Bretton Woods, Nixon Shock, OPEC, Yom Kippur War, Oil Embargo, Stagflation, Paul Volcker, Ronald Reagan and Morning in America

Posted by PITHOCRATES - October 1st, 2013

History 101

(Originally published September 18th, 2012)

Under the Bretton Woods System the Americans promised to Exchange their Gold for Dollars at $35 per Ounce

Wars are expensive.  All kinds.  The military kind.  As well as the social kind.  And the Sixties gave us a couple of doozies.  The Vietnam War.  And the War on Poverty.  Spending in Vietnam started in the Fifties.  But spending, as well as troop deployment, surged in the Sixties.  First under JFK.  Then under LBJ.  They added this military spending onto the Cold War spending.  Then LBJ declared a war on poverty.  And all of this spending was on top of NASA trying to put a man on the moon.  Which was yet another part of the Cold War.  To beat the Soviets to the moon after they beat us in orbit.

This was a lot of spending.  And it carried over into the Seventies.  Giving President Nixon a big problem.  As he also had a balance of payments deficit.  And a trade deficit.  Long story short Nixon was running out of money.  So they started printing it.  Which caused another problem as the US was still part of the Bretton Woods system.  A quasi gold standard.  Where the US pegged the dollar to gold at $35 per ounce.  Which meant when they started printing dollars the money supply grew greater than their gold supply.  And depreciated the dollar.  Which was a problem because under Bretton Woods the Americans promised to exchange their gold for dollars at $35 per ounce.

When other nations saw the dollar depreciate so that it would take more and more of them to buy an ounce of gold they simply preferred having the gold instead.  Something the Americans couldn’t depreciate.  Nations exchanged their dollars for gold.  And began to leave the Bretton Woods system.    Nixon had a choice to stop this gold outflow.  He could strengthen the dollar by reducing the money supply (i.e., stop printing dollars) and cut spending.  Or he could ‘close the gold window’ and decouple the dollar from gold.  Which is what he did on August 15, 1971.  And shocked the international financial markets.  Hence the name the Nixon Shock.

When the US supported Israel in the Yom Kippur War the Arab Oil Producers responded with an Oil Embargo

Without the restraint of gold preventing the printing of money the Keynesians were in hog heaven.  As they hated the gold standard.  The suspension of the convertibility of gold ushered in the heyday of Keynesian economics.  Even Nixon said, “I am now a Keynesian in economics.”  The US had crossed the Rubicon.  Inflationary Keynesian policies were now in charge of the economy.  And they expanded the money supply.  Without restraint.  For there was nothing to fear.  No consequences.  Just robust economic activity.  Of course OPEC didn’t see it that way.

Part of the Bretton Woods system was that other nations used the dollar as a reserve currency.  Because it was as good as gold.  As our trading partners could exchange $35 for an ounce of gold.  Which is why we priced international assets in dollars.  Like oil.  Which is why OPEC had a problem with the Nixon Shock.  The dollars they got for their oil were rapidly becoming worth less than they once were.  Which greatly reduced what they could buy with those dollars.  The oil exporters were losing money with the American devaluation of the dollar.  So they raised the price of oil.  A lot.  Basically pricing it at the current value of gold in US dollars.  Meaning the more they depreciated the dollar the higher the price of oil went.  As well as gas prices.

With the initial expansion of the money supply there was short-term economic gain.  The boom.  But shortly behind this inflationary gain came higher prices.  And a collapse in economic activity.  The bust.  This was the dark side of Keynesian economics.  Higher prices that pushed economies into recessions.  And to make matters worse Americans were putting more of their depreciated dollars into the gas tank.  And the Keynesians said, “No problem.  We can fix this with some inflation.”  Which they tried to by expanding the money supply further.  Meanwhile, Egypt and Syria attacked Israel on October 6, 1973, kicking off the Yom Kippur War.  And when the US supported their ally Israel the Arab oil producers responded with an oil embargo.  Reducing the amount of oil entering America, further raising prices.  And causing gas lines as gas stations ran out of gas.  (In part due to Nixon’s price controls that did not reset demand via higher prices to the reduced supply.  And a ceiling on domestic oil prices discouraged any domestic production.)  The Yom Kippur War ended about 20 days later.  Without a major change in borders.  With an Israeli agreement to pull their forces back to the east side of the Suez Canal the Arab oil producers (all but Libya) ended their oil embargo in March of 1974.

It was Morning in America thanks to the Abandonment of Keynesian Inflationary Policies

So oil flowed into the US again.  But the economy was still suffering from high unemployment.  Which the Keynesians fixed with some more inflation.  With another burst of monetary expansion starting around 1975.  To their surprise, though, unemployment did not fall.  It just raised prices.  Including oil prices.  Which increased gas prices.  The US was suffering from high unemployment and high inflation.  Which wasn’t supposed to happen in Keynesian economics.  Even their Phillips Curve had no place on its graph for this phenomenon.  The Keynesians were dumfounded.  And the American people suffered through the malaise of stagflation.  And if things weren’t bad enough the Iranians revolted and the Shah of Iran (and US ally) stepped down and left the country.  Disrupting their oil industry.  And then President Carter put a halt to Iranian oil imports.  Bringing on the 1979 oil crisis.

This crisis was similar to the previous one.  But not quite as bad.  As it was only Iranian oil being boycotted.  But there was some panic buying.  And some gas lines again.  But Carter did something else.  He began to deregulate oil prices over a period of time.  It wouldn’t help matters in 1979 but it did allow the price of crude oil to rise in the US.  Drawing the oil rigs back to the US.  Especially in Alaska.  Also, the Big Three began to make smaller, more fuel efficient cars.  These two events would combine with another event to bring down the price of oil.  And the gasoline we made from that oil.

Actually, there was something else President Carter did that would also affect the price of oil.  He appointed Paul Volcker Chairman of the Federal Reserve in August of 1979.  He was the anti-Keynesian.  He raised interest rates to contract the money supply and threw the country into a steep recession.  Which brought prices down.  Wringing out the damage of a decade’s worth of inflation.  When Ronald Reagan won the 1980 presidency he kept Volcker as Chairman.  And suffered through a horrible 2-year recession.  But when they emerged it was Morning in America.  They had brought inflation under control.  Unemployment fell.  The economy rebounded thanks to Reagan’s tax cuts.  And the price of oil plummeted.  Thanks to the abandonment of Keynesian inflationary policies.  And the abandonment of oil regulation.  As well as the reduction in demand (due to those smaller and more fuel efficient cars).  Which created a surge in oil exploration and production that resulted in an oil glut in the Eighties.  Bringing the price oil down to almost what it was before the two oil shocks.

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Bretton Woods, Nixon Shock, OPEC, Yom Kippur War, Oil Embargo, Stagflation, Paul Volcker, Ronald Reagan and Morning in America

Posted by PITHOCRATES - September 18th, 2012

History 101

Under the Bretton Woods System the Americans promised to Exchange their Gold for Dollars at $35 per Ounce

Wars are expensive.  All kinds.  The military kind.  As well as the social kind.  And the Sixties gave us a couple of doozies.  The Vietnam War.  And the War on Poverty.  Spending in Vietnam started in the Fifties.  But spending, as well as troop deployment, surged in the Sixties.  First under JFK.  Then under LBJ.  They added this military spending onto the Cold War spending.  Then LBJ declared a war on poverty.  And all of this spending was on top of NASA trying to put a man on the moon.  Which was yet another part of the Cold War.  To beat the Soviets to the moon after they beat us in orbit.

This was a lot of spending.  And it carried over into the Seventies.  Giving President Nixon a big problem.  As he also had a balance of payments deficit.  And a trade deficit.  Long story short Nixon was running out of money.  So they started printing it.  Which caused another problem as the US was still part of the Bretton Woods system.  A quasi gold standard.  Where the US pegged the dollar to gold at $35 per ounce.  Which meant when they started printing dollars the money supply grew greater than their gold supply.  And depreciated the dollar.  Which was a problem because under Bretton Woods the Americans promised to exchange their gold for dollars at $35 per ounce.

When other nations saw the dollar depreciate so that it would take more and more of them to buy an ounce of gold they simply preferred having the gold instead.  Something the Americans couldn’t depreciate.  Nations exchanged their dollars for gold.  And began to leave the Bretton Woods system.    Nixon had a choice to stop this gold outflow.  He could strengthen the dollar by reducing the money supply (i.e., stop printing dollars) and cut spending.  Or he could ‘close the gold window’ and decouple the dollar from gold.  Which is what he did on August 15, 1971.  And shocked the international financial markets.  Hence the name the Nixon Shock.

When the US supported Israel in the Yom Kippur War the Arab Oil Producers responded with an Oil Embargo

Without the restraint of gold preventing the printing of money the Keynesians were in hog heaven.  As they hated the gold standard.  The suspension of the convertibility of gold ushered in the heyday of Keynesian economics.  Even Nixon said, “I am now a Keynesian in economics.”  The US had crossed the Rubicon.  Inflationary Keynesian policies were now in charge of the economy.  And they expanded the money supply.  Without restraint.  For there was nothing to fear.  No consequences.  Just robust economic activity.  Of course OPEC didn’t see it that way.

Part of the Bretton Woods system was that other nations used the dollar as a reserve currency.  Because it was as good as gold.  As our trading partners could exchange $35 for an ounce of gold.  Which is why we priced international assets in dollars.  Like oil.  Which is why OPEC had a problem with the Nixon Shock.  The dollars they got for their oil were rapidly becoming worth less than they once were.  Which greatly reduced what they could buy with those dollars.  The oil exporters were losing money with the American devaluation of the dollar.  So they raised the price of oil.  A lot.  Basically pricing it at the current value of gold in US dollars.  Meaning the more they depreciated the dollar the higher the price of oil went.  As well as gas prices.

With the initial expansion of the money supply there was short-term economic gain.  The boom.  But shortly behind this inflationary gain came higher prices.  And a collapse in economic activity.  The bust.  This was the dark side of Keynesian economics.  Higher prices that pushed economies into recessions.  And to make matters worse Americans were putting more of their depreciated dollars into the gas tank.  And the Keynesians said, “No problem.  We can fix this with some inflation.”  Which they tried to by expanding the money supply further.  Meanwhile, Egypt and Syria attacked Israel on October 6, 1973, kicking off the Yom Kippur War.  And when the US supported their ally Israel the Arab oil producers responded with an oil embargo.  Reducing the amount of oil entering America, further raising prices.  And causing gas lines as gas stations ran out of gas.  (In part due to Nixon’s price controls that did not reset demand via higher prices to the reduced supply.  And a ceiling on domestic oil prices discouraged any domestic production.)  The Yom Kippur War ended about 20 days later.  Without a major change in borders.  With an Israeli agreement to pull their forces back to the east side of the Suez Canal the Arab oil producers (all but Libya) ended their oil embargo in March of 1974.

It was Morning in America thanks to the Abandonment of Keynesian Inflationary Policies

So oil flowed into the US again.  But the economy was still suffering from high unemployment.  Which the Keynesians fixed with some more inflation.  With another burst of monetary expansion starting around 1975.  To their surprise, though, unemployment did not fall.  It just raised prices.  Including oil prices.  Which increased gas prices.  The US was suffering from high unemployment and high inflation.  Which wasn’t supposed to happen in Keynesian economics.  Even their Phillips Curve had no place on its graph for this phenomenon.  The Keynesians were dumfounded.  And the American people suffered through the malaise of stagflation.  And if things weren’t bad enough the Iranians revolted and the Shah of Iran (and US ally) stepped down and left the country.  Disrupting their oil industry.  And then President Carter put a halt to Iranian oil imports.  Bringing on the 1979 oil crisis.

This crisis was similar to the previous one.  But not quite as bad.  As it was only Iranian oil being boycotted.  But there was some panic buying.  And some gas lines again.  But Carter did something else.  He began to deregulate oil prices over a period of time.  It wouldn’t help matters in 1979 but it did allow the price of crude oil to rise in the US.  Drawing the oil rigs back to the US.  Especially in Alaska.  Also, the Big Three began to make smaller, more fuel efficient cars.  These two events would combine with another event to bring down the price of oil.  And the gasoline we made from that oil.

Actually, there was something else President Carter did that would also affect the price of oil.  He appointed Paul Volcker Chairman of the Federal Reserve in August of 1979.  He was the anti-Keynesian.  He raised interest rates to contract the money supply and threw the country into a steep recession.  Which brought prices down.  Wringing out the damage of a decade’s worth of inflation.  When Ronald Reagan won the 1980 presidency he kept Volcker as Chairman.  And suffered through a horrible 2-year recession.  But when they emerged it was Morning in America.  They had brought inflation under control.  Unemployment fell.  The economy rebounded thanks to Reagan’s tax cuts.  And the price of oil plummeted.  Thanks to the abandonment of Keynesian inflationary policies.  And the abandonment of oil regulation.  As well as the reduction in demand (due to those smaller and more fuel efficient cars).  Which created a surge in oil exploration and production that resulted in an oil glut in the Eighties.  Bringing the price oil down to almost what it was before the two oil shocks.

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President Obama brings Down the Price of Gas by Destroying the Economy with his Economic Policies

Posted by PITHOCRATES - June 2nd, 2012

Week in Review

Remember the movie Monty Python’s Life of Brian?  If you haven’t seen it I highly recommend it.  The politics they lampoon of the Roman occupation?  Funny stuff.  Yes there’s a bit of nudity in it and some may find it a bit blasphemous.  So viewer discretion is recommended.  At the end as Brian was being mistakenly crucified the guy being crucified behind him to his right tried to cheer him up in song.  And told him to Always Look on the Bright Side of Life.  And the people sang.  From atop their crosses.  If these fictional people can see the bright side in their impending long-lasting deaths then we, too, should be able to see the bright side in the continuing bad economic news (see Gas prices are silver lining as economy weakens by Sandy Shore, The Associated Press, posted 6/1/2012 on Economy Watch).

There’s some good news behind the discouraging headlines on the economy: Gas is getting cheaper. At least two states had stations selling gas for $2.99 on Friday and it could fall below $3 in more areas over the weekend.

A plunge in oil prices has knocked more than 30 cents off the price of a gallon of gas in most parts of the U.S. since early April. The national average is now $3.61. Experts predict further decline in the next few weeks.

If Americans spend less filling their tanks, they’ll have more money for discretionary purchases. The downside? Lower oil and gas prices are symptoms of weakening economic conditions in the U.S. and around the globe.

On Friday, oil prices plunged nearly 4 percent as a bleak report on U.S. job growth heightened worries about a slowing global economy and waning oil demand. The unemployment rate rose to 8.2 percent from 8.1 percent. Sobering economic news from China and Europe also contributed to the drop…

Phil Flynn, an analyst for The Price Futures Group, believes falling gas prices could give consumers a psychological boost. But that could evaporate if hiring doesn’t pick up and stock markets keep swooning.

“If you don’t have a job, it doesn’t matter if gasoline prices are $5 or $2 a gallon,” he said.

So President Obama may get his wish after all.  To have low gas prices while he runs for reelection.  And all he had to do to lower gas prices was to destroy the economy with bad economic policy.  Shut down the oil exploration business when oil was in high demand.  Stop the building of a pipeline that would have put hundreds of thousands of jobs into the economic pipeline.  Unleash a wave of new regulations that have stunned small business.  Especially Obamacare.  Leaving them afraid to hire anyone as they fear what the Obama administration will do next to them.  And President Obama’s open attacks on capitalism haven’t assuaged anyone’s fears in the business community that his next policies will only harm them more.  The president has wasted trillions of dollars in stimulus and green energy subsidies that resulted in no net new jobs but in the bankruptcy of the businesses they backed.  And massive new debt that we can’t afford.  The future is bleak indeed.  But gas prices are falling because of it.  So there’s one thing the president can run on.  Things could be worse.  Gas prices could be higher.

It’s the one message President Obama can tell the American people.  That we should, like Brian, Always Look on the Bright Side of Life.  No matter how bad the economic news continues to be.  Because he alone brought down the price of gas.  It’s just a pity so few have a job or feel secure enough in their job to enjoy these low prices.

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Drill, Baby, Drill works well in Russia, Nigeria, Saudi Arabia, Kuwait and the UAE

Posted by PITHOCRATES - April 29th, 2012

Week in Review

So if we drill, baby, drill for oil everywhere it won’t do a thing to lower oil prices.  According to the Obama administration.  Besides, we’ll just export the oil (or refined gasoline) anyway.  So what’s the point?  Well, here’s a thought.  Oil prices are high.  So if the U.S. drilled for oil everywhere and exported all of that oil it may not impact the price of gasoline (though most rational people believe it would) here’s something else that could come from it (see Petrodollar profusion posted 4/28/2012 on The Economist).

FIRST, the good news: China, the country at the centre of the debate about global imbalances, has a current-account surplus that has fallen sharply over the past few years. Now the bad: China was never really the prime culprit when it comes to imbalances at the global level. The biggest counterpart to America’s current-account deficit is the combined surplus of oil-exporting economies, which have enjoyed a huge windfall from high oil prices (see left-hand chart). This year the IMF expects them to run a record surplus of $740 billion, three-fifths of which will come from the Middle East. That will dwarf China’s expected surplus of $180 billion. Since 2000 the cumulative surpluses of oil exporters have come to over $4 trillion, twice as much as that of China…

The most effective policy tool to reduce oil exporters’ current-account surpluses is public spending, and investment in particular because of its high import content. Increased public spending could also help these economies diversify away from oil. That would support their future economic development and create more private-sector jobs for young, growing populations. To maintain social stability, many of these governments need to spend more on education, health care, housing and welfare benefits. Some oil producers, such as Russia and Nigeria, are running fairly balanced budgets, but the governments of the Gulf states are awash with cash. Since 2005 Saudi Arabia, Kuwait and the UAE have increased public spending by 7-8 percentage points of GDP. Even so, the three countries are expected to run an average budget surplus of over 15% this year. That leaves plenty of room to be a little more spendthrift.

Europe, Japan and the United States are suffering under huge budget deficits and trade deficits.  Their aging populations and the pensions and health care for them is threatening the solvency of these nations.  Who have no choice but to raise taxes and borrow ever more money to pay these obligations.  You know who doesn’t have these problems?  Those big oil-exporting economies.  Who are “awash with cash.”  Unlike Europe, Japan or the United States.  Seems to me that it’s better to be “awash with cash” than to be mired in debt.

So drill, baby, drill I say.  Let’s have the same problem the oil exporters are having.  Too much cash.  We could eliminate income taxes.  AND pay all our Social Security and Medicare obligations.  As well as all the education and women’s health programs you desired.  Wouldn’t that be nice?  I mean who would be opposed to that?  Except, of course, the Obama administration.  Because according to them there is nothing to gain from putting more oil onto the market during record prices.  Too bad our president isn’t as much a free market capitalist as they are in Russia, Nigeria, Saudi Arabia, Kuwait and the UAE.

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GM and Ford pursuing Carbon Fiber to Improve Fuel Efficiency and Increase Profits

Posted by PITHOCRATES - April 15th, 2012

Week in Review

Ford and GM following the lead of Airbus and Boeing.  Using composite materials to make their vehicles lighter.  And more fuel efficient.  For as Airbus and Boeing have proven, improved fuel efficiency during times of high fuel costs leads to more unit sales (see Ford, Dow to explore carbon fiber use in vehicles by Deepa Seetharaman posted 4/12/2012 on Reuters).

Ford Motor Co and Dow Chemical Co will work to develop cost-effective ways of using carbon fiber in high-volume cars and trucks as the No.2 U.S. automaker moves to cut vehicle weight to improve overall fuel economy…

Weight reduction is one way for automakers to boost the efficiency of their fleets in anticipation of rising oil prices and stricter fuel economy standards for upcoming model years…

Using carbon fiber in lieu of conventional steel can lower the weight of a vehicle component by up to 50 percent, according to the U.S. Department of Energy. Cutting a car’s weight by 10 percent can improve fuel economy by as much as 8 percent.

Carbon fiber, already used in racing cars and products like hockey sticks, is not new to the auto industry. BMW (BMWG.DE), for example, uses the material in its M3 coupe.

Yet carbon fiber’s high cost has blocked its wide-scale use. Industry experts say one way to lower the overall cost of carbon fiber is to find cheaper ways of preparing those materials…

Last month, the Obama administration announced it would provide $14.2 million in funding to spur development of stronger and lighter materials.

Really?  The government needs to fund this with subsidies?  You mean there is no incentive for automakers to make their cars lighter?  I think there is.  If they can make a car lighter without shrinking it down to something slightly larger than a shoe box they will improve fuel economy.  And increase sales.  For what family would not want to buy a fuel efficient car that lets them pack the family in it and take it on vacation?  Letting them take longer trips because the cost of gasoline doesn’t eat up the family vacation budget?  Or let families spend more on their grocery bill rather than on gasoline?  To enjoy more cookouts during their summer vacation?  One thing for certain is that if you can produce a more fuel efficient car that doesn’t trade anything else to get that efficiency (size, range, etc.), people will run to buy it.  And that is what we call incentive.

GM revenue in 2011 was $150.3 billion alone.  So Ford and GM are not doing this to get their hands on that piddling $14.2 million in federal money.  Which was about 0.01% of GM’s total revenue in 2011.  Which is little more than a rounding error.  They’re doing this to increase their market share in an increasingly competitive market.  In 2011 GM, Ford and Chrysler had global market shares of 8%, 8% and 3%, respectively.  If you divide GM’s revenue by 8 that comes to about $18.8 billion in revenue per percentage point.  Which is one heck of an incentive to increase unit sales to get just one more percentage point in market share.  And during times of high fuel costs one way to do that is to make a car cheaper to own by making it more fuel efficient.  That’s why they’re pouring money into carbon fiber technology.  Not because the government is offering what amounts to loose change under the sofa cushions as far as GM is concerned.  Because fuel efficiency equals higher market share when gasoline is expensive.  And market share equals higher revenue.  And profits.

Yes, it’s greed that’s making Ford and GM pursue carbon fiber to increase fuel efficiency.  Which is the best reason.  Because greed requires no government subsidies.

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President Obama stops the Keystone XL Pipeline because it’s in our Best Interest to pay High Gasoline Prices

Posted by PITHOCRATES - March 24th, 2012

Week in Review

The Obama administration stopped the Keystone XL pipeline.  In the face of rising gasoline prices.  Which doesn’t make sense.  Because that pipeline will lower oil prices in the future when it’s pumping oil.  And lower gas prices.  So approving the pipeline would have been the smart thing to do in the long run.  The problem is that it doesn’t help them in the short run on something that is far more important than lowering gas prices (see Obama defends handling of Keystone pipeline by KEN THOMAS, Associated Press, posted 3/22/2012 on Yahoo! News).

Deep in Republican oil country, Obama said lawmakers refused to give his administration enough time review the controversial 1,170-mile Keystone XL pipeline in order to ensure that it wouldn’t compromise the health and safety of people living in surrounding areas.

“Unfortunately, Congress decided they wanted their own timeline,” Obama said. “Not the company, not the experts, but members of Congress who decided this might be a fun political issue decided to try to intervene and make it impossible for us to make an informed decision.”

Really?  You want to use that as your excuse for stopping the Keystone XL pipeline?  That your experts didn’t have enough time to help you arrive at an informed decision?   Just like your experts helped you to arrive at an informed decision to fund Solyndra?  And all those other green energy initiatives that couldn’t receive the necessary private investment capital?  And failed?  That’s the excuse you want to use?

First of all, the president’s experts really aren’t all that good.  Based on their track record of helping people arrive at informed decisions.  Secondly, everyone knows this was a nod to the environmentalist base.  And is purely political.  To help them with fund raising.  And their reelection chances.  As their record on energy and gas prices (or the economy in general) isn’t going to garner them any votes.  So they have to make sure they get 100% of the vote from those who hate oil.  (And a healthy economy.)  The people who wanted them to stop the Keystone XL pipeline.  The environmentalist base. 

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Increasing oil supplies won’t lower gas prices only reducing U.S. demand can according to Obama and the AP

Posted by PITHOCRATES - March 24th, 2012

Week in Review

On the one hand gas prices aren’t high (see Rising gas prices aren’t as bad as you think).  On the other hand they are.  But there’s nothing the president can do about it so quit your bitching (see FACT CHECK: More US Drilling Didn’t Drop Gas Price [Higher fuel economy won’t lower gas prices according to AP] by JACK GILLUM and SETH BORENSTEIN, Associated Press, posted 3/21/2012 on ABC News).

U.S. oil production is back to the same level it was in March 2003, when gas cost $2.10 per gallon when adjusted for inflation. But that’s not what prices are now.

That’s because oil is a global commodity and U.S. production has only a tiny influence on supply. Factors far beyond the control of a nation or a president dictate the price of gasoline.

Funny.  When the stimulus failed it was the stimulus wasn’t big enough.  But when we only increase oil supplies a little and it doesn’t influence the world price of oil they don’t say the increase in supply wasn’t big enough.

The late 1980s and 1990s show exactly how domestic drilling is not related to gas prices.

Seasonally adjusted U.S. oil production dropped steadily from February 1986 until three years ago. But starting in March 1986, inflation-adjusted gas prices fell below the $2-a-gallon mark and stayed there for most of the rest of the 1980s and 1990s. Production between 1986 and 1999 dropped by nearly one-third. If the drill-now theory were correct, prices should have soared. Instead they went down by nearly a dollar.

Figures don’t lie but liars figure.  Talk about twisting the facts to support your Democrat president.  For what they say the data doesn’t support the data DOES support during the previous decade.  Following the 1973 Oil Crisis.  When OPEC placed an embargo on oil shipments to the U.S. and other Western nations that helped Israel in the Yom Kippur War.  Oil prices soared.  Bringing a lot of non-OPEC producers into the market.  To cash in on those high prices.  And while they were increasing oil production from the mid-Seventies to the mid-Eighties they flooded the market with oil.  Which also coincided with a reduction in demand in the U.S.  Who switched from gas-guzzlers to little cars with ‘sewing machine’ engines.  Tiny four cylinder engines.  This explosion in supply and reduction in demand caused the 1980s oil glut.  Causing oil prices to plummet.  Which kept gas prices low throughout the 1980s oil glut.

So when oil supply goes up gas prices come down.  In the 1980s that increase in oil supply came from outside of the U.S.  But it lowered gas prices nonetheless.  If an increase in U.S. production can match the increase of the non-OPEC producers during the Eighties then gas prices will come down, too.  But NOT increasing oil production will only increase gas prices in the face of increasing oil demand.

Unlike natural gas or electricity, the United States alone does not have the power to change the supply-and-demand equation in the world oil market, said Christopher Knittel, a professor of energy economics at MIT. American oil production is about 11 percent of the world’s output, so even if the U.S. were to increase its oil production by 50 percent — that is more than drilling in the Arctic, increased public-lands and offshore drilling, and the Canadian pipeline would provide — it would at most cut gas prices by 10 percent.

By this logic then there’s no point in trying to improve fuel economy.  Yet we do.  For when it comes to gasoline everything on the demand side of the equation can lower gas prices.  But nothing on the supply side can.  President Obama says we can inflate our tires.  Get a tune up.  Increase CAFE standards (force auto makers to increase the miles per gallon their cars can get).  Move into electric cars and hybrids.  If we do any of these we can bring down the price of gasoline.  But if we flood the market with new domestic oil it won’t do jack squat.  Go figure.

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FT110: “You can’t blame our dependence on foreign oil for high gas prices AND say that producing more domestic oil won’t lower gas prices.” -Old Pithy

Posted by PITHOCRATES - March 23rd, 2012

Fundamental Truth

The Combination of Low Demand and High Supply caused Oil Prices to Fall over 70% by 1986

The Organization of the Petroleum Exporting Countries (OPEC) is a cartel.  Made up currently of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.  Their purpose is to set oil quotas for their oil-producing members.  To limit the amount of oil they bring to market.  To reduce supply.  And increase oil prices.  At least that’s the idea.  It’s been hard to keep the individual OPEC members from cheating, though.  And a lot do.  Often selling more than their quota.  Because when oil prices are high selling a few percentages above their quota can be very profitable.  Unless everyone else does so as well.  Which they usually do.  For their choice is either not to cheat and not share in any of those ‘excess’ profits (beyond their agreed to quota).  Or cheat, too.  Thereby increasing supply.  And lowering oil prices.  Not something any oil producer wants to do.  But it’s the only way to share in any of those ‘excess’ profits.

But that’s not the only problem OPEC has.  There are a lot of oil producers who aren’t members of OPEC.  Who can bring oil to market in any quantity they choose.  Especially when they see the high price OPEC is charging.  OPEC’s high price allows non-OPEC suppliers to sell a lot of oil at a slightly lower price and reap huge profits.  Which puts pressure on the OPEC target price.  Forcing them to lower their target price.  For if they don’t lower their price they will lose oil sales to those non-OPEC producers.  Which is exactly what happened in the late Seventies.  While OPEC was cutting back on production (to raise prices) the non-OPEC nations were increasing production.  And taking over market share with their lower prices.  Causing OPEC to reverse policy and increase production during the mid-Eighties.  Giving us the 1980s oil glut.

Of course, this rise in non-OPEC production was a direct result of the 1973 Oil Crisis.  Many of the OPEC members are Muslim nations.  Who don’t like the state of Israel.  In response to the West’s support of Israel in the Yom Kippur War (1973) OPEC announced an oil embargo on those nations who helped Israel.  Giving us the 1973 oil crisis.  Where this sudden reduction in supply caused the price of oil to soar.  Making the oil business a very profitable business.  Causing those non-OPEC producers to enter the market.  Then the Iranian Revolution (1979) disrupted Iranian crude production.  Keeping Iranian oil off the market.  This reduction in demand caused oil prices to rise.  Then Jimmy Carter broke off diplomatic relations with the Iranian state.  And boycotted their oil when it returned to the market.  Further encouraging the non-OPEC producers to bring more oil to market.  Meanwhile U.S. demand fell because of those high prices.  And our switch to smaller, 4-cyclinder, front wheel drive cars.  Saying goodbye to our beloved muscle cars of the Sixties and Seventies.  And the V-8 engine.  The combination of low demand and high supply caused oil prices to fall over 70% by 1986.  Giving us the oil glut of the 1980s.  When gasoline was cheap.  Enticing the V-8 engine back into the market.

Improved Fuel Economy AND Increased Oil Supplies can Reduce the Price at the Pump

So, yes, Virginia.  The amount of oil entering the market matters.  The more of it there is the cheaper it will be.  As history has shown.  When less oil entered the market prices rose.  When more oil entered the market prices fell.  And anything that can affect the supply of oil making it to market will affect the price of oil.  (And everything downstream of oil.  Jet fuel.  Diesel.  And gasoline.)  Wars.  Regional instability.  And governmental regulation. 

So what are things that will bring more oil to market?  Well there’s the obvious.  You drill for more oil.  This is so obvious but a lot of people refuse to accept this economic principle.  As supply increases prices fall.  The 1980s oil glut proved this.  Even John Maynard Keynes has graphs showing this in his Keynesian economics.  The economics of choice for governments everywhere.   Yet there are Keynesian politicians who avert their eyes to this economic principle.  So there’s that.  More drilling.  You can also make the permitting process easier to drill for oil.  You can open up federal lands currently closed to drilling.  And once you find oil you bring it to market.  As quickly as you can.  And few things are quicker than pipelines.  From the oil fields.  To the oil refineries.  (And then jet fuel, diesel and gasoline pipelines from the refineries to dispensing centers).  So before oil fields are ready to produce you start building pipelines from those fields to the refineries.  Or you build new refineries.

Improving fuel economy did help reduce our demand for imported oil in the Eighties.  As well as lowered the price for that imported oil.  But it wasn’t fuel economy alone.  The non-OPEC nations were increasing production from the mid-Seventies through the mid-Eighties.  Without that oil flooding the market oil prices wouldn’t have fallen 70%.  And they won’t fall again if we ONLY try to reduce our demand for foreign oil.  For reducing demand is marginal at best in reducing oil prices. 

Only if we Drill and Build Pipelines can we Reduce the Price at the Pump

For there are no electric airplanes.  The cost to electrify all railroad tracks is too prohibitive to consider.  The capital costs to build that electrical infrastructure.  The maintenance costs to maintain it.  And the electricity costs from the increased demand for electrical power while supply remains the same.  Or falls.  Because excessive regulation inhibits the building of new power plants.  And speeds up the shutdown of older plants.  Especially coal-fired because they pollute too much.  And hydro power.  Because of the environmental impact of dams.  Severely straining our electric grids.  And moving into electric cars will stress our electric grids even further.  Leading to brown outs.  And rolling blackouts.   Or worse.  Causing wires to overheat and sag, coming into contact with trees.  Shorting out.  Causing cascading blackouts as power plants disconnect from the grid to prevent damage from the resulting current surges.  Like they did in the Northeast Blackout of 2003.

You can’t replace oil with electricity.  In some cases there is just no electric equivalent.  Such as the airplane.  Or the cost of moving from oil to electricity is just prohibitive.  Such as updating the nation’s electrical infrastructure to meet an exploding demand.  Which leaves oil.  We need it.  And will keep using it.  Because there is no better alternative.  Yet.  So we need to produce it.  And do everything we can to help bring that oil to market.  Not fight against it.  And it all starts with drilling. 

We must drill.  Bring that oil up from under the ground.  Put it into a pipeline.  And pump it to a refinery.  If we do this enough we will be less dependent on foreign oil.  And have more control over the price at the pump.

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Iran and al Qaeda hate America and Anyone who Associates with America or Sells them Oil

Posted by PITHOCRATES - September 28th, 2011

In 2001 al Qaeda was by far More Evil than Iran but the Evil Race is Still On

Iranian president Ahmadinejad denies the Holocaust.  And that al Qaeda brought down the Twin Towers.  Which is really pissing off al Qaeda (see Al Qaeda to Iran: Stop Spreading 9/11 Conspiracy Theory by Lee Ferran posted 9/27/2011 on ABC News).

“The Iranian government has professed on the tongue of its president Ahmadinejad that it does not believe that al Qaeda was behind 9/11 but rather, the U.S. government,” an article reads. “So we may ask the question: why would Iran ascribe to such a ridiculous belief that stands in the face of all logic and evidence?”

Though Iran was the first of the two to use the “Great Satan” as a synonym for the U.S., the author claims that Iran sees itself as a rival for al Qaeda when it comes to anti-Americanism and was jealous of the 9/11 attacks.

“For them, al Qaeda was a competitor for the hearts and minds of the disenfranchised Muslims around the world,” the article says. “Al Qaeda… succeeded in what Iran couldn’t. Therefore it was necessary for the Iranians to discredit 9/11 and what better way to do so? Conspiracy theories.”

Reminds me a little of that Austin Powers movie where Dr. Evil laments that his son is not evil enough.

In your face, Iran, says al Qaeda.  Yes, in 2001, al Qaeda was by far more evil than Iran.  Sadly, the evil competition hasn’t ended.  And we should worry about escalation in the evil race.  Especially when one of these evil competitors may already have a nuclear bomb.

I wonder how the 9/11 deniers will take this?  All those George W. Bush haters who said Bush imploded the Twin Towers.  So he could invade the Middle East.  Most everyone else blamed al Qaeda.  Something al Qaeda, incidentally, never denied.  And claims responsibility for to this day.  Even after punishing retribution.  And the death of their glorious leader.  Osama bin Laden.

And what about those saying that our only enemy is al Qaeda?  That Iran’s nuclear program is only for peaceful purposes.  And their meddling in the Middle East is nothing to worry about.  Sure they support Hezbollah.  And they support Hamas.  And support these groups in their goal of removing American ally Israel from the world map.  But there’s nothing to worry about.  For I’m sure their territorial ambitions will end with Israel.  Much like Hitler‘s did with the Sudetenland.  Besides, who else says they have an anti-American agenda?  Other than the big bad of anti-Americanism?  Al Qaeda.

The Wahhabis don’t like the House of Saud or their Coziness with the U.S

So, yes, Virginia, radical Islamists want to hurt Americans.  Despite the last 2+ years of de-Bushifying the nation.  Despite the Cairo speech.  Nothing has changed.  The bad guys are still gunning for Americans.  Wherever they can find Americans (see US warns of possible kidnap plot in Saudi Arabia posted 9/28/2011 on CBS News).

The U.S. Embassy in Saudi Arabia warned Americans on Wednesday that a terrorist group may be planning to abduct Westerners in the capital of Riyadh…

Saudi Arabia has waged a heavy crackdown on Islamist militants since al Qaeda’s Saudi branch launched a wave of attacks in the country in 2003, including suicide bombings and shootings that killed dozens of Saudis and foreigners. At least 11 Americans were among the dead.

Saudi Arabia is an important U.S. ally in the Middle East.  And friend.   Which is why they get a lot of this kind of stuff in their kingdom.  And their actions in 2003 prove this.  For everyone talks about the Saudi money that financed bin Laden.  But it wasn’t the House of Saud.  It was the Wahhabi Muslim sect residing within their kingdom.  From whence bin Laden came.

The Wahhabis don’t like the House of Saud.  Or their coziness with the U.S.  So the Saudis walk a fine line.  Staying friendly with the U.S.  Without being too friendly with the U.S.  To keep the peace in their kingdom.  And to maintain stability in the Middle East.

And all the while they’re dealing with this threat from within they have to deal with the threat from without.  Iran.  Who may have a hand in these Arab uprisings.  Especially where there are Shiite majorities.  To expand Iranian hegemony into the Middle East.  Especially in the Sunni areas of the Middle East.

On Monday, the former chief of Saudi intelligence services said the kingdom’s sizable oil installations were safe despite the growing threat of terrorist attacks in the region.

Prince Turki al-Faisal said the unrest in the Arab world would not spill over into Saudi Arabia.

“While the general picture of Saudi Arabia’s surroundings is predominated by this great turmoil, at the center of these many storms sits our Kingdom, which, I am glad to report, remains stable and secure,” he said.

Which is good.  Because next to Canada, Saudi Arabia is the second largest source of U.S. oil imports.  Even expanded their production to compensate for the loss of Libyan crude.  Again, Saudi Arabia is an important ally.  And friend.

The Loss of Refinery Capacity Now will make Gas Prices Soar During any Economic Recovery

Oil is the lifeblood of a modern economy.  Advanced nations consume oil with a voracious appetite.  That’s why Saudi crude is so important.  Both to the West.  And the enemies of the West.  Because if they can disrupt it they can disrupt the Western economies.  So any threat to Saudi Arabia is a national security interest.  Especially when it’s against Americans in the kingdom.

So oil is important.  As is the price of oil.  When it falls it’s for one of two reasons.  Either we’ve increased supply.  Or people just aren’t buying it (see Crude Oil Set for Second Straight Quarterly Decline on Europe Debt Crisis by Mark Shenk posted 9/28/2011 on Bloomberg).

Crude oil fell in New York, heading for the biggest quarterly drop since 2008, on concern that Europe’s debt crisis will linger and on rising U.S. stockpiles…

Crude stockpiles advanced as imports rose and refineries reduced operating rates…

Gasoline stockpiles rose 791,000 barrels to 214.9 million in the week ended Sept. 23, the report showed. Supplies of distillate fuel, a category that includes heating oil and diesel, increased 72,000 barrels to 157.7 million.

Sadly, this fall in price is due to people not buying it.

What?  Oil prices are falling?  That’s good news, yes?  Sadly, no.  Not in this case.  Because they are falling for a bad reason.  Weak demand.  From an economy on the precipice of another recession.  (The economy is so bad that people just aren’t buying gasoline).  Though some will argue we’ve never emerged from the Great Recession.  And it gets worse.

“The crude market is also under pressure because of the announcement of yet another possible shutdown of an East Coast refinery,” said Carl Larry, director of energy derivatives and research at Blue Ocean Brokerage LLC in New York. “At some point we’ll be able to count on both hands the number of operable refineries on the East Coast.”

Refineries are shutting down because of this extraordinary weak demand.  Which will not be good on the far side of this recession.  When the economy picks up.  For with the loss of this refinery capacity, when demand picks up gas prices will soar.  And it gets worse.

As economies heat up so will demand for oil.  Making oil prices soar.  Making high gasoline prices even higher.  Dampening any economic recovery.  Perhaps even throwing us back into recession.

A Big Oil Shock could Take any Bustling Economy and Thrown it into Recession

So the post-recession oil supply is not looking good.  Is there anything else to worry about?  Of course there is (see Double-dip ahead? Posted 9/28/2011 on The Economist).

Unfortunately, the economy has been battered for most of the year: by lousy weather, a seismic disaster in Japan, soaring oil prices, a major intensification of the European crisis, the end of QE2, and a down-to-the-wire blow-up over the debt ceiling among other things. There was good reason to think that the economy might have grown at 4% this year, but actual performance is largely governed by two big factors: what shocks occur and how policymakers respond to them.

Shocks, eh?  There could be a big oil shock in the pipeline.  Thanks to a bad economy that is closing down refinery capacity.  And an Arab Spring that is going to no one knows where yet.  And there are those who have eyes on Saudi Arabia.  People who don’t like America.  So, yeah, there could be a big oil shock coming our way.  Which could take any bustling economy and throw it into recession.

What Happens in the Middle East Matters to the Price of Gasoline and to American Security

There is a race between Iran and al Qaeda to see who can do America more harm.  We have made some progress against al Qaeda.  But we haven’t done much on the Iranian front.  And they’re about to acquire nuclear weapons.  Or already has them.

If our archenemy says that Iran is their rival in anti-Americanism, then Iran is probably anti-American.  And we should probably act accordingly.  Like the Saudis have against al Qaeda.  Despite the great risks that brought to their kingdom.  From the al Qaeda-sympathetic Wahhabi population.

When George W. Bush invaded Iraq many called it blood for oil.  They were adamantly against that.  Almost as much as they were against $4/gallon gasoline.  For they want their cheap gasoline.  And believe they should be able to get it no matter what happens in the Middle East.

But what happens in the Middle East matters.  To the price of gasoline.  And to American security.  They are linked.  And if given the chance, our enemies will use one.  To get to the other.  Us.  Because oil is the lifeblood of a modern economy.  And if they can’t defeat us in military arms.  They can shut us down by controlling the oil in the Middle East.

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High Gas Prices may be Keeping some of Us in Recession, but the Rich and our Elected Leaders are doing Okay

Posted by PITHOCRATES - June 27th, 2011

The Oil Supply determines Gasoline Prices

President Obama will release approximately 30 million barrels of oil from the U.S. Strategic Reserve to try and bring down gasoline prices for this summer driving season.  Because the high cost of gasoline is leaving consumers with little disposable income.  Or a reason to reelect him in 2012 (see U.S. Consumer Spending Stalled in May by The Associated Press posted 6/27/2011 on The New York Times).

Americans in May spent at the weakest pace in 20 months, a sign that gas prices are taking a toll on the economy, according to a government report Monday.

Recessions don’t reelect presidents.  Because people don’t like recessions.  People have little money to spend on the ‘luxuries’ (dinner out, movies, vacation, etc.) in life.  And barely have enough to pay for the necessities of life.  So the high price of gasoline does not make a happy constituent.  And if you need a happy constituent to reelect you, the smart money is bet on making the constituency happy.  By bringing down gasoline prices.  Which we know how to do.  President Obama has shown us.  You simply Increase the amount of oil in the market. 

So far, drawing down the Strategic Reserve is the only thing his administration has down to increase the supply of oil.  He stopped drilling in the Gulf of Mexico.  And new drilling permits have not exactly been flying out of Washington.  But there’s still hope.  Thanks to our good friends to the north.  Who have some of the largest oil reserves in the world.  And only need a way to get it to the American refineries.  Which Obama can make happen.  By saying ‘yes’ to an oil pipeline (see China eyes Canada oil, US’s energy nest egg by Rob Gilles, Associated Press, posted 6/26/2011 on Yahoo! News).

In the northern reaches of Alberta lies a vast reserve of oil that the U.S. views as a pillar of its future energy needs.

China, with a growing appetite for oil that may one day surpass that of the U.S., is ready to spend the dollars for a big piece of it.

The oil sands of this Canadian province are so big that they will be able to serve both of the world’s largest economies as production expands in the coming years. But that will mean building at least two pipelines, one south to the Texas Gulf Coast and another west toward the Pacific, and that in turn means fresh environmental battles on top of those already raging over the costly and energy-intensive method of extracting oil from sand.

Uh-oh.  Environmental battles.  You know what that means?  No relief at the pump.  Not from this administration that set green energy as the cornerstone of its economic recovery.  I mean, lowering the price of gasoline so people don’t remember the vacation that wasn’t come election time is one thing.  But making gasoline cheap and plentiful?  In an administration with Steven (somehow we have to figure out how to boost the price of gasoline to the levels in Europe) Chu as Energy Secretary?  Not going to happen.

Critics dislike the whole concept of oil sands, because extracting the oil requires huge amounts of energy and water, increases greenhouse gas emissions and threatens rivers and forests. Keystone XL, the pipeline that would bring Alberta oil to Texas Gulf Coast refineries to serve the U.S. market, compounds the issue…

Environmental groups want [President Obama] to reject it, seeing it as a test of Obama’s will to fight climate change.

The Chinese may likely get their pipeline.  But the environmentalists will be pressuring Obama to just say ‘no’.  So get used to those high prices.  They’ll probably be around for a long time to come.  At least until 2012.

The Rich get Richer, We get Poorer and Senators get Bigger Offices

People are getting richer than ever before.  Even during the Great Recession.  Some feel it’s not fair.  Especially those who hate corporate America (see The rich aren’t like you and me by Michael Winship posted 6/27/2011 on Salon).

The annual wealth report by Merrill Lynch and Capgemini finds that the assets of these so-called “high net worth individuals” reached $42.7 trillion in 2010, a rise of nearly ten percent from the previous year at a time when, as The Guardian observed, “austerity budgets were implemented by many governments in the developed world…”

Ernest Hemingway claimed that when F. Scott Fitzgerald once said to him, “The rich are different from you and me,” he archly replied, “Yes, they have more money.” Whether it’s true or not, the Hemingway in the story got it wrong. The rich not only have more money, they have more power, more clout — and more to hide.

Interestingly, this hasn’t changed during the Obama administration.  In fact, crony capitalism has never been better.  Bailouts for friends on Wall Street.  GE with a booming green energy business thanks to Obama’s green energy initiatives (and who are NOT, by the way, paying any income taxes).  Automotive bailouts that favored the UAW over actual stakeholders.  Oh, it’s good to be king.  And part of the ruling elite.  Now it’s time to reward them for a job…done (see Senators Stay Put in Hideaways by Daniel Newhauser posted 6/27/2011 on Roll Call).

A number of long-serving Senators are sitting out this year’s draw for coveted hideaways…

It’s a Senate tradition that is a cross between “Trading Spaces” and the NBA draft. Every two years, after some of the longest-serving lawmakers retire or pass away, the remaining Senators start the process of shuffling spaces, seeking to enhance their status with a coveted secret office.

The Great Recession lingers on because of high gasoline prices caused by government policies that hinder bringing more oil to market.  George W. Bush and Dick Cheney never did anything like this to drive up the price of oil.  And they were oilmen.  Who would have profited handsomely from high oil prices.  As the Democrats and the mainstream media pointed out endlessly as gasoline prices entered $4/gallon territory.  No such accusations now.  Just silence.  As the Obama policies leave a swath of destruction across the fruited plain.  Congress could do something about this.  But there is more important business to attend to.  Namely, showing other senators who has a bigger office.

Four of the 10 longest-serving sitting Senators decided it was time for an upgrade, including Hatch, who snagged the legendary space once occupied by the late Sen. Edward Kennedy (D-Mass.), and Levin, who moved into the impressive hideaway of former Sen. Chris Dodd (D-Conn.).

Hatch said his elegant new third-floor office, with a fireplace, large windows and high arched ceilings, is a significant upgrade, especially because it is just paces from the Senate floor.

And a nicer office.  Elegant?  Fireplace?  High arched ceilings?  What is this?  Imperial Rome?  Some get so upset when the rich get richer but when the people’s representatives, our servants, live just as good as the rich there is barely a whisper of disapproval.

Leahy, meanwhile, said he was in no hurry to move.

“Why would I want to give up mine?” he asked. “I’ve got the most beautiful view probably in the whole Capitol.”

An avid photographer, the second-most-senior Senator, brandishing a professional-grade digital camera, scrolled to a freshly snapped photo to prove his case.

“Recognize that guy?” he asked Wednesday, pointing to a man clad in familiar orange-tinted sunglasses, his arm casually resting on a balcony ledge looking out on a spectacular view of the Washington Monument. “It’s Bono.”

The seven-term Senator is the proud inhabitant of a first-floor hideaway, formerly the stomping grounds of the late Sen. Ted Stevens (R-Alaska). With a fireplace, built-in bookshelves, a private bathroom and a balcony, it is a rare gem among the Capitol’s hidden offices, and certainly enough to impress even a rock star.

This is your U.S. Senate.  Taking care of the people’s business.  Totally insulated from the Great Recession.  While taking the time to swoon over celebrities.  From the balcony of a gem of a hidden office.  It would appear that the rich are not the only ones who have more money, more power, more clout — and more to hide.

Out of Touch with American People

The Left attacked Ronald Reagan and George W. Bush as being out of touch with the American people.  Tax breaks for the rich.  And spending cuts for the poor.  That neither saw the suffering masses their policies created.  Well, President Obama is addressing this income disparity.  By making everyone poorer.  Except, of course, his cronies who are generous with the campaign cash donations.

The high cost of gasoline is hurting Americans and keeping the Great Recession alive and well.  And we can blame Barack Obama now for the high cost of gasoline.  By restricting the supply of oil to the market.  Because more oil means lower gas prices.  (Obama proved he knows this by drawing down the Strategic Reserve to do just that.)  His administration placed a moratorium on drilling in the Gulf of Mexico.  His administration is making it difficult to get drilling permits.  And now his administration may say ‘no’ to that pipeline from the Alberta oil sands to the Texas Gulf Coast.  Or delay saying ‘yes’ for as long as possible to appease the environmentalists.  Meanwhile, the Chinese will move ahead and do whatever it takes to get that Canadian oil.  Because without oil a modern economy will grind to a halt.  And no amount of windmills or solar panels will change that. 

The Chinese know this.  And they’ll probably get that Canadian oil while the Obama administration is still dithering over the environmental impact of the proposed pipeline.  Completely indifferent to the plight of struggling American families.  And quite happy to sit by and watch the price of gasoline get to European levels.  To advance their green energy policies.  So they can reward their most generous cronies.

And it was Ronald Reagan and George W. Bush who were out of touch with American people?

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