By Joseph Lawler on 6.27.08 @ 12:07AM
But the reasoned testimony of oil experts is likely to fall on deaf ears in Congress.
On Wednesday, Cambridge Energy Research Associates' Dr. Daniel
Yergin told the Democratic chairs of the Joint Economic Committee
(JEC) to do what they have long refused. They should let the oil
companies start drilling.
"Investment [in oil] needs to be stepped up to play a vigorous
game of catch-up," Yergin announced. He paid some lip service to
alternative fuels, calling for an "ecumenical approach" to the
problem, which includes things that both Daniel Day Lewisian
conservatives and fuzzy liberals want.
Mostly, though, he reminded them of the very stark "reality that
over 60 percent of our energy today comes from oil and gas," and
that that figure isn't likely to budge much in the near term.
Yergin knows something about the subject. He's an expert on oil
markets whose book The Prize: The Epic Quest for Oil, Money,
and Power won a Pulitzer.
But it's likely that his measured advice will be ignored by the
Democratic-controlled Congress in favor of populist policies --
such as the windfall profits tax, suing OPEC, authoritarian
regulation of oil markets, and massive subsidies for alternative
fuels -- that most of those who lined up to testify warned would be
disastrous.
YERGIN EXPLAINED that markets are more than capable of solving
America's current energy problem without the kinds of government
interventions the JEC's vice chair, Rep. Carolyn Maloney (D-NY),
has proposed.
He illustrated the point by telling a tale of two oil shocks:
the seventies oil crisis under Jimmy Carter and the drop in
production following Hurricane Katrina.
Under Jimmy Carter's price controls the supply of gas dwindled,
leading to those infamous, hated "gas lines." In 2005, however, the
market was left alone and the price mechanism ensured a "smooth"
supply response, limiting shortages and only temporarily boosting
prices.
Yergin labored to dissuade Maloney from a witch-hunt for
speculators. She, along with Rep. John Larson (D-CT), has proposed
an insane bill that would allow only those who are able physically
to receive barrels of oil to participate in oil futures markets as
a way of kneecapping those markets.
Rep. Kevin Brady of Texas called such plans "gimmicks." Other
Republicans piled on with stronger language. Retiring New Mexico
Sen. Pete Domenici even warned that the U.S. might face "economic
destruction" if we don't allow more domestic production, according
to the Hill.
Utah Sen. Bob Bennett said of the Democrats' reluctance to open
up the reserves in the Alaskan National Wildlife Refuge that the
caribou would just love to play in the new oilfields. At least, I
think that's what he was saying.
"I've been to Alaska. I've seen ANWR. I've also seen the Naval
Petroleum Reserve...[T]here's more wildlife in the petroleum
reserve than there is in the wildlife refuge, and there's more oil
in the wildlife refuge than there is in the oil reserve," Bennett
claimed.
ONE OF THE things that became abundantly clear in the hearing was
just how much trouble the U.S. would be in if we had clamped down
on the market more tightly.
John Laitner of the American Council for an Energy-Efficient
Economy explained that efficiency has doubled since 1970. Thus the
greatest gains have been in "the energy that we don't see in our
daily lives," and that people are not now forced to foot the bill
for at these higher rates.
Frederick Joutz, professor of economics at the George Washington
University, explained that Americans used less oil per dollar of
GDP in 2007 than they did in 1973. There have been some regulations
passed, but most of these gains are the result of the free market
responding to changes in price.
Yergin noted that American demand for oil actually peaked in
2007. He said that if the price of oil continues to rise, the U.S.
could conceivably decrease daily consumption by 600,000 to 900,000
barrels a day without causing great discomfort or disrupting daily
life.
The message that these distinguished panelists tried to send
Congress, in other words, was 1) Don't panic; and 2) Loosen your
grip. For that reason, they'll probably be ignored.
When government decides it's necessary to take an activist role
in matters of supply and demand -- when it's assumed that some
guilty party must pay for that $4 a
gallon gas -- our elected representatives tend to forget that the
free market is a viable option.
topics:
Economics, Energy, Alaska, Oil
