Let's hope producers will invest in new fields

No politician will say that high gas prices are good for you.

But Holman Jenkins will tell you they have certain advantages.

Jenkins, a columnist for the Wall Street Journal, explains it this way, essentially:

Many of the world’s oil fields are approaching the stage in their depletion where taking oil from them will get slower and more expensive. New fields are needed, but producers are reluctant to make the large investments necessary for deep-water searches and for exploration in some other parts of the world, for fear that prices will fall and the new finds will not be profitable. If prices remain high and risk becomes more acceptable, more oil may be found.

There seems, according to Jenkins, to be plenty of oil in the ground. The trouble is the expense of getting it out.

Of course, that isn’t what has caused gas prices to be so high. Part of what did, according to conventional wisdom, is the failure of OPEC nations to produce enough to make oil cheaper. Moreover, there is a fear that supplies will be shrunk through terrorist acts. As Jenkins notes, suicide bombers in three boats hit Iraq’s southern terminal last month, and suicide killers shot up a petrochemical plant in Saudi Arabia a few days later.

Jenkins didn’t say this, but it is true: When a consumer thinks a product is going to get scarce, he buys as much of it as he can and he will pay more for it. Oil refineries are behaving the way North Carolinians behave toward bread and milk when a hurricane is coming.

It would seem logical, moreover, that the price of gas might be elevated because there seems to be no limit to what we will pay for it. At more than $2 a gallon, we are still motoring merrily along.

In addition to those mentioned by Jenkins, another result of the current prices could be intensified efforts to find desperately needed alternative energy sources. The first manufacturer to produce a hydrogen-powered car is going to make a mint. It will come, eventually.

Meanwhile, there may be political ramifications to the high prices. The blame falls by nature on the current officeholder, President Bush, even though he is not responsible. Prices might be lower if Congress had passed his proposed energy plan, which includes increasing the supply by drilling in the Arctic Wildlife Reserve. Sen. John Kerry, Bush’s presumed Democratic opponent in November, has suggested nothing more than pressuring OPEC for more production. He once advocated a new 50-cent tax on gas, but not since he has been campaigning for president.

And speaking of politics, Bush is right to hang on to the Strategic Petroleum Reserve, which would be enough to last the country for two months. Some of his critics have said he should allow that oil to reach the market but Kerry, to his credit, has not.

That reserve is there for use in case America’s oil imports were ever cut off, and there never has been time when such an interruption was more conceivable.

Eventually, oil prices will decline. In the meantime, as we suffer at the pump, let’s hope that producers will take advantage of the prices and find us some new crude.

—MIKE ROUSE

Published in Editorials on May 22, 2004 10:56 PM