Free the Gas Market
We canít change worldwide demand, but we
can lift unnecessary restrictions on production and refinery
By Herman Cain
October 5, 2005
Good ideas are hard to come by Ė especially in Washington. But a
good idea can stand the test of time, and it can weather the assault
of its critics if it gets the opportunity to prove itself.
¬†¬†¬†¬† President Bush had a couple of good ideas in his recent
address on the U.S. energy situation. He said he would temporarily
suspend environmental regulations on gasoline production to ease our
supply crunch, and he would work toward helping refineries expand.
Congress, as well as state legislatures, must follow the presidentís
lead and find solutions to the pressing need for increased supply
and refining capacity. Our demand for oil and gas products isnít
going down any time soon, and itís time for Washington to get
serious about our gasoline supply. Itís time to put ideas into
action and free our gas market.
¬†¬†¬†¬† Bush talked about suspending Environmental Protection
Agency rules that require specific blends of gasoline for different
seasons and different areas of the country. His reasoning was that
suspending some of the rules during this post-hurricane crunch would
allow gas to flow more freely around the country, getting supplies
where they are needed.
¬†¬†¬†¬† This is a good idea for the short term, and an even
better idea for the long term. We are required to have 17 unique
blends of gas due to different statesí emissions standards. Congress
should enact a uniform federal standard for clean gasoline and
eliminate the hodgepodge of fuel blends mandated throughout the
¬†¬†¬†¬† Some states even have laws dictating a minimum gasoline
price, while others Ė as we saw after Hurricane Katrina Ė have laws
restricting how high stations can raise their prices. That means we
have laws against low prices and laws against high prices. And once
a price is set, retailers must tack on state and federal gas taxes
ranging from 26 cents to about 63 cents per gallon.
¬†¬†¬†¬† Laws dictating prices run counter to free market
principles. When supply is squeezed, it is policies like that that
lead to shortages and ďWeíre ClosedĒ signs turning up at gas
stations. But my neighborhood station is also held captive by the
supply chain of oil drillers and oil refiners. And thatís where
Bushís other good idea comes in.
¬†¬†¬†¬† The president mentioned expanding existing refineries
and the construction of new ones. Just like the gasoline blends, the
EPA has its fingerprints on our refinery shortage. Regulations on
plant emissions abound, not to mention the bureaucratic obstacles to
building a new refinery. Arizona Clean Fuels has been trying to
build a new refinery for the past 12 years Ė and it just got its air
permit this year. If it is too much trouble to expand our nationís
refinery capacity, then investors wonít do it. And the ability to
refine more oil would be a boon for our gas supply.
¬†¬†¬†¬† One investor whoís interested in the supply problem is
Richard Branson, the British entrepreneur behind Virgin Atlantic
Airways. He says heís ready to build his own refinery. It probably
wonít be in the United States, because the process would be too
tangled in bureaucratic red tape. This is a timely reminder that
itís entrepreneurs like Mr. Branson who will be able to increase the
worldís refining capacity Ė not the government. Unless government
gets out of the way, those would-be refinery builders might find
other investments more attractive. Iíd hate to see Mr. Bransonís
American counterparts give up on refinery building and expansion in
¬†¬†¬†¬† Thereís another idea that the president and Energy
Secretary Samuel Bodman are talking about: conservation.
Conservation certainly has a role in lowering gas prices, keeping
our air clean and mitigating the effect of gas prices on our
wallets. We could probably all reevaluate our driving habits and
make more efficient use of the gas in our tanks. Conserving gas
alone, however, is not the sole solution to combating rising energy
prices or the supply problem. Rapidly rising worldwide demand for
petroleum Ė particularly in China and India Ė directly affects
petroleum supplies and, therefore, the price we pay at the pump.
Further, the free flow of oil is a crucial component to the future
of our free market economy.
¬†¬†¬†¬† What we need is to free our gasoline market. I am
definitely opposed to flagrant abuse of our environment, but I am
also opposed to flagrant choking of our economy caused by too many
regulations. The fewer restrictions suppliers face, the easier it
will be for them to make gas available. Years from now, when weíre
able to fill our tanks without worrying whether our neighborhood
stations will be open tomorrow, weíll be glad this generation acted
on these ideas today.
Herman Cain is the former president and CEO of Godfatherís Pizza,
Inc. and currently is CEO and president of T.H.E. New Voice, Inc., a
business and leadership consulting company. He is the National
Chairman of the Media Research Centerís Free Market Project.