Start Drilling Now to Lower Oil, Gasoline Prices by Kevin Hassett
The Bear on Aug 14 2008 at 8:26 am | Filed under: Energy Policy
High energy prices have everyone who doesn’t own an oil well in the dumps. Consumer sentiment is the lowest it has been in almost 30 years, and a recent analysis of sentiment by Economy.com suggests that high gas prices are the main culprit.
Against this backdrop, it is hardly surprising that politicians are debating ways to reduce energy prices.
To drill or not to drill?
The two sides are as far apart as can be. Republicans have argued that, in addition to aggressively seeking alternatives to oil, we should work to develop new reserves at home. Democrats, for the most part, have argued that oil discoveries can’t affect the current high price, because any newly discovered reserves take so long to deliver.
Barack Obama, the presumptive Democratic presidential nominee, summarized this argument concisely recently, when he said: “Offshore drilling would not lower gas prices today, it would not lower gas prices next year and it would not lower gas prices five years from now.”
Who is right? The economics of natural resources clearly favors the Republican view.
The economics of extracting resources is quite simple and intuitive.
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