GOVERNMENT SHOULD GET OUT OF THE OIL PICTURE

Gasoline prices are zooming; they're currently up 45 percent over last year. Drivers are worried that this may affect their summer vacation plans, while truckers are still seething after a march on Washington to protest high diesel costs.

Hotly pursuing votes, presidential candidates are scrambling to provide political solutions for the doubling of heating oil prices in New Hampshire in the last year.What's behind the increase in gas prices - and what, if anything, can politicians do about it? Let's first understand the cause, which is tied to the Organization of Petroleum Exporting Countries' efforts to increase the price of crude oil.

OPEC has driven oil prices up by restricting oil exports by nearly 3 million barrels a day, increasing oil prices from about $12 to more than $30 per barrel in the past year.

Market prices, if not distorted by government intervention in the form of taxes and regulations, represent the scarcity of the oil. Higher prices indicate greater scarcity, and are an incentive to reduce oil consumption, resulting in more oil being available in the future.

What is the proper response to the situation? The Clinton administration believes the answer lies in greater government involvement in the already heavily burdened oil industry.

U.S. Energy Secretary Bill Richardson is pressuring OPEC nations to increase their oil production in order to achieve the correct market price for oil - and Richardson apparently knows the correct price for oil, arguing that ''$30 is too high.''

This tactic may net some success, as some oil ministers have already indicated that they are going to bow to U.S. pressure and at least prevent oil prices from rising any higher.

But we have been down this path before. In the 1970s, OPEC successfully orchestrated oil markets to its advantage. The U.S. responded with price controls, heavy taxes and massive government meddling in energy markets. The results were dismal.

This time, we should consider other methods to deal with this situation. Heavy government intervention drives the price of energy up. Freeing the market to adjust to changing conditions would achieve the desired results: lower oil prices and more diesel fuel, heating oil and gasoline available for consumers.

Consider the gasoline market. According to the American Petroleum Institute, gasoline taxes average over 41 cents per gallon in this country. These taxes doubled in the 1980s - and they then increased 54 percent more in the past decade.

If these taxes, which account for nearly 32 percent of the pump price of gasoline, were removed, then gasoline prices would fall dramatically. Such a tax cut would do more for gasoline consumers than would government threats against OPEC.

Don't stop there, of course. Cuts in other taxes on oil and gasoline production and reductions in taxes on diesel would also decrease energy prices.

In the past year, U.S. oil imports have decreased a mere 1.7 percent. An increase in U.S. oil production, to offset the decrease in oil imports, would result in lower oil prices. The appropriate policy, therefore, is to stop penalizing oil producers for providing energy for consumers.

Oil producers pay billions of dollars annually in severance taxes on oil production that decrease profit and output. Eliminating or reducing these taxes would make more oil production profitable. And this increased production would drive oil and fuel prices down.

Heavy regulations in the oil industry also penalize energy production. The number of refiners has been cut in half over the last decade, partly due to regulatory burdens. Regulations on exploration and production also hinder oil output. Lifting the regulatory burden would make more production profitable, again benefitting energy consumers.

Promising oil locations, including sites in Alaska and offshore, are restricted. Opening up a tiny portion of Alaska for exploration would allow the United States to expand available oil reserves.

Most of these restrictions are due to unreasonable environmental demands, and easing these restrictions would allow the development of new oil production, forcing prices down.

Government intervention drives up prices and creates inefficiencies in oil production. The answer to high prices is not increased government interference, but tax cuts, the deregulation of the oil industry and allowing oil producers to respond to higher prices with higher production levels.

Less government involvement, not more, is the right solution.

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