To burst the oil bubble, use a drill! If Congress stands up to special interests and develops domestic energy sources, oil prices will tumble.
The United States has ample oil reserves. For more than a decade, environmentalists have prevented drilling for oil and natural gas in the "1002 Area" of Alaska's Arctic National Wildlife Refuge, an area in the refuge's Northern Coastal Plain set aside by President Carter and Congress for possible oil development in 1980.
At 1.5 million acres, the 1002 Area is less than 8 percent of the refuge. The U.S. Energy Information Agency estimates the amount of recoverable oil there at 10.4 billion barrels.
President Clinton vetoed a bill authorizing drilling in ANWR under environmentalist pressure in 1995. Had he not done so, nearly 1.4 billion barrels of oil would likely be flowing from ANWR this year. That's equal to about one-quarter of our current imports.
Subsequent efforts to open as little as 2,000 acres to oil and gas exploration have failed repeatedly, but Sen. Pete Domenici, R-N.M., is trying again this year.
If you think oil prices are inflated, just get a load of environmentalists' claim that opening 2,000 acres to development would have a devastating impact on ANWR. The acreage involved is just 0.01 percent of ANWR's total.
The United States also has enormous oil and gas reserves in the Outer-Continental Shelf, but environmental lobbyists have succeeded in keeping these resources locked away, too. There's been a moratorium on offshore drilling since 1981.
The Department of Interior's Minerals Management Service estimates that areas covered by the moratorium contain nearly 19 billion barrels of recoverable oil - equal to about four years of U.S. oil imports.
But don't look for the Outer-Continental Shelf to be opened anytime soon. A U.S. House Appropriations subcommittee rebuffed an effort to lift the 27-year moratorium earlier this month.
The United States also has considerable reserves of oil shale - a sedimentary rock that produces oil when heated.
The Bakken Formation, located in North Dakota and Montana, contains between 3 billion and 4.3 billion barrels of previously undiscovered, recoverable oil while the Green River Formation, in Wyoming, Utah and Colorado, contains between 500 billion and 1.1 trillion barrels of recoverable oil. The midpoint estimate for the Green River Formation alone is three times Saudi Arabia's known reserves.
Environmentalists, predictably, argue that increased drilling would do nothing to reduce fuel prices.
Their first argument is that it will take a decade for these areas to produce oil. But while production may be years away, the decision to drill will immediately burst the oil bubble created by investor speculation.
Speculation has contributed significantly to the price of oil: Mary Novak of the economic forecasting firm Global Insights estimates that if speculation were eliminated, a barrel of oil would cost just $75 to $80.
Why do many investors flock to oil? Because two American reserves are going in opposite directions. The Federal Reserve has produced a veritable gusher of dollars, driving down the dollar's value, while our oil reserves are kept below ground, keeping oil prices high.
As long as investors expect demand for oil to grow and supplies to remain the same or shrink, they'll continue using oil as a hedge against the devaluing dollar. Drilling would change all that.
The Greens' second argument is that OPEC will respond to our domestic oil development by reducing oil output, keeping prices high.
The reality is that sustained high prices aren't in OPEC's long-term interest, as it provides incentives to oil development projects that wouldn't exist otherwise. The Rand Corp. estimates crude oil prices would have to be between $70 and $95 per barrel for oil development in Green River to be profitable. Once developed, it will become a permanent competitor to OPEC.
The facts are clear: Developing domestic sources of oil will help end the energy crisis.
And with two-thirds of Americans now in favor of such drilling, it's time to act.