Why Are Gas Prices so High?

According to our grandstanding politicians, as well as some loud, obnoxious media gasbags like Bill O'Reilly, gas prices are high because of an evil conspiracy by "Big Oil." It turns out that they're partially right, but not in the way they intended.

In this "Big Oil" post by John Hinderaker of the indispensable Power Line blog, we learn that in comparison to the world's large state-owned oil companies, our companies are pipsqueaks. This chart from Chevron illustrates the point most convincingly:


According to John,

With 94% of the world's oil supply locked up by foreign governments, most of which are hostile to the United States, the relatively puny American oil companies do not have access to enough crude oil to significantly affect the market and help bring prices down. Thus, Exxon Mobil, a small oil company, buys 90% of the crude oil that it refines for the U.S. market from the big players, i.e, mostly-hostile foreign governments. The price at the U.S. pump is rising because the price the big oil companies charge Exxon Mobil and the other small American companies for crude oil is going up.

This is obviously a tough situation for the American consumer. The irony is that it doesn't have to be that way. The United States--unlike, say, France--actually has vast petroleum reserves. It would be possible for American oil companies to develop those reserves, play a far bigger role in international markets, and deliver gas at the pump to American consumers at a much lower price, while creating many thousands of jobs for Americans. This would be infinitely preferable to shipping endless billions of dollars to Saudi Arabia, Russia and Venezuela.

So, why doesn't it happen? Because the Democratic Party--aided, sadly, by a handful of Republicans--deliberately keeps gas prices high and our domestic oil companies small by putting most of our reserves off limits to development. China is now drilling in the Caribbean, but our own companies are barred by law from developing large oil fields off the coasts of Florida and California. Enormous shale oil deposits in the Rocky Mountain states could go a long way toward supplying American consumers' needs, but the Democratic Congress won't allow those resources to be developed. ANWR contains vast petroleum reserves, but we don't know how vast, because Congress, not wanting the American people to know how badly its policies are hurting our economy, has made it illegal to explore and map those reserves, let alone develop them.

In short, all Americans are paying a terrible price for the Democratic Party's perverse energy policies.

Sounds about right to me.