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Energy Markets Need Less Regulation Not More

As the crisis in Iraq continues to evolve and energy prices spike as a result, our government should make it a priority to let markets work. Oil prices are around $115 per barrel and the price at the pump for average Americans is approaching $3.70 per gallon. Because businesses rely on energy to operate and trade, higher energy prices increases prices overall. Yet, politicians in Washington are doing everything they can to raise energy prices.

The Senate committee on Energy and Natural Resources voted last week 12-10 to force approval for the Keystone XL Pipeline without the president’s signature. This charge is supported broadly by both Republicans and Democrats in the Senate. However, Senate Majority Leader Harry Reid is unlikely to bring the proposal to the floor.

Both Reid and Obama, under pressure from environmental groups, have consistently opposed completing the Keystone XL Pipeline even though it is already thousands of miles long. The pipeline would make oil transportation cheaper and safer throughout the United States, easing some of the pressure on world oil prices to increase. This pipeline is just one example of the numerous projects which progressives, under the banner of environmentalism, will not support. Some House Republicans are fed up with the obstructionist Democrats and have brought a bill, H.R. 3301, to the floor which would expedite permit approval not just for Keystone XL but for all pipelines. This bill passed the House this week.

In other news, Senators Bob Corker and Chris Murphy are both proposing an increase in the federal gas tax from 18.4 cents to 30.4 cents to fund further road building. Such a tax would directly increase gas prices in addition to the increases from the chaos in the Middle East. This is a burden for both producers and consumers and places transportation management further away from states and localities. Also, the EPA recently released a new rule to cap coal power plant emissions at 30% nationally and the Supreme Court mostly upheld their power to regulate energy production in a recent ruling. This will certainly result in higher energy prices, higher prices overall, and lost jobs.

These politicians clearly distrust the market. Though coal power plants supply energy effectively and technology is already moving towards energy-efficiency, the State has its own goals in mind. Though the efforts of companies to build pipelines and other energy projects are likely to lower energy prices and improve our technology, the government thinks it knows better. It is ridiculous enough that private sector projects must go through so much red tape and regulation for approval. It is even more absurd that key leaders in government have the power to outright block private decisions.

Free markets, under the direction of consumers and entrepreneurs, best satisfy the preferences of participants. When prices can move freely, quantity supplied will equal quantity demanded and both sides of the market are satisfied. If a business is able to construct a new project, this is because its benefits for the business and consumers will outweigh the costs of production. Yet, the government sees the need to manage the free market. It forces its goals from the top down and damages enterprise. It cannot economically calculate like entrepreneurs can. It is especially during times of crises when prices must move freely and businesses should be able to act as they please to respond to changes. Energy prices are currently higher than they could be. As Iraq drifts into civil war, the government should release its stranglehold on energy production for the benefit of the American people.