Three Articles about Oil

Oil and Metals Going Wild! (by Sean Brodrick)
4/26/2006 8:00:00 AM

Oil prices slowed their bull charge yesterday as the White House desperately applied the brakes. But that bull run won't slow for long.

I think his enumeration of the President's moves is important, and much ignored (though, perhaps, deservedly so).

President Bush did four things …

1) He waived regional clean-air specifications for summer-grade gasoline in order to boost imports of motor fuel to the United States.

2) He ordered that deliveries to the nation’s emergency reserve be suspended.

3) He gave refiners extra time to pay back emergency oil loans, and

4) He said Congress should find a way to approve permits to build new refineries a year after they are filed.

Talk About Rearranging
Deck Chairs on the Titanic!

President Bush is swimming against a tidal wave of forces that are likely to push oil and gas prices sharply higher this summer.

Emphasis his, though it's actually a subtitle. You'll have to read the rest of his piece to see what all he has to say.

I'll just quote the blurb in my email for Tibor Machan's article The Oil Conspiracy Conspiracy

Today President Bush joined the chorus of voices demanding an investigation into oil company profits. It's enough to make you think there's some kind of conspiracy -- to ignore the laws of economics.

I've praised President Bush's economic accumen before (faint praise, perhaps, but higher than the MSM), and if all he did were what's listed above, he'd be doing all he can or should do. Unfortunately, that's not all he's up to.
BTW, from Machan:

Americans are still merrily purchasing huge, gas guzzling cars, SUVs, boats, and so forth, thereby giving support to the conclusion that they aren’t hurting as much as they make out when they complain to some shallow news reporter who takes their complaint as decisive evidence for how bad things are getting.

So, yes, not only are gasoline prices not that high, all relevant things considered, but their rise is fully explainable by plain commonsense economics and politics.

Finally this from the Mises Institute:

So, let us trace this sorry story to its most recent beginnings.

(1) Congress requires new fuel mixtures during the warm weather months which are costly and disrupt available supplies, but those mixtures do not make the air any cleaner;
(2) The President and Congress decide to invade Iraq and now are making threats toward Iran, thus guaranteeing political instability and violence in the largest oil-producing region of the world;
(3) Congress requires even more ethanol mixtures, despite the fact that it disrupts supplies and ethanol manufacturers cannot meet the goals;
(4) gasoline prices spike, and members of Congress call for arrest and imprisonment of oil executives.

Something obviously is wrong with this picture.

Not surprisingly, almost all of the anger from consumers — if editorial cartoons are an indication of the direction of the rage — is pointed toward oil companies and their executives. On the other hand, members of Congress, which created this current crisis, are calling for the near-destruction of oil companies, imprisonment of executives, as well as a whole new set of taxes that would further reduce available fuel supplies — all in the name, of course, of lowering gasoline prices.
We cannot put these things into the category of bad policies made by well-meaning people. Instead, we are seeing the attempted destruction of one of the most vital industries in our country to be carried out by incompetent, venal tyrants who have no intention of telling the truth — and we have a cynical media acting as the mouthpiece.
There is a way out of this mess — reinstitute free markets in gasoline and oil — but Congress and the President of the United States, not to mention those who are politically connected, have no intention of permitting the markets to work.

Emphasis mine. I also reformatted the numbered points for emphasis.

My points, limiting myself to the present topic:
Anybody who acts surprised that starting a war in the Middle East would have an effect on gas prices is either an idiot or dishonest.

There is a great deal of political unrest in the world and most of it is in oil producing regions. Besides the obvious Middle Eastern producers we have Russia, Venezuela and Nigeria.

On the demand side, there is the economic growth of India and China. All these articles describe that better than I would.

Broderick recommends you buy oil-related stocks and precious metals, Machan says to quitcher bitchin', and Anderson says throw out the politicians, with particular emphasis on the Republicans, but Schumer and Pelosi take hits too. It's about to get tougher folks. Do one of those things, or hunker down.

Update: anybody who hasn't yet, should also read Joe Gandelman's post on the same topic. Many of the same points are made by different sources. I'd like to counter his implication that a windfall profits tax on the oil companies would be helpful for stabilizing gas prices by mentioning that one of the consequences of that would be to dry up investment in the firms, and do harm to those of us with IRAs and 401ks that are invested in oil. We'll either pay now or pay later.

BTW, let's see 'em act to stabilize the price of ethanol, while we're at it.