Don’t choke on that pipe

I might be stepping in over my head here, but I think I’m gonna try anyway…

Those generous Saudis have gifted the gas guzzling United States with a promised increase in production. There is this odd consumer assumption that lower prices will come from higher production, whether it’s ours or the Middle East.

What I think I see happening is a shift of the supply curve to the right. Glance at the second chart on this site and see if you agree.

For simplicity, I’ll use that chart’s numbers. At say $4 a gallon, the Saudis can sell 50 (add the zeros) gallons of oil. That’s $200 (plus zeros) to their piggy bank. But demand started to slip a bit. So they’re willing to increase production if demand calls for such.

Instead of consuming at the level before, we’ll be so relieved when prices get to $3.75 that we’ll bump up demand to about 67 (add the zeros) gallons of oil. (Again these are the numbers on that second chart – not actual numbers.) That puts $250 (plus zeros) into the Middle East pockets, an increase of 25% for them. All they have to do is pump it – it’s not a sacrifice, folks.

Like the crack addict, we have to stop sucking on that pipe. Senator John McCain is right. One way to do that is to drill for our own. Senator Barack Obama’s goal to add a windfalls profit tax to the most profitable oil companies will only shift wealth within the companies and also prices upward.

The second option? Use less. I know a few of you will laugh at me, but I think it’s a matter of national importance that we find a way to reduce our dependency on foreign oil. I stand apart from some of my Republican bloggers who demand that an SUV is a direct path to Nirvana. I also think John McCain’s plans for making energy use a part of his campaign are a good idea.

America, we need to grow up and make a solution. I believe it will come in the combination of increased US production and increased energy alternatives. Prices will simply need to fall where they may. What cannot continue is the glassy-eyed euphoria that comes from sucking on a supplier’s pipe.

Comments

  1. The thing that no one seems to be talking about is that we are sending all of our money to OPEC and China and they are either funding terrorists or building up their military with some of the money, and buying up businesses like crazy. We are selling out our very economy in order not to drill for our own oil. I think it’s a sinister plot to destroy our sovereignty. What right thinking politician can’t see this and would act to stop the insanity?