A Free Market Will Solve America’s Energy Problems

by | Mar 23, 2003

In recent weeks American consumers have experienced two-dollar-per-gallon gasoline prices, and predictably, many politicians and commentators blame the “greed” of U.S. oil and power companies. The truth, however, is that shortages occur when demand exceeds supply, and that the American supply of energy is being strangled by the policies of U.S. federal and state governments. […]

In recent weeks American consumers have experienced two-dollar-per-gallon gasoline prices, and predictably, many politicians and commentators blame the “greed” of U.S. oil and power companies. The truth, however, is that shortages occur when demand exceeds supply, and that the American supply of energy is being strangled by the policies of U.S. federal and state governments. This is why the Senate should take the opportunity next week to vote for lifting current environmental restrictions that prevent oil drilling in Alaska’s National Wildlife Refuge (ANWR).

If the Senate carries through on this, it will be a great boon to American consumers. Geologists claim that ANWR holds seven billion barrels, enabling it to add significantly to American energy production. Senator Frank Murkowski of Alaska, chairman of the Senate Committee on Energy and Natural Resources, states that “ANWR could produce oil for decades, adding as much as $325 billion to the U.S. economy and reducing imports by well over one million barrels per day.” If Congress finally approves the President’s plan, the government’s go-ahead to domestic producers will result in an increased supply of oil-based products to American consumers.

But the new administration should not stop there. The United States also possesses large deposits of oil offshore on the Outer Continental Shelf (OCS). The OCS is an area that stretches 200 miles out from the Atlantic, Pacific and Gulf coasts. Half the oil in the OCS, particularly off the California coast, is in areas that are currently closed by environmental restrictions. Opening these areas to development will also result in increases of domestic oil and lower consumer prices.

Environmental restrictions also limit production of natural gas, which currently supplies 25 percent of the energy Americans consume, a figure that will rise in the future. As one example, producers in Wyoming’s Powder River Basin saw the federal government suspend the issuing of drilling permits pending the outcome of a second environmental study. Powder River holds 39 trillion cubic feet of gas, which could be used to generate heat and electricity for many years, but the government’s environmental restrictions severely limited production.

The recent electricity shortage in California was another example of the way in which environmentalists handcuff the U.S. energy industry. For example, the biomass power industry, which burns waste from forest timber to produce electricity, has been crippled by lawsuits from environmentalist organizations. The Honey Lake biomass plant was shut down several years ago because of litigation originated by the San Francisco-based Earth Island Institute against the U.S. Forest Service. Because of the lawsuit, the Forest Service suspended the logging operations that provided the biomass company with its fuel source. Prior to the shutdown, the 20 biomass companies in California could collectively have generated 600 megawatts per year. Further, California has not built a new power plant in almost 20 years. The reason is that any attempt must endure years of costly lawsuits from environmentalist groups. The Diablo Canyon nuclear station, finally completed in 1985, had its building costs increased twelve-fold, from $500 million to $6 billion. Nuclear plants, despite their unparalleled safety record in the United States, are a favorite target, but hydroelectric plants are also attacked because they require construction of dams, and coal plants because they are considered too dirty.

The United States is a country rich in both energy sources and the technology necessary to develop them. But the policies of our own government are preventing such development from occurring. America needs to learn from the bitter experience of England. Last century the popular expression “taking coal to Newcastle” (a center of English coal production) was coined to indicate the absurdity of taking a product to a place that was plentiful in it. But in the late 1940s, when the British government nationalized the coal industry, shortages and rationing resulted, and taking coal to Newcastle became a grim reality. Similarly, the United States today, with its enormous supplies of oil, natural gas, timber and other energy sources, is suffering shortages and high prices because of restrictions imposed by our government.

If the U.S. government establishes freedom in the energy industry by removing environmental restrictions, we will witness a significant increase in domestic production of oil, natural gas and electricity. This will do more than increase supply and lower prices for American customers. It could herald a new commitment by the U.S. government to economic freedom and capitalism. The relative freedom of the computer industry has led to an explosion of innovativeness and productivity. The same freedom in the energy industry will lead to the same result.

Made available through ARI’s MediaLink.

Andrew Bernstein holds a Ph.D. in Philosophy from the City University of New York. He lectures all over the world.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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