The Blame Game: O-I-L
Last Updated on 10/13/2008
Published on 6/19/2008
By Lynn Muller
Whenever the voting population is impacted in a negative way economically, elected and appointed officials at all levels of government, as well as candidates running for office, engage in a cumbersome and very inappropriate process of blaming, first others and then each other. With respect to gasoline prices and their rise to historic levels, we have all witnessed "the blame game" in full flower.
This is beyond unfortunate. One presidential candidate prides himself on "straight talk" while the other says he represents "change you can believe in." With respect to gasoline prices, neither makes one feel comfortable as to the veracity of their principal campaign slogan.
While there may be problems with futures trading, distribution and refining and other related topics, at which elected officials rail, these are not the core problem. In fact, we would all be well-served if we actually had some straight talk that would lead to change we could believe in.
The following represent the facts as I understand them:
* Energy independence is a wonderful slogan that has been around since the late 1970s but is not possible in any real sense for at least 20 to 30 years.
* While a specific, long-range plan for energy alternatives is needed and advisable, it will take a minimum of a quarter century to get from here to there, and we will still need a lot of oil.
* Notwithstanding the "blame game," the simple economic law of supply and demand is still operative ... demand worldwide and domestically is grossly outstripping supply and does not appear to be on the verge of changing in the near term.
* America has abundant untapped oil reserves, and without ever touching the Alaska field we can and should peruse an aggressive program of oil exploration and extraction. Cuba, just off our shores, with Chinese financial backing, will be drilling off shore from Florida -- notwithstanding our own laws and regulations that prohibit us from doing the same. We also have a massive low sulfur oil find that parallels in size to the Saudi oil reserves, in the states of North Dakota, South Dakota and Montana. We should start drilling immediately.
* Nuclear power needs to be accelerated as a source. Currently, the City of Chicago gets and has gotten for decades over 65 percent of its electricity from nuclear. Vermont, "the Green Mountain State," gets 80 percent of its electricity from nuclear.
The current price per barrel is mostly impacted by the supply and demand equation. If America announced a program for specific oil extraction domestically and a nuclear alternative, I believe the spot market price for oil would drop not less than $30 per barrel inside of three weeks.
It is time to get serious about energy and American domestic energy needs both currently and for the foreseeable future.
Muller, of Georgetown, received his doctorate in monetary economics at The George Washington University. He taught investments and portfolio management for three years.
