Opening the Alaskan National Wildlife Refuge for oil exploration is a good thing, but it is being pushed for the wrong reason. As an economist, I have no idea whether we should be less or more dependent on “foreign oil,” and except for all-knowing central planners, neither does anyone else.
Actually, there is no reason to care about what percentage of our oil comes from where. The proper mix of foreign and domestic oil is revealed by the market decisions of freely trading consumers and producers, and in a free society that is the way it should be. There is no particular reason to suspect that new oil from Alaska, or anywhere else, will have an effect on our level of dependence. This oil will enter the world market and be sold alongside oil from all other sources. Greater independence from foreign oil might or might not result.
The reason that we should open the refuge and other areas to oil drilling is to give the Organization of Petroleum Exporting Countries some competition. What cartels hate more than anything are new supplies entering “their” market from sources outside the cartel.
What every cartel needs to survive is supply restrictions, and these can come only from government. Usually, supply-restricting laws are implemented to protect a domestic cartel. Examples in this country include the former Civil Aeronautics Board, enforcing the airline cartel; the Federal Communications Commission, enforcing the broadcast cartel; and tobacco quotas, establishing and enforcing a tobacco grower’s cartel.
Since the energy crisis of the 1970s, except for a brief period in the 1980s, our energy policies have acted as a supply-restricting cartel enforcement mechanism for OPEC. In the 1970s OPEC’s market power came from President Richard Nixon’s price controls on crude oil and gasoline. Because of the controls, domestic exploration and production was stopped most of the decade. In the 1980s, after President Ronald Reagan abolished the Nixon controls, the bottom fell out for OPEC as domestic exploration soared and the world went from oil shortage to oil glut.
But starting in the 1990s, OPEC’s new cartel enforcement agency in the United States became the Department of Interior. By enforcing restrictions on Alaskan and off-shore drilling, coal mining in the Southwest, and nuclear power-plant construction, coal and nuclear being substitutes for oil, U.S. policies have allowed OPEC to thrive. This is taking place with the backing of the environmental movement—which is OPEC’s best friend and most effective lobbyist in Congress.
The real reason to allow drilling in the refuge, off the coast of North Carolina, or wherever, is to break the back of OPEC. The policy of tacit collusion between the Arab oil-producing states, the American environmental movement, Congress and the Department of Interior needs to be ended immediately. The reason is to release American consumers from the monopoly stranglehold that this unholy alliance has created.
At the end of the day we may be buying the same proportion of our oil from foreign producers as we are today. The point is that there will be the possibility to go elsewhere, to fire our suppliers, whoever they are. This is what’s important, not how much we’re buying from whom at any particular time. Our goal should not be energy independence but energy freedom.
Dr. Roy Cordato is vice president for research and resident scholar at the John Locke Foundation.