Economic Reality Check for Democratic Oil Rhetoric

July 20, 2008

There has been a lot of rhetoric from both parties with regards to what policies, if any, can bring down gas prices. John McCain has proposed one bad policy: a temporary gas tax holiday. But recently, the issue of offshore drilling has now come up.

Republicans do tend to speak with a monotonic voice when it comes to “drill, drill, drill,” but the Democratic response to this policy proposal has been pretty dishonest.

Yesterday, at a blogger’s convention, Al Gore claimed that drilling in Alaska would not lower the price of gasoline because the oil would be sold to China. But because oil is a global commodity, the world price would fall, leading to lower prices at the pump. Mr. Gore is either lying when he uses this rhetoric, or doesn’t understand the economics of oil. He should be honest and tell the people that he doesn’t believe the environmental harms are worth the lower prices of gasoline (and the further environmental harm such lower prices would do). But he should stop spreading misinformation, understating the benefits of drilling. (To be fair, Republicans tend to ignore the environment when they discuss the costs/benefits of environmental policies, merely citing the lost economic output as measured via GDP.)

House Speaker Nancy Pelosi has engaged in more nonsensical rhetoric. She said, “The Bush plan is a hoax. It will neither reduce gas prices nor increase energy independence. It just gives millions more acres to the same companies that are sitting on nearly 68 million acres of public lands and coastal areas.”

Even if she was right in that the oil companies are not drilling where they “should be” now in order to restrict supply and raise the price to consumers, why would they drill in newly available places? Despite the accusations one may hear constantly from environmentalists, oil companies are in this business to make money, not primarily to harm the environment (which is indeed a byproduct of their business). By her own argument, she should have nothing to worry about with regards to the environment if the offshore drilling ban is lifted.

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