Sunset News: Why does gas cost so much?

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Saturday, June 14, 2008

Why does gas cost so much?

Why does gas cost so much?

The average price of gasoline nationwide has crossed $4 per gallon, according to news reports. The cheapest fuel can be found in Missouri, where it costs $3.80 a gallon, while Californians fork over nearly $4.50 at the pump.

How did this happen?

“High oil prices are here to stay due to heightened political risks, irresponsible behavior by oil-producing governments and growing global demand outside U.S. control,” Heritage energy expert Ariel Cohen writes.

The wrong solution

So what do we do about high energy prices?

A recent proposal from liberals in Congress—blocked on Tuesday in the Senate—demonstrates the wrong approach.

Heritage’s Ben Lieberman argues that the legislation “repeats the mistakes of the past by adding constraints that will discourage domestic energy supplies.”

For example, the proposal would empower Washington to:

  • Raise taxes on domestic oil production. When Congress adopted this policy in the 1970s, domestic production actually dropped, making us more dependent on imports and hardly helping prices at the pump.
  • Pick winners and losers among energy alternatives. This strategy of government direction of the economy has failed time and again in the past and rewards special interests at taxpayer expense.
  • Impose counterproductive “price-gouging” legislation. Like price controls, Lieberman explains, such laws “try to make high prices illegal,” keeping new supplies from reaching the market. Without more supply, prices remain high.

“Simply put,” Lieberman concludes, “the Consumer-First Energy Act is an anti-energy bill that will only add to already-high energy costs.”

The right solution

The correct solution to high energy prices would be to get government out of the way and allow for more energy production.

Lieberman suggests, for example, that “we need fewer restrictions on domestic oil drilling. America remains the only oil-producing nation that has placed a substantial amount of its energy potential off-limits.” The ANWR oil fields in Alaska are estimated to contain oil “equivalent to 15 years of imports from Saudi Arabia.”

Cohen also has a few ideas:

  1. Nations that consume gasoline can pressure oil producers to open more energy to production, for example by limiting the power of the OPEC cartel.
  1. Energy firms can invest in new technologies that can promote efficiency and allow exploration of new energy sources.
  1. The auto industry should “prepare for the likely transformation of automotive transportation when market forces will shift it to electric, hybrid, and plug-in hybrid cars.”

Heritage Foundation research has also pointed to expanded nuclear energy, a repeal of the misguided ethanol mandate and avoidance of harmful cap-and-tax global warming schemes as means to keep energy prices low.

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