August 4, 2004, Price gusher
The spot price of crude oil has crossed $44/bbl., an all-time record (though I will be the first to point out, hardly historically high when one factors in inflation). Its August, of course... high driving season here, and let's face it--like most Americans, I'm somewhat peeved about paying over $30 to fill up a tank of gas for my not-particularly-gas-guzzling vehicle.
But while people get pissed because that's how they see it, the reality of economics is that there is a petrol-component to just about every good and service we have. Food, building materials, computer chips, clothing and workers all have to be transported, and the overwhelming energy choice (besides human or animal power) is the internal combustion engine. As the price of oil soars, truckers and shippers and airlines all have to absorb higher costs, and then pass them on in their prices; transport costs are a significant component of the price of many, many things. The ripple effect to the economy of a sustained oil price hike would be disastrous.
I've made this point before: oil prices were stable, and pretty low, under Reagan and Clinton (two terms), but oil prices went wild-- sometimes dramatically increasing, under Ford, Carter, and Bush I (one-termers all). High oil prices do not-- do not-- bode well for the economy. Period.
We'll see if good old Prince Bandar (often called Bandar Bush, because of his close, unnaturally close, actually, relationship with the Bush family) can make good on his promise to bring down oil prices in the months before the election. Since we will be starting from record highs, today, 90 days before the election, maybe he'll be able to pull it off!
This all has an interesting bearing on Iraq: it would have taken a while under any circumstances to get Iraq's oil infrastructure up to the point where it could export enough oil to effect world prices. But that infrastructure has been the subject of heavy sabotage and directed attacks, and frankly, the years necessary to get it up and running will start when the violence ceases (or at least slows down). Throw in fears of supply problems from Russia (one of the world's biggest exporters these days), and tremendously increased instability in the Middle East (thanks to the President's decision to take us to war in Iraq) and you see the potential for oil prices to explode, at least short term.
Not that Dick Cheney isn't insistent that its not the party that controls the executive, both houses of the legislature, and the Supreme Court, but the damned minority party that is entirely at fault for this. (Q: How do you know Dick Cheney is lying? A: His lips are moving.)
The fact is, since 9-11-01, when it was crystal clear that our dependence on oil--not merely OPEC oil or imported oil-- but oil itself, of which we are rapidly running out of domestically while our demand seems to rise insatiably, largely so that people can make a fashion statement and drive SUVs-- got us attacked, we (led by this Administration) have done little or nothing to curb demand-- the principle problem. We know the world is runing out of supply-- and American supply peaked decades ago. So Cheney is, of course, lying-- as btw, I have never seen him NOT do (other than baseline questions like "in your opinion who should we vote for?") The fact is, our number one energy resource-- BY FAR-- is simple conservation. The gross inefficiencies in our energy use, and in our energy delivery systems, are staggering. It will take time and investment in some new technologies, but there are numerous off the shelf technologies not being used, because government policy ostensibly rewards waste. Again, domestically, we have very limited additional supplies: we would get Iraqi oil up and running long before the Arctic National Wildlife Reserve will get us anything.
But whatever. Fortunes will be made from this. Prior to Dick Cheney's reign, Halliburton specialized in building structures for the oil extraction industry. I think they still might be in that business...
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