Sen. Barack Obama and Sen. Hillary Clinton both say that they can lower gas prices if they are elected president. But unless they plan on putting an additional couple of million barrels of oil onto the world market from their own personal stock, their efforts probably will not lead to much of a reduction at the pumps and could make things worse. Despite the liberal mythology that gas prices are set in a shadowy conspiracy by oil companies in some oil-filled back room, the fact is that oil is a commodity traded on the world market. American oil companies can no more set the price of a barrel of oil than they can impact heavily on the world's supply.

So what can a president of the Federal government in general do to help ease gas prices? The answer in the short term is not much. The Federal government does not produce a drop of oil on its own, so nothing it may do can have an immediate impact on production. But the government can institute policies that negatively impact supply, leading to higher gas prices. Increasing taxes on oil companies and restricting exploration and drilling are two of those policies. There are only two guaranteed ways to reduce the long-term price of a commodity, lower demand or increase supply. Conservatives believe that the government should for the most part resist the temptation to try and regulate lower prices and allow the oil companies to do what they do best, produce oil for the market.

Government intervention in the market inevitably leads to restrictions in supply. The United States could end its dependence on foreign oil in less than 10 years if the government would allow American oil companies to drill in areas where there are known reserves right here in the United States. The United States Geological Survey recently announced that it had increased its estimate of recoverable oil in the Bakken formation of western North Dakota by 25 times to between 3 and 4.3 billion barrels. That is enough oil to satisfy 5 months of demand in this country if it served as the only source of oil. And there are other domestic sources of oil that would add to the total. But the Federal government prevents oil companies from exploring and developing resources in large area of the country. The most famous of these is the Alaska National Wildlife Refuge, which has been the subject of much Congressional debate in recent years. The government should reduce restrictions on drilling, on and off shore, and allow oil companies to increase world supply from domestic sources. Just the announcement that the United States was going to fully develop its known oil reserves would help bring down the price of a barrel of oil in the near term.

Another way that the government puts pressure on supply is by mandating so-called "boutique" blends of gasoline for use in different parts of the country. The Environmental Protection Agency currently requires the use of more than 15 different types of these reformulated low-emissions fuels to help reduce air pollution levels. Each of these is more expensive to produce and must be shipped separately, which in turn increases the price of gas at the pump. Furthermore, some have not resulted in the expected reductions in pollution that they were designed to achieve. Cleaner air is a worthwhile goal, however, and reformulated gas has a role to play. The government should reduce the number of blends in use, perhaps down to one, to help open up bottlenecks in supply caused by refineries shifting gears to produce all the different types of gasoline.

Liberal and populist politicians get a lot of mileage out of promising to reign in oil company profits. But what they will not admit is that the Federal government, and governments at the state and local levels, profit far more from a gallon of gas than the oil companies do. The Federal gasoline tax is currently 18.4 cents per gallon. That's more than twice the average per-gallon profit of eight cents that the oil companies make. It is true that, taken as a whole, oil companies are making astronomical profits, billions of dollars per quarter. But even all of those huge profits are dwarfed by the total amount of money that Federal and state government gas taxes have grossed. Since 1977, governments have collected $1.34 trillion in taxes on gasoline; more than double what all the U.S oil companies combined made in profits over the same period.

Perhaps the only thing government can do to impact the price of gas immediately is to suspend the gasoline tax. But while an 18 cent drop in gas prices would be welcome, it would only be a temporary solution. In the long run, government should practice less intervention in the market as a means of keeping gasoline supplies high enough to meet demand. The fact of the matter is that demand for oil is increasing worldwide, and has not yet peaked here in the United States. Until people start to significantly change their driving habits, or viable alternative sources of energy are brought to market, supplies of oil will have to increase for prices to come down.