Economics argues for domestic oil drilling

Jim Stockhausen, Henderson

Wednesday, July 2, 2008 | 2:04 a.m.

In response to Terry E Peele’s Monday letter, headlined “An easier way to lower gas prices in the U.S.”:

He states: “Many are arguing that opening offshore drilling and drilling in the Arctic National Wildlife Refuge will result in lower prices for a gallon of gasoline and our being less dependent on foreign oil. If domestically produced crude is priced the same as imported oil, where is the difference in the price at the pumps?” Mr. Peele is ignoring the law of supply and demand. If supply is dramatically increased, prices will fall. The domestically produced crude, as with all world crude, will sell for less.

He states: “What (President Bush) should be doing is asking companies producing domestically to withhold their crude from the world market and sell to the American consumer at a lower price. That would have a more immediate effect on the price at the pump.” Again Mr. Peele is ignoring the law of supply and demand. If supply is decreased, world prices will rise. How can we require a publicly owned company to sell to the lowest bidder? How would the stockholders, including millions in the United States, feel about that?

He states: “What is really happening in this debate is the American consumer is being sold a ‘red herring.’ The oil companies want to drill in these environmentally sensitive areas to put more crude on the world market, taking advantage of the growing demand by China.” If these oil companies put more crude on the world market, the United States would benefit with lower gas prices and more profits to U.S. companies, enriching their stockholders.