When faced with an issue of grave concern to the public, a politician has two choices. He can try to solve the problem. That would be the course of a true statesman. Alternatively, however, he can take the path of the demagogue, and seek to exploit the problem by blaming it on scapegoats among or linked to his political adversaries.
In the case of the current energy crisis, President Obama has chosen the second path.
Responding to public concern over sharply rising gasoline prices, President Obama announced last week that he was asking Attorney General Eric Holder to launch a criminal investigation of price gouging by oil companies, refiners, and gas stations.
Such posturing is so absurd as to exceed the capacity of satire. The reason gasoline prices are up is that the price of crude oil is up. There is not only a direct correlation between the two, but a causal relationship: The primary cost of producing gasoline is the cost of the oil from which it is refined. It is impossible to make cheap gasoline from expensive oil. To launch a witch hunt against gasoline providers for high price at the pump when oil is selling for $110 per barrel is a truly amazing political stunt.
However, there is a question worthy of investigation, and that is why oil prices are so high. Well, prices are determined by supply and demand. If oil prices are high, it must be because there is too little supply relative to demand. Whose fault is this? The answer can be obtained by looking at the data.
These graphs show non-OPEC and OPEC oil production, as well as the global price of oil, for the years 1973 through 2011. Note the vast difference in the production patterns: Non-OPEC production rises to meet increased demand. In fact, it nearly doubles — which is what one would expect, since the world economy and world population roughly doubled as well over the same span of time. In contrast, OPEC production figures show no rational trend. Instead, they vary wildly in accord with tactical decisions by the cartel to manipulate supplies and prices. But what is even more stunning is this: In 1973, OPEC oil production was 30 million barrels per day, exactly what it is today. That is, despite the passage of more than a third of a century, during which time the world population doubled in size — and despite the fact that OPEC countries are sitting on top of 80 percent of the world’s commercially accessible oil reserves — OPEC production has not increased at all.