Be careful what you ask for

Background: Over the past few weeks, some letters have appeared in the Farmington Observer complaining about gas prices and demanding that "someone do something." Someone usually means government and something usually means tax oil companies. That's bad economic policy.

As gas prices climb, the drumbeat for some kind of government action gets louder. Each week seems to bring another letter calling for action with people begging to be saved from greedy oil executives. Unfortunately, politicians are too willing to answer the call. I suggest that before citizens clamor for their elected officials to do "something", they keep in mind past "somethings".

In the seventies, the government did something and price controls were placed on gas. Predictably, this resulted in higher demand than available supplies and motorists faced shortages and long lines at the pump.

In the eighties, the government did something and punitive windfall oil taxes redirected billions of dollars from the oil industry to its own coffers. As expected, American companies shifted their investment and production overseas to avoid the taxes. This short-sighted money grab reduced domestic production and increased our reliance on foreign sources of oil.

Over the past three or four decades, the government has done something and passed numerous regulations which increasingly closed off additional sources of oil and other energy supplies. Vast areas of the country are closed to oil exploration due to environmental hysteria. While France generates nearly 80 percent of its electricity needs from nuclear energy, the United States generates less than 20 percent due to onerous regulations. Tight restrictions on oil refineries have lowered domestic gasoline production, requiring us to import gas to meet our needs

Politicians and environmentalists like to praise alternative energy sources such as ethanol and bio-fuels, wind power, and solar energy. However, science shows these sources are incapable of generating the energy necessary to meet our needs given current and foreseeable technology. Unfortunately, this doesn’t stop our representatives from spending tax dollars to subsidize these alternatives. These subsidies hide the true cost of alternative energy production and distort markets. One such distortion is found in higher food prices and shortages in third world countries. So while smug politicians pander to the public and pat themselves on the back for "doing something" about the high cost of oil, the cost of bread and milk rises and food riots occur in other countries.

Anyone with a basic understanding of economics understands that profits do not determine gas prices. Supply and demand determine price. If you want lower prices, cut demand or increase supply. Try as they might, politicians cannot suspend the basic laws of economics.

To those who demand action from our government, I offer the adage "be careful what you ask for, because you may get it."

[Letter to the Editor - Farmington Observer. Published 06/05/2008.]