Who’s to blame for gas prices?

Who is most to blame for America’s skyrocketing gasoline prices?

The list of suspects and collaborators is long – foreign oil producers, environmentalists, lack of competition among oil companies, instability in the Middle East, etc.

Yet, none of those can begin to compete with the U.S. federal government as the chief contributor to $4-plus-a-gallon gas and $130-a-barrel oil. And the problem is far bigger than you might suspect.

It’s not just at ANWR in the remote parts of Alaska where Washington continues to prohibit pumping of vast reserves of oil – even in a time of national crisis, when the American people are on the verge of apoplexy over gas prices. In fact, the U.S. government is pretty much blocking exploration and pumping of oil on most so-called public land.

Federal lands throughout the United States are estimated to contain 31 billion barrels of oil and 231 trillion cubic feet of natural gas. Some 60 percent of onshore federal lands that have potential as domestic sources of oil and natural gas are officially closed to leasing by the Bureau of Land Management. That translates to 62 percent domestic oil reserves inaccessible for development.

But it gets worse.

An additional 30 percent of onshore federal oil and 49 percent of onshore federal gas may only be developed subject to restrictions over and above standard environmental lease terms, including seasonal timing limitations.

And, I am afraid, it gets still worse.

Just 8 percent of onshore federal oil and 10 percent of onshore federal gas are accessible under standard lease terms.

That’s quite a service the federal government is providing for the country, isn’t it? But if you don’t like the fact that Washington is blocking development of oil and gasoline on lands owned by you, consider this.

Not only is the federal government’s energy policy bent toward subverting the development of energy, Washington also demands – and gets – a huge cut on the sale of every gallon of gasoline sold, far more, in fact, than the oil companies themselves profit from each gallon.

It’s true.

While few Americans realize they own the land where drilling could bring gas prices down dramatically, they also have little clue that up to 75 cents of the cost per gallon is the result of local, state and federal taxes – and that number is rising. That’s because government profits to the tune of 20 percent of the cost paid at the pump.

Do you think government has an incentive to lower the cost of a gallon of gas when it rakes in 20 percent of the price? I don’t think so. Government is, in fact, making windfall profits from rising gas prices. By definition, the oil companies do not make windfall profits. As any economics 101 student knows, windfall profits are those made without effort or investment. The only party making windfall profits from gas and oil by that definition is government. Government has every possible incentive to keep gas prices high and going higher.

According to the U.S. Energy Information Administration, when the average price of regular unleaded gas peaked at $3 per gallon in 2006, most major companies were profiting only about 10 cents per gallon on refining and marketing options, while the federal government alone profited by as much as 18.4 cents per gallon.

And what did the government do to earn that money? It blocked exploration and development of oil. What a racket! How do I invest in those futures?

Well, you can’t exactly invest in the government. It’s more like allowing yourself to be extorted at the point of a gun.


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