Higher Gas Prices on the Horizon

Richard Rahn, a senior fellow at The Cato Institute published an article Thursday in The Washington Times titled "The Next Oil Shock." In his article Mr. Rahn states that the current price of oil, which is around $50 a barrel, is below the price needed to meet current demand for a sustained period of time; way below, if global demand rebounds. In basic economic terms, when demand is more than supply, the price goes up.

Add to this the fact that a barrel of oil is denominated in dollars. With Tim "Turbo Tax" Geithner frequently exhibiting symptoms of "foot in mouth disease", along with other actions by him, the Federal Reserve and others in our government that will weaken the dollar, it will take more of them to buy a barrel of oil. Ergo, higher price at the pump.

But it gets even better (sarcasm intended). States Mr. Rahn in his article:

"When oil prices soared a couple of years ago, the Bush administration moved to open up government lands and certain offshore areas for more oil exploration and production. Officials in the new Obama administration are now in the process of again locking up these areas to prevent oil production.

If the Obama administration is right in its forecast that the economy will be growing again by the end of this year - which is probably even more true for the world economy - the demand for oil will be rising rapidly again. Yet much production has been shut down because of the recession, and potential future supply inside the U.S. is being restricted by government action.

The result should be obvious - gasoline at the pump will be at least $3, if not $4 or more. "

Many environmentalists and politicians love to expound on 'renewable' energy as the savior to rescue us from our dependence on oil. That's a lovely idea in theory and I'm not dismissing renewables from the picture totally, but let's face reality: geothermal, wind and solar energy combined account for only 3% of our energy. It's not economical to produce, the conservationists fight the renewable energy projects the moment someone tries to put it into their backyard, and even other environmentalists fight it when states attempt to implement any plan for the transmission of the energy to end users. As a result, the likelihood of renewable energy playing a significant role in energy production in the next 20+ years is slim. So for the next 20 years or so, we still need to look for increased access to fossil fuels for our energy independence.

That said, the Obama administration's actions to further curtail energy production is lunatic. It begs the question of whether they want the price of gasoline to skyrocket. That would not surprise me as I once had a liberal Democrat state that he would be ecstatic with $4 to $5 per gallon of gasoline if that is what it would take to get Americans to stop driving SUV's and trucks. His reason is the need to 'save' the world from global warming. Given the similar beliefs of some climate change fanatics working for the Obama administration, their otherwise unfathomable actions make more sense when viewed as a deliberate move to drive up energy prices to force Americans to drastically change their lifestyle, which is fully in line with their ideology.

It would also serve to make us more dependent upon government to survive. How convenient...and how Orwellian.