What prevents a robust supply response to changes in scarcity conditions in the gasoline market? U.S. oil refining capacity is now less than it was in 1980, and since that time there's been a 25 percent increase in demand. Because of costly environmental regulations, it's been 30 years since a new refinery has been built. According to the American Petroleum Institute, over the last 10 years, it has cost the oil industry $47 billion to comply with costly and sometimes useless environmental controls. There are restrictions on exploiting the huge oil reserves in Alaska, the Gulf and the Atlantic and Pacific coasts.
Speaker Hastert said, "These are extraordinary times that call for extraordinary measures. We expect oil companies to do their part to help ease the pain American families are feeling from high energy prices." Instead of mouthing platitudes and beating up on oil executives, Speaker Hastert should lead the effort to reduce restrictions on drilling and refinery construction. Sen. Dorgan should review our 1970s experience with an oil windfall profits tax that reduced American production and increased our dependence on foreign sources.
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