Nonsense on Oil Security
President Bush has finally acknowledged that the U.S. is facing “tough times” economically but unfortunately he has the wrong medicine to heal our ailing economy. According to Bush, the rising cost of oil reflects that “demand is rising faster than supply.” His solution is to open the Arctic National Wildlife Refuge to oil exploration and to “take a look” at suspending the federal gas tax. As Brian writes below, John McCain and Hillary Clinton have joined in the call to suspend the gas tax.
Boy, have we moved a long way from the JFK days! Back then, leaders responded to challenges by challenging the American people to rise above. Facing a threat from the Communist exploration of space, Kennedy promised to put a man on the moon. One imagines that today Kennedy would turn our oil problems into an inspired call to reduce our energy dependence. Yet, somehow, Bush’s response is not to try to curtail our demand on foreign oil but to supply more oil. Yet, drilling in the Arctic would hardly impact oil prices. And cutting the gas tax would only spur more U.S. demand, which would further drive up prices, likely reducing the impact of the tax cut in the first place and leading us to send more of our money to Saudi Arabia instead of to the U.S. government.
The best way in the long-term to drive down oil prices is to make major investments in green technology that reduce our demand for oil and increase the supply of affordable substitutes. Even just announcing such a program could impact futures markets today. In the shorter-term, one way to drive down the price of oil is to strengthen our currency. According to a recent piece in the Wall Street Journal, “If the dollar had merely retained its value against the euro, oil would be in the neighborhood of $70 a barrel. Dollar weakness explains a large part of the oil price surge.”
Gas prices in the 1990s hovered around $20 a barrel; today, they’re closer to $120. President Bush has been a miserable failure in understanding and guarding against this rise, which has been tragic for many American workers. Unfortunately, he still has not learned the economic lessons of how to get us out of the mess he has led us into. Destroying our natural environment through drilling and reducing our gas tax so we send more money to the Saudis is not the answer. It will only lead us further down the path of oil insecurity.
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And, by amazing and convenient coincidence, the investments that will begin to wean America off foreign oil are also a part of the solution to our currency crisis. After all, the value of a currency is to a large degree a reflection of the world’s long term faith in the economy on which the currency is based. Not surprisingly, as the US economy has steered an ever grimmer course into debt-spending fueled meltdown, our currency has tanked relative to other leading currencies. To right the ship, we need to channel our remaining financial, intellectual and political resources into diversifying our energy alternatives, and send a signal to the world that the American economy is back on track. As Brian Vogt argued earlier this week, a summer gas tax brake will send precisely the wrong signal.
Comment on May 1, 2008 @ 12:55 pm
As I understand it, Congress, according to President Bush, failed to allow any new refineries to be built. So we are in a quandary. So now after 30 years of no refineries, we are scrambling to make ethanol and causing food prices to sky rocket.
We have the oil capacity but not enough refineries to make enough home heating oil and diesel fuel. How high is the price going? Try $7.00 per gallon.. Even if we allowed new drilling in Alaska, we can?t refine it fast enough to keep up with demand. There are simply not enough refineries to make the fuels we need.. Refined oil=National Security. I say, the Our Government should make this a top priority and for the sake of National Security, BUILD several immediately even if it takes three years. This may ward off a depression.
Comment on May 2, 2008 @ 8:00 am