Politics & Policy

Congressional Oil Cartel

Members pass a law they have been breaking for years.

Members of Congress should consider themselves fortunate that the Constitution gives them legislative immunity. Otherwise, they might someday face prosecution under a law they overwhelmingly passed this week.

The bill — referred to as “NOPEC” — is a meaningless gesture whose symbolism is intended to mollify angry motorists as gasoline prices approach $4 per gallon. Even though Democrats are intentionally keeping those prices high for environmentalist reasons, they have passed this bill as their way of shaking a stick at the Organization of Petroleum Exporting Countries (OPEC), the international cartel whose supply decisions have enormous and dangerous influence on the price of oil.

The NOPEC bill’s relevant language reads as follows:

It shall be illegal and a violation of this Act . . . to limit the production or distribution of oil, natural gas, or any other petroleum product . . . or to otherwise take any action in restraint of trade for oil, natural gas, or any petroleum product when such action, combination, or collective action has a direct, substantial, and reasonably foreseeable effect on the market, supply, price, or distribution of oil, natural gas, or other petroleum product in the United States.

This is designed to make OPEC’s activities illegal. But here’s the problem: All that talk about “limiting the production of oil” could apply to Congress just as much it does to OPEC. Thomas Pyle, president of the Institute for Energy Research, comments:

The Congress itself is guilty of committing the crimes outlined in this legislation. In fact, it is a repeat offender. The only difference between the Congress and OPEC in this regard is that OPEC is willing to produce oil for its citizens and its economies. The U.S. Congress, unfortunately, is not.

Pyle is referring to Congress’s refusal to lease more public lands for oil and natural-gas exploration. His group receives substantial funding from the oil industry, but he makes a point that even an environmentalist can appreciate. Congressional Democrats, together with a few moderate Republicans, have killed repeated attempts to open America’s Arctic National Wildlife Refuge (ANWR) for oil exploration, and Congress has barred states from deciding whether to allow drilling on the Outer Continental Shelf in the Atlantic and Pacific Oceans and the eastern Gulf of Mexico. All these actions were taken, in part, to limit carbon emissions. But if NOPEC somehow managed to reduce oil prices (which it will not), it would do so by pressuring OPEC to increase oil production. And any OPEC increase large enough to lower prices would cause far more carbon emissions than any potential increase in American production.

Liberals have expressed justifiable skepticism as to whether boosting domestic oil production can substantially alter gasoline prices. After all, oil sells on a world market so large (currently 82.5 million barrels per day) that a few million extra barrels per day, to be realized years after drilling begins, would cause only the slightest reduction in price. But the continued ban on domestic drilling does indeed have a substantial, direct, and foreseeable effect on the supply of oil in the United States, which means that its perpetrators clearly violate the wording of the NOPEC bill.

Prices are not the only consideration when it comes to domestic supply. Members of both parties preach the goal of “energy independence” for a variety of reasons. The most obvious pertains to national security — in the event that a war or other emergency disrupts imports, a marginal increase in quickly available domestic oil would be invaluable. There are economic factors as well. Wouldn’t we rather have Americans instead of Kuwaitis — let alone some of OPEC’s less well-behaved members — getting rich by producing and selling oil at $125 per barrel?

The amount of oil we could produce is not negligible. Take ANWR, just one of several untouched sites that contain known oil supplies. Based on figures from the Energy Information Administration, ANWR alone could produce enough oil (in 2004, the EIA estimated 900,000 barrels per day by 2025) to make 6.4 billion gallons of gasoline annually. Because producing and refining five barrels of oil requires energy equivalent to one barrel, this translates to a net energy gain of four-fifths that amount, or 5.1 billion gallons of gasoline annually. That is enough gasoline for 13 days of American consumption at the current rate. Moreover, Uncle Sam would make somewhere between $150 billion and $300 billion on ANWR leases over the estimated life of the oil deposit.

That compares very favorably with the 6.5 billion gallons of ethanol that we produced last year under government compulsion — coincidentally, almost exactly the same amount by volume. That heavily subsidized product, after taking its production requirements into account, carries a net energy gain of about two days’ gasoline consumption, at an extra cost of $6 billion to $8 billion to federal and state taxpayers and motorists — and that is without even considering the effect on food prices.

ANWR would produce a limited amount, to be sure, but it would come as an unsubsidized benefit, free and clear, both to the American economy and to individual Americans. At current prices, 900,000 barrels per day would displace about $41 billion of oil imports annually. If that yearly amount were applied to a single month, it would wipe out around 70 percent of that month’s trade deficit. This includes production from ANWR alone, with nothing from other domestic sources.

Of course, Congress has another reason for refusing to lease ANWR: It hopes to protect this tiny part of a vast wildlife preserve, which not one American in a thousand will ever see, from whatever minimal damage drilling might cause. ANWR’s desolate beauty may even be worthy of such protection. But the overriding desire to protect it, combined with this week’s passage of NOPEC, demonstrates once again this Congress’s bipolar policy toward energy production: They say they want more oil to be produced by OPEC, yet they also want less oil to be produced because it causes carbon pollution. They say they want lower gasoline prices because motorists are upset, yet they also want higher gasoline prices so that more people will conserve.

Call it what you want, but this isn’t leadership.

 – David Freddoso is an NRO staff reporter.


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