We finally have some good economic news: The price of oil (and therefore gas) is going down; way down. Wholesale oil prices dropped from about $100 a barrel to $66, but gasoline prices have fallen from near $4 a gallon to $2.78 at the close of last week.
What’s causing the price drop in gas? Is it the government’s policies — especially for the last five years — of increasing taxes, massively increasing government spending and debt, and semi-nationalizing or outright socializing private industries? Is it “regulation” that saved us from super-high gas prices?
To hear most politicians talk, everything good that happens is the result of the government. Since the government is involved in virtually everything, there’s a certain superficial truth to this claim. Sometimes, economic conditions improve when the government removes itself, or minimizes its control over, some private sector of economic activity. I suppose you could give the government credit in that case, but one thing is for certain: Nothing that consists of creating economic growth ever occurred in a government office. The government office itself is made possible and funded by the activities of private individuals in the private sector — i.e., tax money or (more often today) simply borrowing against the national debt.
In the case of oil and fuel, it’s more that the government didn’t manage to get as successfully involved in restraining and restricting private activity as it otherwise would have. Case in point: the practice of obtaining gas and fuel known as fracking.
The recovery of natural gas through smart drilling and hydraulic fracturing is cutting energy costs and raising living standards throughout the United States, a newly published study has found. Economists at IHS Inc. report hydraulic fracturing, also known as fracking, will likely raise average U.S. household income by $2,700 per year and create 1.2 million new jobs by 2020.
Hydraulic fracturing is the process of extracting oil and natural gas from shale rock layers deep within the earth. Engineers drill thousands of feet below the earth’s surface and then create cracks in the shale formations by injecting water, sand, and trace chemicals under high pressure. Although energy producers have utilized fracking since the middle of the last century, Americans are benefiting from a fracking revolution today thanks to recent technological advances and new oil and natural gas discoveries. [Source: IHS.com Sept. 2013, news.heartland.org, 11/8/13]
Although strongly opposed by environmentalists and many of our reigning politicians, fracking — without noticeably destroying the planet — has actually led to a better life for millions of Americans for whom it’s a challenge to pay high prices at the gas pump.
Keep in mind that the same people who oppose fracking also have opposed any kind of additional oil pipeline, offshore drilling or any oil production of any kind anywhere near the United States. In addition to making us more dependent on the religiously fanatical and dangerous Middle East for oil, such attitudes and policies have (by restricting supply) contributed to the rise in oil prices. Incredibly, these same Mother Earth lovers who can’t stand mankind doing anything at all with or to the sacred planet are the very ones who most stridently oppose wars in the Middle East — upon whom their environmentalist policies have made us more dependent.
Normally, most people attribute the high cost of gas to corporate greed. “If big oil companies like Exxon weren’t greedy, the prices would not be so high.” Of course, you don’t hear the same explanation when oil prices come down. Are price reductions due to corporate greed? Obviously not. Are they due to a sudden desire of profit-making companies to be charitable? No, it’s not that either. It’s much more basic than that. It’s called the law of supply and demand.
It has been said that even in a Communist society — one where the economy is completely run by political incompetents, rather than partially run by them as in our own — that the laws of economics are still operative. Supply and demand, even on a “black” market or underground market, ultimately determine (under more hazardous conditions, in those cases) the costs of various items (e.g., the black market for illegal drugs.)
We have a severely hampered market economy in the United States. Politicians and corporate leaders often do interact with each other in such a way to exploit the poor hapless voters who assume that government does somehow control the whole economy. In a fully private market economy, no business owners would be able to hide behind the skirts of their political enablers; they would flourish or fail completely at the hands of their customers. To a large extent, that’s how businesses still must operate, even today. At the end of the day, even in a severely hampered market economy (some call it “crony capitalism”) such as our own, supply and demand has to assert itself.
Fracking, it appears, has ended up playing a role in increasing the supply of affordable fuel to customers who need and demand it.
In fact, oil prices are dropping so low, and so quickly, that alarm is being raised by some about the impact on stock in oil companies. As economist Lawrence Kudlow writes,
While very few Democrats, including President Barack Obama, supported the entrepreneurial, innovative dynamism of horizontal drilling and hydraulic fracturing, they’ve lately tried to take credit for the oil and gas shale revolution. No one’s buying it. AEI’s Mark Perry actually wonders why the Democrats aren’t scheduling hearings in the lame-duck Congress to blame oil-industry manipulators and evil speculators for the drop in oil prices.
Actually, both political parties support continued regulation of private industry, including oil. They differ only in that Democrats foster unhampered regulation while Republicans (at least some of them) appear interested in reducing some regulation. What both sides miss is that the magical and mythical “regulation” doesn’t solve anything. “Regulation” doesn’t refer to legitimate claims against damage to body or property; instead, “regulation” as we know it consists of government setting the priorities for entire industries, determining everything that an industry may do, and in the process controlling the private and independent activities of individual citizens (who mistakenly think government is helping them rather than controlling them).
Regulation certainly doesn’t make prices cheaper. Whenever regulation affects prices at all (not only in the oil industry, but other fields such as medical care), it serves only to increase prices, not lower them. Cost increases are always passed along to the customer; and private business owners always get the blame.
It might risk oversimplifying to claim that fracking alone has lowered the cost of gas. But evidence suggests it has clearly played a role. Regulators didn’t get their hands on this practice in time, and as a result the cost of fuel will be much less for Americans going forward, absent some other factor that might arise either in the marketplace or the many onerous activities of an always growing and expanding government.
The main argument environmentalists usually think they have in their favor is not science so much as morality. “Sure, have your lower gas prices and make your lives easier. But it’s a selfish annihilation of the planet.” They try to get people to feel guilty. In this respect, they remind me a lot of the 1950s Catholic grade school nuns who tried to get kids to feel guilty for secular pursuits (most often sex or sexuality). They’re nuns, only with guns.
Modern-day environmentalist fundamentalists succeed insofar as people will end up voting for hard-core environmentalist politicians like Barack Obama (or his spineless counterparts in the Republican Party); but they still keep driving their cars and otherwise leaving those sinful “carbon footprints” to advance their human lives on the planet, instead of treating the planet as some kind of mystical God figure whom you dare not tarnish or alter in any way.
It takes a philosopher to challenge environmentalists on this most basic point. Philosopher Alex Epstein puts it eloquently when he asks, “For decades, environmentalists have told us that using traditional fuels is a self-destructive addiction that will destroy our planet. Yet at the same time, by every measure of human well-being, from life expectancy to clean water to climate safety, life has been getting better and better. How can this be?” [See alexepstein.com]
Maybe — just maybe — human productivity has made life on earth better for the human beings who are entitled to inhabit and enjoy that planet. And maybe we shouldn’t feel guilty for that fact.
Be sure to “friend” Dr. Hurd on Facebook. Search under “Michael Hurd” (Rehoboth Beach DE). Get up-to-the-minute postings, recommended articles and links, and engage in back-and-forth discussion with Dr. Hurd on topics of interest. Also follow Dr. Hurd on Twitter at @MichaelJHurd1