Barack Obama: Incompetency's Gift to Big Oil?
President Barack Obama, accompanied by Energy Secretary, Steven Chu, delivers remarks on the energy bill, Monday, June 29, 2009, in the Grand Foyer of the White House in Washington. Photo by Pablo Martinez Monsivais: AP
During the 2008 election, Barak Obama constantly quipped about "Big Oil" (i.e. successful American energy providers.) They allegedly ran the Bush administration; they had filled John McCain's pockets with dirty money; they were profiting from the high oil prices that they had somehow magically caused; and they were gleefully killing the Earth (which, of course, oilmen won't need anymore after they take their ill-gotten gains back to their sunless home world deep in the Crab Nebula.)
If you believe the Obamabot propaganda machine, now that he is president, the days of big profit by Big Oil are numbered. There's just one problem: while Obama's policies may devastate the wider economy, they could leave Big Oil, that well-worn faceless bogeyman for leftist gobbledygook the world over, sitting pretty. Obama is no friend of the oil industry (or the six billion consumers it benefits), but his policies sometimes seem designed to enrich established energy producers - by creating a wholly manmade energy crisis several years down the road.
Imagine for a moment that you actually were part of a plot to jack up oil prices to obscene levels - what would you do? Much like OPEC tries to do, you would simply restrict the supply of oil. This would, of course, harm consumers and blunt economic growth, but it would leave you in command of a chokepoint in the world economy. Yet restricting supply is a cornerstone of Obama's energy policy - which should really be called a "lack-of-energy-policy", since the only energy in which Obama is interested is subsidized novelty technologies like biofuel and solar.
So while Obama's green warriors tilt at windmills and E85, supplies of oil, gas, coal and the other energy technologies that the economy is actually fueled by will be intentionally allowed to wither.
Combine this politically driven lack of access for exploration and development with the fact that the financial crisis (through a collapse of oil prices and a freeze in credit markets) has essentially halted new infrastructure investment in the oil industry, and it becomes very easy to argue that a looming imbalance in supply is building. While the Obama administration fiddles, the inexorable atrophy of mature oil field production imperceptibly tightens supplies daily.
Then there is the demand side to consider. Unless one believes that we have reached the end of civilization with the current recession (and who could blame you for thinking this if you listened to the hyperbole and fear mongering that was used to pass various bailouts and stimuli), then you have to believe that demand for energy will increase in the future. China and India are not going away and they are not going to go without.
On top of any natural return to demand equilibrium are the artificial measures that have been universally taken by governments to stimulate the economy with fiscal and monetary sugar rushes. The scale of these endeavors is truly staggering, and most of the money set in motion by them has yet to be spent. Being unspent, these measures did little to stabilize the economy, but they are likely to have an unintended consequence when they do enter circulation: sustained inflation.
Inflation will have two major effects on the oil industry (as well as natural gas and coal). The first will be a surge in prices driven not just by inflation itself, but by fear of inflation. As dollars and other currencies lose value, investors will seek out safe havens, such as commodities. The up-swing in prices will then attract the much-dreaded "speculators" (i.e. strange people who like money and want to buy things that will be worth more of it) and a positive feedback loop could arise in prices: they will go up because people expect them to go up even more. This is also known as a bubble.
The second effect that inflation will have is to erode fixed-rate debt. This will be bad for banks and other creditors, but it will benefit those industries that tend to rely on large amounts of long-term debt to finance huge physical infrastructures - such as oil fields, pipelines, offshore rigs and the like.
And the cherry on top of this sundae? Since the Obama administration is set on micromanaging the technology of the future - actually picking (with all the wisdom of government) which ideas are best and how we will power our homes, cars, businesses, and hobbies - the chances that a new energy technology capable of competing on price with fossil fuels has probably decreased. Politics, subsidy, waste, and incompetence are very likely to crowd out true innovation for years to come. Innovative people will concentrate on gaming the system, rather than changing the game.
Supply restrictions, demand pressure, flight to safety buying, debt relief, and crowding out of real competition - that's the possible future for oil in the US. Functionally, Obama's Energy Incompetence is like Big Oil having a friend in the White House.
There are threats, though. One is that Obama and his allies might use the oil price spikes they are engineering as a populist excuse for confiscatory taxation, and the other is that in the long term, the health of the oil industry will be compromised by worldwide economic decay.
Ultimately, energy supplies and economic activity must exist in equilibrium. One can raise the other up, or one can tear the other down, but they cannot go
their separate ways for long. In the intermediate term, however, there might be a lot of money to be made from the vandalism of that equilibrium by Barack
Obama.
http://www.energytribune.com/articles.cfm?aid=1996
Black Blade: This is just so amazingly similar to the state of the world as depicted in Ayn Rand's "Atlas Shrugged". We have a "Central Planning" committee run amok destroying American industry in an effort to build a Socialist Society while blaming others (i.e. the previos administration(s)). Our new government hate and despise the The Constitution of the United States and The Bill of Rights.
"Interesting Times"
