I miss $4 a gallon gas!
I miss $4 a gallon gas!
Just kidding. I don’t, but apparently the idiots at the New York Times editorial page do. I am a huge believer in the First Amendment. The only exceptions I generally think of are matters of national security. Of course, compromising national security seems to be a prime objective of the New York Times.
On December 26th, the Times ran an editorial calling for gas taxes to permanently cause the price of gas to be $4 to $5 a gallon. With the obligatory genuflection to the altar of socialism, the times also said there should be a method of giving a “tax credit to vulnerable segments of the population.”
Despite my strong support for the First Amendment, in the case of the New York Times editorial board, I’m having second thoughts.
The meteoric rise of gas prices earlier this year was caused, by two things. The first was the OPEC price cartel and the second was speculation in the oil market. OPEC is a cartel made of 12 member states, which controls much of the world’s oil production. While OPEC’s goal has always been to maintain a high price for oil, within OPEC is a smaller minority, which seeks to use oil as a weapon to cripple Western and primarily, the American Economy.
Speculation drove gas prices to their dizzying heights of this summer. On July 11th, a record was set with oil being at $147.27 a barrel. On July 14th, President Bush lifted the Executive Order that banned offshore drilling in the United States. The order was more symbolic than anything else, as Congress has also passed a law banning off shore drilling and that would have to be repealed by Congress.
That one act was enough to prick the speculative bubble and immediately oil prices began go fall.
Price cartels, which OPEC is one, are notoriously difficult to maintain. Their success is dependent on price discipline among the members, and in the case of OPEC, non-members who also produce oil. Once price discipline fails, it becomes an “every man for himself” race to the bottom as cartel members now try to undercut each other in order to sell.
Unfortunately, for the United States, the conditions for incredibly expensive gas are looming, like a storm on the horizon. In less than a month, Barack Obama will become President. In Obama, we will have the most liberal President we have ever had, along with the most liberal Congress. They have no interest in further drilling for oil. Indeed, they have talked about putting more American land off limits for oil exploration and drilling.
You don’t have to be a Ph.D. in Economics to figure out what will happen next. When you have demand that is constant or growing and you restrict supply, prices rise.
The bad news for the American consumer is that by the third and fourth year of the Obama administration, we maybe wistfully remembering the days when gas was only $4 a gallon.
The bad news for Obama is that his third and fourth years may look like Jimmy Carter’s third and fourth years. The Carter administration was doomed by their absolute incompetence as well as the 1979 energy crisis.
Obama has said in the past, his only problem with high gas prices is that they occurred so quickly and were a shock to the economy. When gas prices start to rise, don’t look for much help from the government.
In the meanwhile, gas in my area is around $1.50 a gallon. I’m going to enjoy it while it lasts and I’m making some plans for the future, because it’s going to be a bumpy ride!