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Jul 12, 2008

Munger, oil from a libertarian perspective.

Delaware Libertarian has an interesting piece on the position of Dr. Mike Munger, Libertarian candidate for governor in North Carolina on off-shore drilling for oil and natural gas.

I really cannot fault this one as it is really the free market solution, the government gets out of the way and let business get on with the job of supplying the consumer with fuel. The current shortage is not as Obama and associates would have it, a failure of free enterprise but is a failure of government intervention in the free market.

Could anyone take seriously the suggestion that in a time of rising demand oil companies would not go looking for new fields to get into production, would not build more refineries to turn out a marketable commodity, and in so doing deny themselves huge potential profits?

For a long time governments in the US have locked huge tracts up and prevented exploration in them for political reasons, yet now we see the left hypothesizing that oil companies have deliberately cut back on exploration to reduce the amount of oil and force up the price.

Dr. Munger's proposed comprehensive solution would require broad cooperation at the federal and state level. The key points are:

1. End tariffs on ethanol imports.

2. Allow drilling and new exploration for high-yield sources of oil and natural gas on Federal lands and offshore in all U.S. waters.

3. End domestic ethanol subsidies, which waste both energy and money.

4. Allow the increasing price of gasoline and oil to do its job, by encouraging consumers to conserve, and rewarding oil companies for finding new reserves.

5. Allow the immediate development of new domestic refining capacity and cracking facilities, which has been held up for more than a decade by short-run political gamesmanship.

"The key is to recognize that the increased price of oil and gas will solve this problem for us, if we let it," according to Dr. Munger. "Oil companies will develop new reserves, and new refining capacity. Consumers will choose more fuel-efficient cars, and heating options. Alternative fuels and energy sources will become competitive, and will be developed rapidly in the marketplace."

As for the current proposals by both Bev Perdue and Pat McCrory, "They will have no effect, and in fact they are not even making any real effort" to solve the problem," said Dr. Munger.

None of this will cut prices in the short term, but will create a light at the end of the tunnel, and perhaps make OPEC realize that the west will no longer be held to ransom in a few years. It would then seem logical to them to make more supplies available now to maximise their production and profits.

Dr. Munger has a PhD in economics and experience working in regulatory policy at the U.S. Federal Trade Commission. He holds a current joint appointment in Duke's Economics Department. He believes that only comprehensive energy reform will work to solve the nation's energy security problems.

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