers. America taxpayers have just spent some $50 billion liberating Iraq and another $87 billion rebuilding its infrastructure, including oil pipelines. Iraq should not be permitted to join OPEC to gouge the very U.S. consumers and businesses who helped bring it freedom and democracy.

A competitive world oil price could be less than half the current price. High oil prices severely harm the U.S. economy, since we are the world’s premier oil importer. It is a tax on American consumers.

Iraq can help lift this tax on Americans by staying out of OPEC and counteracting its monopolistic policies. Our government should insist upon it.

The radicalized environmentalists — and many of the Kerry Democrats in Congress — don’t agree with any of this.

Their idea of an energy policy is to get Americans out of the cars they want to drive —SUVs, mini-vans, and mini-trucks — and into less convenient and less safe smaller cars or, better yet, buses and subways. Only a few years ago, Al Gore wrote that the combustible engine was one of the worst inventions in the history of mankind. That is why many liberals long for a European-style energy policy, with gasoline costs of $4 or $5 a gallon. That’s not an energy policy; it’s a recession policy.

More domestic oil production and a competitive world price would end the “energy crisis” overnight. The U.S. government can help achieve that with a pro-production energy bill. Mr Kerry: The best energy policy taxes less and drills more.

Stephen Moore is a senior fellow at the Cato Institute.