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Why punish oil companies just when we need more energy?

By Dennis T. Avery
web posted May 8, 2006

Gasoline at $3 per gallon tells us vehicle fuel is scarce in America right now. Some U.S. politicians propose to "fix" the high prices with an "excess profits tax" on the oil companies.

If you want less of something, tax it. If you want less fuel at higher prices, just raise the taxes on the energy companies.

If you want more of something, raise its price. Willing suppliers then find ways to provide it. Over time, competition and investment bring down prices.

The excess profits tax is a political diversion to help you forget that it's America's own voters and politicians who have created our current pain at the gas pump: Many of the "excess profits taxers" have voted consistently against more energy.

  • Bill Clinton vetoed drilling for the oil in the Alaska National Wildlife Refuge, which could boost U.S. domestic reserves by 50 percent. The oil drilling would impact about 20 acres of the 1.5 million in the wildlife preserve.
  • The Feds have banned drilling for America's rich offshore oil deposits, except in the western Gulf of Mexico. Even Hurricane Katrina failed to cause any leakage from the big oil wells there.
  • America's oil refining capacity is strained to the limit, and governments won't license more because people don't want oil refineries in their communities.
  • The EPA now mandates that our gasoline be blended with scarce and expensive ethanol, even though cars built since 1988 don't need an "oxygenate." Supplying 10 percent of our auto fuel as ethanol would force us to clear 100 million acres of forests for fuel crops.
  • The Greens shut down safe, economic nuclear power plants with endless lawsuits. The rest of us let them. Even the Greens are now backing away from costly, ugly wind farms, and solar is going nowhere.

There's no shortage of petroleum. Canada alone has 2500 billion barrels of oil in the massive Athabasca tar sands, 400 miles north of Montana. That's 83 years worth of current world oil consumption. Steam injection can deliver the oil for $10-13 per barrel, but it will take several years and big bucks to expand tar sands output importantly.

The first world is highly nervous about fossil fuels, even though there's no evidence that burning them has significantly increased Earth's temperatures.

Who told us that humans were more powerful than the sun? In the past 25 years, we've found massive global evidence that the Earth has a natural, moderate 1500-year climate cycle linked to the sun. Deep ice cores from Greenland and Antarctica say the Medieval Warming in the 12th century and the Roman Warming in the 1st century were both warmer than today. So do seabed sediments, cave stalagmites, glaciers and tree rings from around the world. The cycle is at least a million years old.

Six years ago, Green guilt gave California its rolling blackouts. California found that current technology really offers only two alternatives for powering the modern world: fossil and nuclear. California opted for more fossil power plants.

Since then, millions of auto sales in China and India have underscored the world's rising demand for energy. China and India have decided to build both fossil and nuclear power plants, lots of them.

America today faces the same choice that was forced on California and China. We need more fossil fuel, more nuclear plants, or both. Punishing oil companies will only discourage the increasing energy investments we need.

Dennis T. Avery is a senior fellow for Hudson Institute in Washington, DC and the Director for the Center for Global Food Issues. He was formerly a senior analyst for the Department of State. Readers may write him at Post Office Box 202, Churchville, VA 24421.

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