ALT-2 How Oil Prices are Determined
Congressional Hearings on Oil Prices
How do people like Dick Durbin and Chuck Schumer get into leadership positions? How many times are they going to call up oil company executives to congressional hearings? Why do we call them hearings? They should be called stump speech gatherings for chump congressmen who want to posture for the next election. Why do the obviously brighter oil company guys bother to listen to such nonsense? When asked about the cause of our current gasoline/oil crisis, why not bring out a full-length mirror and put in the room facing our esteemed Senators? I long to hear one of the oil company guys say, "Take a good look in the mirror. There you will see America's primary problem."
I don't know whether to call Durbin and Schumer and their ilk disingenuous or just plain stupid. Did they not take Economics 101? Did anyone ever explain supply and demand to them? It is hard to believe they could be elected to the United States Senate and be that uninformed. I am not here to defend the large bonuses or high salaries of oil company top management. I think those should be reduced and placed back into the company for R&D and returned to the shareholders in the form of dividends, but I do defend these private companies' right to run their own companies. Can you imagine dumb Durbin running as much as a gas station?
Stay with me for a few seconds while I get technical. Oil prices are primarily determined by 1)supply and demand 2) the value of the US dollar 3) Commodities trading. I could name other factors, but these drive the engine.
1) Supply is not rising to meet demands. Demand is up in China and India. We have all heard that. What we don't hear is that it is up almost everywhere. The Middle East, South America, and guess where else-the USA. So put a few small mirrors on those gas pumps, too. Increasing demand has another side. It means the global economy is catching on to the value of free markets and capitalism.
Do we blame OPEC for not increasing supply-maybe sue them as our brilliant Congress just agreed to do? Not exactly. They knew they have a finite amount, so they don't want to overextend a good thing. Also, we won't drill in our own country, so why expect them to abuse their supply to meet our needs? It is hard for me to defend OPEC because I think they are corrupt enemies, but the US Congress is the primary culprit in this problem. America can conserve-(how about reducing the speed limit to 55?), but it can do little else to slow demand.
How do we increase supply? Drill, drill, drill and refine, refine, refine. Beginning with Clinton vetoes and continuing with stubborn refusals by Congress (mostly Democrats) to authorize drilling in ANWR and off our east and west coasts, we find ourselves beholden to foreign oil. (side note to Senators-We get more from Canada than we do OPEC. Are we going to sue them, too?) When one of the simpletons holding these nonsensical hearings ventured outside and found himself in front of a microphone and camera (imagine that) he said drilling wasn't the answer. Takes too long. "We need to explore alternative energy to reduce our dependence on foreign oil." Memo to simpleton: We are going to be dependent on oil (wherever it comes from) for at least two, maybe three decades. Developing alternates will take much longer than getting oil out of ANWR. If you had allowed drilling ten years ago when you had the chance, America would be awash in its own oil. How about allowing refineries to be built? What a concept. Drill at home, refine at home. How complicated. Stop sending money to our enemies.
Am I against alternatives? Of course not. However, ethanol idiocy seems to be the only thing our bright guys can come up with. Food for oil. Bright. Why do you continue to say no to nuclear and the many other feasible alternatives? Let's try some things that make sense. Conservation-nuclear-wind-solar-r&d tax credits for research. I am even all right with increasing CAF standards for autos because I believe the technology is on the shelf to make fuel-efficient cars.
2) The value of the US dollar. Too complicated for this article, but the Fedcould stop interest rate cuts as a start. Let free markets work.
3) Commodities trading. We have a bunch of folks betting on the future price ofoil. That drives up the price. Seems impossible, but it is so. Congress does not seem to understand this. They especially do not understand that an announcement that we are going to encourage domestic drilling, especially in ANWR and off our coasts, will drop the price of oil very, very soon. Possible overnight. Why? Because speculators know that supply will catch up. Even if it does take many years, they know it is coming.
I wonder how that Congressman managed to get in front of that camera and mike without getting run over by Schumer?
