I’m not an economist but I feel people have missed a few points regarding the recent hike in gas prices and arguments for domestic exploration.
Real quick: Oil companies are publicly held entities. They therefore have to keep their shareholders in mind; it’s part-and-parcel of our economic system. What do shareholders want? Solid performance, growth in sales, and increased profits. To them the recent rise in gasoline prices can only be viewed as a boon.
How did it happen? We seem to have managed to get as close to supply and demand parity as we have been in decades. Simply put: supply is currently at demand and prices have corrected commensurately.
This is a function of free-market Capitalism. Prices are up and these companies and their shareholders are enjoying the benefits of record-breaking profits. Why on Earth would these companies be at all interested in increasing supply? An increase in supply should see a corresponding drop in price, and a drop in price would see a reduction in profit. The very concept of opening up domestic exploration and/or recovery runs contrary to the company’s and shareholders best interests.
The problem runs deeper, however. Countless individuals and organizations are partially to heavily invested in the petroleum industries via mutual funds, pension funds, and retirement accounts. Would anyone really want to meddle with the market and negatively impact these wide-spread investors? Tampering with markets thirty-five years ago resulted in a worsening of the oil crisis under President Nixon, cascading through the Carter presidency.
Lastly, ask yourself why politicians would ever vote for opening up reserves and wastelands for exploration. The politicians posit, posture, and pander to the Environmentalists and the NIMBY’s by fighting “for the environment,†all the while riding the Environmental wave to re-election. At the same time — and this is the point people seem to be oblivious to — by their legislative inactivity the politicians are protecting the profitability of a major industry (a favor likely to be returned, no?).
If only those constituents knew that by protecting ANWR, the California and Florida coasts, and preventing oil shale recovery their elected officials are actually doing more for Evil Oil then anything else could. Clever, huh?