Is it really all about “Big Oil” manipulating the market to jack up its profits? Hmmm, if that were the case, why didn’t these big bad companies do the same thing when oil was at $15 a barrel, and they weren’t making any money?
In reality, the problems stem from big government. Don’t believe me? Well, consider a few interesting points from an April 28 story in The New York Times – hardly a bastion of free market thinking, by the way.
• “A key reason that supply is not rising to meet demand is that producers outside of the OPEC cartel — countries like Russia, Mexico and Norway — have been showing troubling signs of sluggishness. Unlike the Organization of the Petroleum Exporting Countries, whose explicit goal is to regulate supply to keep prices up, the other countries are the free traders of the international market, with every incentive to produce flat-out at a time of high prices. But for a variety of reasons, like sharply higher drilling costs and nationalistic policies that restrict foreign investments, these countries are finding it difficult, if not impossible, to increase output.”
Was that “nationalist policies”?
• “In many other places, the problems are not located below ground, as energy executives like to put it, but above ground. Higher petroleum taxes and more costly licensing agreements, scarce manpower and swelling costs, as well as political wrangling and violence, are making it much harder to raise production. ‘It’s a crunch,’ said J. Robinson West, chairman of PFC Energy, an energy consulting firm in Washington. ‘The world is not running out of oil, but rather it’s running out of oil production capacity.’”
Was that taxes, and “political wrangling and violence”?
• “Another country, Russia, is also clouding analysts’ forecasts. The country is not exactly running out of places to look for oil — a huge chunk of Eastern Siberia remains unexplored — and Russia has been the biggest contributor to the growth in energy supplies in the last decade. But earlier this month, Russian energy officials warned that the days of stunning growth that followed the demise of the Soviet Union were over, as the country would focus on stabilizing its output.”
• “About 75 percent of the world’s oil reserves are in OPEC countries, where governments voluntarily restrict their output to push up prices.”
Was that government purposely restricting output?
And don’t forget about the problems created by our own government. Restrictions on energy exploration in places like ANWR and in offshore waters are just plain dumb economics.
Meanwhile, what are the incentives at work for private firms?
• “In fact, high prices have sparked a global dash for oil. Companies are trawling deep oceans or seeking to drill in the Arctic Ocean. In some cases, the hunt has been successful. Brazil, for example, has struck large offshore discoveries that could turn the country into one of the world’s top 10 producers in the coming decade.”
Obviously, if government got out of the way, the market would work quite well in serving the energy needs of consumers and businesses.
Don’t blame so-called Big Oil. Instead, point the finger in the right direction – at Big Government.
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