Monday, May 5, 2008

Markets Works -- Too Bad Congress Doesn't

But in fact, even as our own dithering Congress refuses to help ease the energy crunch, things are already changing — thanks to you, the consumer, and you, the producer.

That's right: It's the private sector that's doing it.

One of the glories of a capitalist system is that price signals are allowed to work. When the price for a good rises, that means it's in scarce supply. When the price falls, it's relatively abundant. This signals to users and producers they must change their behavior.


The U.S. itself has 656 trillion cubic feet of natural gas and 112 billion barrels of oil on federal lands alone — there for the taking if only Congress would allow it.

But even without it, we're going gangbusters. As the American Petroleum Institute recently noted, "an estimated 4,577 (U.S.) oil wells were completed in the first quarter of 2008, up 12%" from last year and the highest rate since 1986. U.S. oil companies are going back to tapped-out wells and pumping oil that wasn't economically recoverable at $25 a barrel but is at $100.

That's the supply side. What about demand? U.S. fuel demand in the first three months of 2008 was down 1.4% from a year earlier — the third straight quarterly year-over-year decline in a row.

Gasoline consumption has risen about 1.5% a year since 2000. But Energy Department data showed demand in the first quarter edging down for the first time in more than two decades.

In short, the tide has turned.

Don't cut the gas tax for the summer -- cut it for diesel only to reduce the inflation pressure on shipping food and other products.

More importantly, get the government out of the way and let the markets actually do their job.


Investors Business Daily

No comments:

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 United States License