Putting the Squeeze on Big Oil

COMMENTARY Coal, Oil, Natural Gas

Putting the Squeeze on Big Oil

Nov 28th, 2005 2 min read
Edwin J. Feulner, Ph.D.


Edwin J. Feulner is the founder and former president of The Heritage Foundation.

Who can resist good theater? Certainly not American lawmakers.

All the pieces were in place on Nov. 9, as the Senate held hearings about the soaring price of energy. The CEOs of the five largest oil companies were the guest stars, called in to endure lectures from a host of lawmakers.

Sen. Daniel Inouye, D-Hawaii, noted, "In the midst of pain, in the midst of suffering, the public sees headlines about record profits." His colleague, Sen. Barbara Boxer, D-Calif., added, "Working people struggle with high gas prices, and your sacrifices appear to be nothing."

Fair enough so far. But now I'm going to do something these grandstanding lawmakers won't do: Provide full disclosure. As many members of Congress do, The Heritage Foundation accepts donations from oil companies. It's not much; last year these donations equaled less than 0.3 percent of our annual budget.

But even if we didn't get a dime from "Big Oil," we'd still fight for the free market, which is critical to our goal of "building an America where freedom, opportunity, prosperity and civil society flourish."

Lawmakers, on the other hand, aren't likely to disclose that many of the policies making energy so expensive are the direct result of congressional action. In fact, shortly after they finished taking the CEOs to task, lawmakers went out and made our energy situation even worse.

Before the House of Representatives passed the federal budget, lawmakers stripped out a provision that would have allowed companies to drill for oil in the Arctic National Wildlife Refuge. Such exploration would disturb a miniscule segment of the ANWR (drilling would be limited to a tiny area, roughly equivalent to the size of a postage stamp on a football field) and could generate as many as 16 billion barrels of oil, enough to replace about 30 years worth of oil imports from Saudi Arabia.

In addition, partly because of opposition by lawmakers from Florida and California, Congress bans oil and natural gas exploration in the eastern Gulf of Mexico and in the outer continental shelf. If lawmakers were serious about bringing down oil prices, they would open these untapped domestic resources. That would ease our dependence on imports and boost energy supplies.

They also should take steps to lower the price of natural gas by increasing its supply. Federal law restricts access to resources in the Rocky Mountains and elsewhere. According to a report sent to Congress and the administration by the Industrial Energy Consumers of America, a Washington-based advocacy group, this federal limit drove the price of natural gas 83 percent higher than it could have been dur­ing the energy crisis Americans endured between June 2000 and November 2003. Those higher prices cost consumers more than $111 billion.

Instead of taking these reasonable steps that would lower prices for everyone, lawmakers are trying to increase heating oil subsidies for the poor. A pair of bills that would have added billions of dollars to the federal Low-Income Home Energy Assistance Program recently garnered majorities in the Senate, even though both were denied on procedural grounds.

No doubt versions of those bills will return. As Republican Sen. Judd Gregg of New Hampshire said, "I cannot sit back in good conscience while those in our society struggling to heat their homes are being left in the cold by oil companies." And it's always easier to spend federal money than to decrease cumbersome federal regulations.

"To my constituents, today's hearing is about shared sacrifices in tough times versus oil company greed," Sen. Boxer told the oil executives on Nov. 9. But the hearings ought to be about why lawmakers won't allow companies to drill more wells in the United States and won't ease regulations to allow more refineries, measures that would allow the free market to regulate the supply of oil based on the demand.

Don't hold your breath waiting for lawmakers to admit that hurting oil companies won't help consumers but that changing federal laws might. They'd rather spend their time holding hearings that are little more than hot air.

Ed Feulner is president of The Heritage Foundation (heritage.org), a Washington-based public policy research institute.