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Sunday, April 30, 2006

Gas Prices
William F. Buckley takes up the subject.
And indignation at oil prices is not intelligently exercised by legislative action. Factors here to be considered are varied.
  • In the past 20 years, profits from oil and gas investment have been lower than the profits from many alternative economic enterprises. Ten percent profit is normal (and normative). Oil and gas investments have tended to run two or three points lower than that ten percent.
  • To effect an increase in supply requires a lot of investment and a lot of patience. Five to ten years, significantly to increase supply.
  • The stranglehold of OPEC is not easily dealt with by normal economic responses, given that it is a politically controlled oligopoly.
  • The causes of significant shortfalls in oil production are often political. Mexico is off on another nationalistic excess. Nigeria is in turmoil, reducing production. Iraq is almost one million barrels a day under what it used to produce. Iran is a day-by-day disrupter. The Saudis, who in the past, have with their huge reserves acted as a kind of federal bank, are needing to do more development.
There isn't anything the U.S. can do - except keep its legislative fingers out of the stew. And open its blinded eyes to the possibilities of nuclear energy.

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