|Oil at $300
Posted 07/04/2008 ET
You would think that this story is right out of science fiction. But the facts appear to be that the US Democrat-controlled Congress intends to destroy the Republican middle class with $11 per gallon gasoline.
The Democrats’ base — wealthy white “limousine liberals”, and very poor people — won’t be harmed, but the families who live in suburbia will be devastated.
The multi-millionaires like billionaire Senators John Kerry & Jay Rockefeller, financial speculator George Soros, filmmaker Michael Moore, and actors George Clooney & Meg Ryan can easily pay for their auto and private jet fuel. Poor people are forced to take public transit.
Here’s the reasoning behind the move.
The so-called “Global Oil Crisis” is an invention of the US liberal ruling class, which has successfully managed to export their disastrous ideas worldwide. Oil supply and demand has been on knife-edge balance for years. With the growth of the newly well off Chinese and Indian car-consuming populations, oil consumption has been rapidly increasing in the developing world even as it has been dropping in the US. No wonder India and China, with nearly half the world’s population, refused to sign on to the Kyoto “global warming” treaty.
Cheap energy — and specifically oil — is what made America the powerhouse of the 20th century. When gasoline was $1 a gallon in the US, it was $2-3 a gallon in high-tax Europe. Low US excise taxes enabled the country to grow and our vast middle class to prosper. Even today, the American consumer is paying $4-$5 per gallon of gasoline while his European counterpart is paying $10-12.
To meet this new energy shortfall, economists would assume that the rational market would increase the supply of oil and other oil-substitute energy supplies. But they would be wrong.
First, US the anti-nuclear lobby got the nuclear power industry banned from building new safe and clean fifth-generation power plants, abandoning the field to countries like France, which runs its super-fast trains on nuclear plants scattered throughout the country. In fact, fully 90% of France’s electricity comes from 59 non-polluting “carbon neutral” nuclear; they also recycle 99% of the spent fuel into new fuel using a breeder reactor at the La Hague chemical complex. We don’t do this either.
Next, the eco-greens got the drilling for new known American oil reserves in the barren wasteland of the Alaska ANWR’s near-coast sites, and along the east and west-coasts of the continental US, and in the Gulf of America. Now China & Venezuela are set to start drilling off the coast of Cuba – but not Exxon or Chevron. They’re forbidden by law.
Then, the construction of new modern and efficient US-based refineries has been halted for 40 years. So there is a perennial shortage of heating fuel in the winter and gasoline in the summer. One hurricane can take out 5% of the nation’s refining capacity for months. A 5% shortfall can now easily cause a $25 price increase.
Meanwhile, the nation’s electricity generators, primarily fuelled by coal-burning plants, were forced to convert to natural-gas, previously mostly used in industry, agriculture and home heating. This has, in turn, driven the price of natural gas through the roof, from $3 per thousand cubic feet to over $11.
Finally, the hundreds of older existing oil fields and pumping derricks were closed and not allowed to re-open due to “environmental concerns”. California alone has scores of older fields just waiting to be re-opened to increase the US oil supply. And these could be re-opened in a matter of months, not years.
But wait, there’s more.
To make matters worse, Congress then mandated using a toxic and polluting chemical — ethanol — inefficiently converted from corn, to help alleviate the oil shortage. Corn farmers promptly sold their commodity to the highest bidder, the ethanol refiners. The price of corn-based foods, like cornflakes – and sugar, chicken, milk, eggs and beef has now shot up.
In the process, a minor supply-demand problem has been artificially legislated into a full-blown crisis. The stock market’s response has been predictable: down, down, down.
The liberal solution, of course, is for Congress to raise taxes, increase the fuel excise tax, and force industry to adapt wacky “carbon credit” schemes to line the pockets of the rich liberals who are capitalizing on the global warming scare by selling newly-invented credits, like Al Gore’s new company is doing. Wrong. This will stress the mostly-Republican middle class even more.
So what is the solution? What’s right for America is wrong for the limousine liberals. It’s simple, really. Unleash the supply-side forces of economics.
Open up domestic oil drilling immediately. Turn back on the older wells now capped off. Fast-track new safe nuclear power plants. Stop creating global food shortages by killing off corn-based Ethanol production. Waive the punitive duty on cheap Brazilian sugar cane ethanol. Plant lots of domestic switchgrass for cleaner & cheaper ethanol manufacture. Begin a crash construction program of 50 new advanced nuclear power plants nationwide. Stop burning up natural gas to generate electricity. Build new clean coal-burning electric power plants nationwide (China is turning one per week for the next 5 years), and construct coal-to-oil conversion plants. The Germans were doing this in WWII. Alternative-energy sources like cheap 4th-generation solar panels will ramp up as their prices continue to fall.
In other words, return to the old policy of cheap domestic energy that has made America the powerhouse (pun intended) that it once was. The US will become oil-independent of our enemies whose treasuries are now overflowing with a flood of newly-printed dollars we’ve been using to pay our oil bills with, and the dollar regain its strength as the world’s reserve currency.
And the irony? All of this can be done now with results beginning in 90 days, and using new super-clean super-efficient and environmentally-friendly technology. The result: oil will drop down to well below $100 per barrel and the economy will once again boom. If France and China and Brazil can do it, why can’t America? Why not indeed?
Oil sells for $145 per barrel mostly because of artificially-created supply-side shortages. A small part of its price is also determined by speculators and uncertainty over a future cut-off of oil from the middle east that a war with Iran could cause. Assuming that Iran’s nuclear bomb program is destroyed by Israel this fall — with or without America’s help – look for oil to spike up to $250-300. And 40 years of congressional bumbling will be the cause.
R. W. “Dick” Gaines
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