President Bush is pushing Congress to drop the ban on U.S. offshore oil drilling.
http://www.nytimes.com/2008/06/19/washington/19energy.html?ref=todayspaper
This argument is nonsense. It’s a red herring. First of all, everyone needs to understand that $130 oil is not due to a lack of supply. Most people automatically assume that the price of oil has been driven up by market forces. If the price goes up, it’s because of demand, right?. Normally this would be true but that is not the case right now. There is plenty of oil in the market. There is no shortage. This is why the Saudi’s have come out and said “there’s no reason for prices to be this high” and they pretended to be puzzled. However the President of Iran put his finger on the real cause, which is the revelation of the long-latent inflation in the U.S. dollar. As the dollar is collapsing one of the first places investors run is oil futures. The run on oil futures drove up the price. It had nothing to do with the oil producers setting the price at $130. They didn’t set anything. The $130 price is set in the commodities exchanges of the world.
Inflation in the U.S. dollar, which has previously been masked by massive foreign infusions of investment capital into the U.S., is now being revealed. This is the reason for the rise in the price of oil. And since much of the world’s economy is tied to the U.S. dollar, the pain is being experienced throughout much of the world.
Now, with that in mind, be very clear that if the U.S. resumes offshore drilling and production, and / or if the U.S. develops the ANWR, since there is no shortage of oil, the oil from offshore drilling and the ANWR will be sold at the market price, which will still be $130. You don’t think the oil companies are going to sell the oil for less than the market price do you?
President Bush’s proposal will give the oil companies what they have been wanting for 27 years but it will not bring down the price of oil. Be very clear on that.
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