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Is There Really an Energy Crisis? A little news item in an April 15 edition of my daily newspaper was headlined "Saudi Arabia proposes to boost oil production." The increase was intended to "meet domestic and international demand while insuring ‘fair’ world prices", said King Abdullah. Indeed, OPEC, the oil cartel, had twice cut production, "contributing," said the news item, "to relative stability that has kept benchmark crude between $50 and $60 a barrel—down from the record highs of more than $78 a barrel last summer. Current prices are around 40% above 2004 levels."
The oil we use today is the result of careful decisions made a decade or two ago by the world’s greatest masters of risk, the oil companies whom we trust to keep the world’s economic engine running. If the price was less in the past, it is because fewer nations were competing for it and that it could be extracted from places less costly than deep oceans. These days when I hear our politicians talk of "energy independence" while often refusing to allow our own reserves of oil and natural gas to be tapped, I am mindful that they are deceiving us. This was clarified in an excellent policy analysis published recently by the Cato Institute. The authors are Eugene Gholz, an assistant professor of public affairs at the University of Texas at Austin, and Daryl G. Press, an associate professor of government at Dartmouth University. It had six pages of footnotes as an indication of how thoroughly researched it was. It’s title was "Energy Alarmism: The Myths That Make Americans Worry About Oil." The authors of the Cato analysis assert that (1) the notion of ‘peak oil’ depletion of existing and future undiscovered reserves of oil is a myth. This is based on what they determined is "scant evidence and dubious models of how the oil market responds to scarcity." That is very good news. The report repeats what every Economics 101 student knows. (2) "Market forces, modified by the cartel behavior of OPEC, determine the key factors that affect oil supply and prices." And now you know why a tiny news story about Saudi Arabia’s intention to pump more oil is an important indicator. Perhaps the most important element of the Cato analysis is (3) the finding that the use of U.S. military power in the Middle East is counterproductive to our interests there. "Past efforts to increase stability in oil-producing areas by supporting dictators, policing violent regions, or spreading democracy have a dubious track record." "In fact, the United States has led 17 efforts at democratic nation building since 1900. Two of those cases, Iraq and Afghanistan, are still under way, though neither appears promising. Of the other 15 cases, only 4 resulted in democracies lasting 10 years or longer." What most Americans do not know is that the world’s major oil companies have wisely diversified their oil holdings to insure that any perturbation in the Middle East will not significantly impact the flow of oil to the world market. One of the regions where oil exists in abundance is Africa. Russia has huge amounts. The Pacific Basin is another and even the Gulf of Mexico still holds great promise of more oil. More reserves exist off our continental shelf on both coasts. We will surely continue to be bombarded by self-serving politicians and others telling us that China poses a threat to the world oil market or that we have to dramatically reduce our use of oil, but the facts do not support these claims. Proposals to raise taxes on gas consumption only hide their greed for funding their many dubious "earmarked" projects. The truth is to be found in the Cato analysis and elsewhere if you can resist being stampeded to drastically alter our economy by schemes such as federally subsidized ethanol production or the nonsense of wind and solar energy. The good news is that the bad news is wrong. Every week we ask for your financial support and many respond. Their donations are essential to our ability to maintain our website and our communications program. These days, my commentaries appear on around 25 "core" news and opinion websites and are routinely posted on a growing number of blogs as well. All this depends, however, on you. Please take a moment to share what you can to keep The National Anxiety Center on the cutting edge of today’s most important issues. Thank you! The Economy: What’s Real and What’s Perception? The most prevalent television commercials I see these days are those offering to loan you money or help you consolidate the debt you have. Others urge you to get into the stock market and invest via the services they provide. Beyond that, there are a lot of commercials aimed at old people like me. They’re about brittle bones and loose bladders. Thanks to exceptionally good genes I don’t suffer these problems, nor do I need a loan or have debt, but I know a lot of people who do. I know too many young couples for whom the debt seems to pile up no matter what they do. Children cost a lot of money. So does illness. Whether it’s a trip to the dentist or some other malady, the cost of health care is scary.
My general perception of the nation’s economy comes from reading business publications, absorbing the news from radio, television, and my daily newspaper. The message is that the nation is doing great! The economy is booming! Anecdotally, I hear a very different message from lots of people. They are young couples with a second mortgage on a house that barely has any furniture in it. They are senior citizens who need to continuing working because a lifetime of work and planning did not and could not anticipate the general rise in the cost of living or property taxes that can only be deemed obscene. I know brokers and financial folk whose phones are not ringing often enough or who now concentrate on providing retirement packages and other comparable advice. I keep getting calls from folks who want me to invest in gold whose value seems to be rising. Much of the work that a previous generation of Americans did, roofing, lawn care, food preparation, is now being done by illegal aliens who, while they work hard, also work for less in jobs we’re told, "Americans won’t do". Whole industries seem to rely on them. I talk with businessmen cutting back on participating in trade shows because the costs keep rising while the sales do not or others whose direct mail programs are yielding fewer and fewer sales. A friend of mine is a trucker and he says that the movement of freight these days is slow, but notes that it is generally that way from Christmas through the end of March. "It’s one of the worst I’ve seen in 27 years." A problem truckers are encountering is that "a lot of our moves or C.O.D. which means credit is becoming a problem." Layovers are more frequent because "there are more trucks than freight right now." This cannot be a sign of the thriving economy the media keeps telling us about. In the "village" area of the little New Jersey town where I have lived my entire life there are more empty storefronts than at any time in my memory. So many nail salons moved in that the town fathers passed a law to prohibit any more. Meanwhile, the village has neither a pharmacy nor hardware store. A friend who lives in Washington, DC reports that his busy downtown avenue is filled with empty storefronts too. These days, even I buy most things I need via the Internet or drive to a nearby mall to shop. As often as not, when I have a question and dial the 800-number, the voice I hear is someone in Mumbai, India. It worries me that the nation must borrow millions every day just to pay for everything a huge and largely incompetent federal government is supposed to be doing. On C-SPAN recently, I heard a Senator referring to a U.S. debt in excess of two trillion dollars owned by foreign governments. Under both Republicans and now Democrats there’s been a spending spree of "earmarked" projects costing taxpayers untold billions. In late March the Economic Policy Institute released data on income inequality based on figures from 2005, the most recent year for which such data is available. All the gains, i.e., the Bush tax cuts, "went to households in the top 10%." The rich got richer. If you were among the 90% who aren’t rich, the real buying power of your wages declined. Meanwhile, President Bush has famously never vetoed a spending bill. Columnist Robert Novak recently reported about a House bill under consideration. "The breakdown of the bill on the House floor today (March 29) raises taxes an average of $1,795 on 115 million taxpayers in 2011. Some 2 million small-business owners would average $3,960 more in taxes. The decreased number of Americans actually subject to income taxes will all be paying higher taxes, and 5 million low-income Americans will be returned to the rolls." The implication is that Democrats are "tax and spend" politicians, but perhaps the Democrats see a need to actually pay for the programs already in place? What we have now is a process that, without some effort to raise revenue to address a huge deficit, without some effort to curb spending, without potentially forced reductions to beloved entitlement programs like Social Security and Medicare, we are looking at a predictable economic implosion. This isn’t about politics because neither party has acted with any rational restraint. I am not an economist. I am just someone listening to friends, reading the newspaper, and thinking that bad things could happen. The Center’s influence is directly related to its communications program and that is dependent on your support. Your donation makes the difference with whether our voice is heard or not. This month, one of our commentaries was published in The Washington Times and the Providence Journal. Our voice is behind heard. Now we need to hear from you!
©
2007 Alan Caruba. |
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The world is not about to run out of oil, but the price is likely to remain where the Saudis and other oil producing nations want it, knowing that too high a price retards the billions that must be invested to find new reserves and then extract, transport and refine it. They know that the world is growing hungrier for oil as nations like China and India industrialize and become major economic centers.
It often seems that everyone I know is wondering how to make a salary stretch and, for many young couples, there is no way a mother can stay at home to provide the most valuable support an infant or toddler needs. Two salaries are needed to meet the bills. There’s something very wrong with that and its impact on the family cannot be good. There’s something wrong when daycare by strangers is a growth industry.