NCPA - National Center for Policy Analysis

Ending U.S. Dependence on Foreign Oil

December 21, 2001

The anti-energy policies of the federal government have strengthened the Organization of Oil Producing Countries (OPEC), experts say. By locking up coal, oil, and natural gas fields, the Clinton administration succeeded in forcing U.S. energy producers to look outside this nation's borders for fuel. Unless the Bush administration succeeds in changing this policy, we can expect more price spikes as OPEC producers attempt to control world oil markets.

The remedy, according to William L. Anderson, is increased exploration and repeal of restrictive energy policies. Specifically, he recommends:

  • Do away with policies that force individuals and businesses to "conserve" energy beyond what they would naturally do given market prices.
  • Do not enact new taxes aimed at forcing up gasoline prices and depressing current demand, as such measures would artificially and uneconomically depress current demand but wouldn't encourage oil companies to produce more oil and gas.
  • Do not increase Corporate Average Fuel Economy (CAFÉ) standards -- a "feel-good" measure that distorts production markets by overvaluing fuel and undervaluing other resources, while doing little to reduce gasoline consumption.

If the government is serious about ending the economic power held by OPEC, it will take the following steps:

  • Deregulate oil and gas markets in order that consumers and producers may enjoy the benefits of free markets.
  • Enact common sense environmental regulation, including opening oil fields offshore and in Alaska.
  • Cut gasoline taxes to allow "true" free market prices to more accurately reflect conditions of supply and demand.

Each of these measures, Anderson says, will permit oil markets in this country not only to work properly, but also will make the U.S. economy less vulnerable to periodic oil shocks due to overseas events.

Source: William L. Anderson, "Uncle Sam's Energy Mess: How the U.S. Government Empowers the OPEC Cartel and Takes Power from the People," Studies in Social Cost, Regulation and the Environment No. 5, March 2001, Institute for Research on the Economics of Taxation.

 

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