This earlier post noted that even the Washington Post editors now understand the folly of Congress considering a windfall profits tax against oil companies as a result of the price spikes that resulted from temporary supply disruptions. The last time that Congress imposed such a tax (late in the Carter Administration), domestic oil production actually decreased by about 5%, which resulted in higher gas prices, and U.S. reliance on foreign oil inceased by about 10%.
Reflecting that markets tend to take care of supply problems if Congress just stays out of the way, this Wall Street Journal ($)/Russell Gold article (free version here) notes that the recent surge in natural gas prices has prompted major exploration companies to make huge investments in recovery of natural gas from unconventional fields located in the contintental United States. The unconventional gas fields contain natural gas that is locked in giant swaths of coal, sandstone or shale from which extraction is expensive and difficult. However, the increase in natural gas prices, coupled with new technologies that crack open these rocks and extract large quantities of gas, is touching off an exploration boom in such fields throughout the Rocky Mountains and in Texas.
Meanwhile, not to be outdone by the fruits of such boring capitalism, the world’s favorite socialist of the moment — Venezuela’s Hugo Chavez — has hooked up with the Kennedy Family and other northeastern U.S. anti-capitalists to supply some oil to U.S. consumers in the northeast at 40% below current market prices. This Opinion Journal piece scours the political motives of Chavez’s “charity,” but there is an even simpler problem with this dubious arrangement — it does not make any sense for Chavez to sell oil at a 40% discount to people in the U.S. who are far richer than his constituents in Venezuela. Not exactly what I would call looking out for the interests of the little guy.