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126 IRET Congressional Advisory 1 (2002)

handle is hein.taxfoundation/iretcgadv0123 and id is 1 raw text is: April 12, 2002 No. 126 ENERGY POLICY IN PERSPECTIVE The jump in oil and gasoline prices between February and early April and the threatened 30-day oil cutoff by Iraq have given new impetus to the energy policy debate in the Congress. Energy security concerns have taken center stage. There is concern that the energy price increase could derail the economic recovery. President Bush has waste money on bizarre alternative energy schemes and forced conservation, because they do not make economic sense, whether recommended by the President or his opponents. It is true that crude oil and gasoline prices have moved up sharply in recent weeks. However, they are barely back to the levels paid this time last year, and are below the levels of last summer. The increase is due only in part to concerns about the conflict in the Middle East. There have been other factors at work, including the advent of the summer driving season and the rebounding economy, both of which increase demand for oil. The economic rebound has also affected other raw material prices. Price hikes that are the result of a strengthening economy should not be confused with exogenous supply shocks that might be the cause of economic difficulties. Of course, it would be even better to have more proposed opening up to drilling of one percent of the Arctic National Wildlife Refuge (ANWR) needed to extract its major reserves. He has also called for a number of conservation and alternative fuel initiatives. The House has passed an energy bill that is generally consistent with the President's objectives, including ANWR. The Senate, where opposition to drilling in ANWR is stronger, 1 the one-hundredth s now considering plentiful oil at its oil exports fo lower prices. In fact, industry analysts regard the oil market - fundamentals as pointing to a price in the low to mid $20's per barrel, and view the current price in excess of $26 a barrel as temporary. But what about the Iraqi embargo? Iraq, under U.N. sanctions, has only been . producing about 1.5 million barrels a day. It has stopped r 30 days, and has urged other oil the measure. Senate opponents favor more conservation measures and tighter corporate fuel economy (CAFE) standards. A bit of perspective is in order. Energy policy should make economic sense for the long term. It should not be based on transitory concerns or events. We should drill in ANWR, but only because it makes economic sense. We should not producing states to do the same. This is not a serious threat. Other nations, pressed for cash, are ready to increase production to take advantage of the selling opportunity. Kuwait, Saudi Arabia, Russia, and Norway are all capable of and inclined toward additional output. In fact, of more consequence is the general strike in Venezuela that has cut off its oil exports, which run about 2.5 million barrels a day. But the Venezuelan Institute for Research on the Economics of Taxation We should drill in ANWR but only because it makes economic sense. We should not waste money on bizarrie alter-native energy schemes and forced conservation, because they do not make economic sense... IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the free market economy. 1730 K Street, N., Suite 910, Washington, D.C. 20006 Voice 202-463-1400 9 Fax 202-463-6199 0 Internet www.iret.org

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