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Location: Pantego, Texas, United States

Wednesday, January 17, 2007

The price of oil is down a lot, to $51 per barrel. Venezuela wants an emergency meeting to agree to reduce output to stop the slide in the oil price, and send it back up. Saudi Arabia says there is no need to have a meeting. Could it be that Saudi Arabia is using their production capability to reduce the price of oil, thus severely harming the economy of Iran? I think it is quite likely. Iran needs the money to continue their strategy of gaining hegemony over the ME, and Saudi Arabia is obviously opposed to the Persian ambitions. Saudi Arabia also wants to slow the development of alternative energy sources. President Bush may be partially responsible for the Saudi action too, but no one would give him any credit. My guess is that Democrats are sad to see the price of oil falling.

What is happening with oil prices now illustrates how sensitive the price is to small changes in supply or demand. Democrats always say that more exploitation of oil sources in Alaska, or the artic or off the coasts will have little effect since it will only increase the supply be a few million barrels a day, small compared to the 18 million barrels per day that the United States uses. But that argument doesn't make any sense. Increasing the US production by two million barrels per day would significantly reduce the US balance of trade, and would also reduce the income of countries that don't like us, like Iran and Venezuela. It is difficult to tell what motivates the Democrats in this regard. They seem to want to reduce oil consumption for environmental reasons, and talk about some expensive alternatives that would severely harm the economy, while opposing economically attractive energy approaches like nuclear power from safe peeble bed reactors. One thing that is clear is that Democrats do not want a free market solution to providing energy in the future. Democrats always claim they are not socialists, but their actions indicate they want total government control of production and distribution, which is a form of socialism.

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