Tuesday, April 26, 2011

Oil Price Reduction: Obama Reverses Bush Success

Under the theory that magic is only the working of that which we don't understand, the leftists in the White House must be absolutely awestruck and skeptical to the point of active disbelief by free markets. They have a much easier time with the old command/control model, where even when things don't work out quite the way they were supposed to, easy explanations came to mind. Oil prices increase without a rest for two years? No problem, just wait for a mideast crisis to break out and blame the rise on it.

This week oil and its derivatives, including gasoline, are touching record levels. Within the next few days we'll be hearing and seeing dozens of stories in the legacy media reporting the highest prices "since 2008" and we'll all know they'r referencing the days of the Bush administration and we'll get the message, "This isn't so very bad, these prices are only matching what happened under Bush."

It's true, during the final year of the Bush presidency oil prices rose inexorably, finally peaking in July 2008 at an all-time high of $145 per barrel of crude. Mr. Bush was presented a selection of possible moves that included price controls, special taxes on the oil companies, increased mileage requirements for cars, insistent calls for more "green energy." Those who suggested additional drilling for American oil were derided: Then, as now, leftists pooh-poohed any possibility of constructive market reaction to a "largely symbolic move."

Now cometh the Obama administration. They've chased American deep-water drilling rigs to Brazil and Africa. They've offered billions of dollars of taxpayer assistance to firms drilling off the South American coasts. After Shell Oil spent $6 billion preparing to drill in the Arctic, the administration pulled the carpet out from under the effort by refusing to approve permits.

A simple graphic tells the devastating story:

As a matter of real fact, the Obama administration has done nearly everything possible to raise the international price of oil and the cost for gas in this country. 

I wonder why?

I wrote about this a couple of years ago in How President Bush's Few Words Saved Us $800 Billion Annually. It's worth reading even now.


Anonymous said...

Seriously? You think that drop is because of the opening of more offshore drilling?

Look at a chart of the stock market, real estate, etc. and you'll see the same drop. Why? You may not have noticed, but the second half of 2008 was the start of the Great Recession. You know, a massive drop in worldwide demand for oil as the world economy collapsed. That is the reason for that decline. It has nothing to do with a proclamation of the leader of a country with 2% of the world's oil reserves.

Bob Leibowitz said...

Thanks for the comment, but you've included a couple of errors.

In the summer of 2008, the bloom was still on the rose, the recession three months off and its approach generally unrecognized. Bush had the courage to break the backs of those who believed that the American government would continue to defend ever-higher prices of oil. It's important to note that Bush's announcement was unexpected and that the price decline began that very day.

The second error is belittling the size of American oil reserves. Largely because of SEC regulations, American firms are required to report reserves on the most conservative basis of any country on earth. On an apples-to-apples basis, the U.S. would report 20%-25% of the world's reserves. Even as it is, the U. S. is the #3 producer in the world.

Under Obama, the vast majority of our reserves are off the table. Under Obama, we're sending money to Brazil to develop reserves there. Under Obama, the Bush order had been reversed. Under Obama, prices are going to record levels.

Bush broke the back of the speculators. Obama talks while money walks.