June 12, 2008 | By Nathaniel Ward

Why does gas cost so much?

The average price of gasoline nationwide has crossed $4 per gallon, according to news reports. The cheapest fuel can be found in Missouri, where it costs $3.80 a gallon, while Californians fork over nearly $4.50 at the pump.

How did this happen?

“High oil prices are here to stay due to heightened political risks, irresponsible behavior by oil-producing governments and growing global demand outside U.S. control,” Heritage energy expert Ariel Cohen writes.

The wrong solution

So what do we do about high energy prices?

A recent proposal from liberals in Congress—blocked on Tuesday in the Senate—demonstrates the wrong approach.

Heritage’s Ben Lieberman argues that the legislation “repeats the mistakes of the past by adding constraints that will discourage domestic energy supplies.”

For example, the proposal would empower Washington to:

• Raise taxes on domestic oil production. When Congress adopted this policy in the 1970s, domestic production actually dropped, making us more dependent on imports and hardly helping prices at the pump.

• Pick winners and losers among energy alternatives. This strategy of government direction of the economy has failed time and again in the past and rewards special interests at taxpayer expense.

• Impose counterproductive “price-gouging” legislation. Like price controls, Lieberman explains, such laws “try to make high prices illegal,” keeping new supplies from reaching the market. Without more supply, prices remain high.

“Simply put,” Lieberman concludes, “the Consumer-First Energy Act is an anti-energy bill that will only add to already-high energy costs.”

The right solution

The correct solution to high energy prices would be to get government out of the way and allow for more energy production.

Lieberman suggests, for example, that “we need fewer restrictions on domestic oil drilling. America remains the only oil-producing nation that has placed a substantial amount of its energy potential off-limits.” The ANWR oil fields in Alaska are estimated to contain oil “equivalent to 15 years of imports from Saudi Arabia.”

Cohen also has a few ideas:

1. Nations that consume gasoline can pressure oil producers to open more energy to production, for example by limiting the power of the OPEC cartel.

2. Energy firms can invest in new technologies that can promote efficiency and allow exploration of new energy sources.

3. The auto industry should “prepare for the likely transformation of automotive transportation when market forces will shift it to electric, hybrid, and plug-in hybrid cars.”

Heritage Foundation research has also pointed to expanded nuclear energy, a repeal of the misguided ethanol mandate and avoidance of harmful cap-and-tax global warming schemes as means to keep energy prices low.

Other Heritage work of note

• Entrepreneurship. Lawmakers are considering a massive new bailout for Amtrak, the inefficient government-subsidized rail transit company. Heritage’s Ron Utt points out that “over the five-year life of the legislation, taxpayers would have to provide a total of $12.8 billion for the benefit of the tiny share of the nation’s travelers using the system.” Instead of a no-questions-asked bailout, Utt suggests linking subsidies to improved performance.

• Entitlements and Entrepreneurship. Heritage economist Brian Riedl reports that the 2009 budget plan that Congress approved last week includes massive tax hikes and gimmicks to raise tax rates even more over the long run; increases discretionary spending; and ignores the looming tsunami of spending on entitlement programs.

• Family and Religion. Heritage’s FamilyFacts.org has produced another important video demonstrating how social science data upholds traditional families. The latest video highlights ten data points that show how important it is that fathers remain involved in their children’s lives.

• American Leadership. The United Nations has sunk to new depths with the election of an anti-American Nicaraguan official as president of the General Assembly, Heritage’s Nile Gardiner and Ray Walser write in Human Events. “There is every chance that D’Escoto will abuse his status by turning the presidency into a platform for his anti-U.S. vitriol,” they write. “The position will provide a high profile bully pulpit for launching ferocious attacks on U.S. foreign policy, and the traditional neutrality of the presidency is likely to be shattered by the presence of a far left ideological zealot with a deep hatred for America.”

• Entrepreneurship. Are government-run businesses more efficient? Hardly. Writing on Townhall.com, Heritage President Ed Feulner explains how the Senate’s subsidized cafeterias couldn’t break even—despite sky-high prices—forcing the liberal Congress to bow to reality and privatize the service. Amtrak also loses up to $130 million a year on food service alone, again at taxpayer expense. And now, Feulner writes, “the same people who have been losing our money in government-restauranteuring are confident they’ll do a much better job handling the even more demanding energy business.”

In other news

• Iran is threatening to sue Western nations for damaging its reputation.

• The military conducted another successful missile interception test off Hawaii last week.

• Sen. Bill Nelson (D-Fla.) has introduced a Constitutional amendment to abolish the Electoral College and replace it with a national direct election for President. The legislation would also regulate the ways private political parties choose their nominees for the office. A 2004 Heritage paper explains that the Electoral College should be preserved because it “preserves federalism, prevents chaos, grants definitive electoral outcomes, and prevents tyrannical or unreasonable rule.”

• Twenty-five years ago Monday, Prime Minister Margaret Thatcher’s Conservative Party won a landslide election. Lady Thatcher is today a Patron of The Heritage Foundation.

• The Palm Beach Post reports on the growing number of Americans seeking to add citizenship in European countries on top of their American citizenship.

• Liberals in Congress quite rightly campaigned in 2006 on a pledge to curb the wasteful practice of assigning special interest earmarks in legislation. Lawmakers have nevertheless added more than 11,000 of these pork barrel projects into bills so far this year.

• The chief executive of the BP oil company said gasoline prices will remain high because of lack of investment in production capacity. This is why Congress should consider lifting hurdles to new production, energy exploration and construction of nuclear facilities

• Americans are confused about Congress’ arbitrary plan to switch most broadcast television to digital signals by February of next year. Washington has mandated that broadcasters stop using traditional signals—forcing consumers to buy new converters through a convoluted government rebate program.

• Many American chemical manufacturers are subject to strict new regulations—imposed by European Union bureaucrats. Europe’s managers have a presumption of guilt, the Washington Post reports: while in America the government must demonstrate a product is unsafe, in Europe it is incumbent on businesses to prove their products aren’t harmful.

Coming up at Heritage

To attend these or any other events at Heritage please RSVP at Heritage’s website. Or you can view these events live online. All times are Eastern.

• On Thursday, June 12 at 9:30 a.m., Heritage hosts a multi-part panel discussion on measuring economic growth and development and techniques to foster entrepreneurship.

• On Friday, June 13 at noon, Steven Mosher of the Population Research Institute looks at the myths and harsh realities of the population control movement, which he believes to be a gigantic, costly, and inhumane fraud upon the human race.

Nathaniel Ward is the Editor of MyHeritage.org—a website for members and supporters of The Heritage Foundation.

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