Cheap Crude: A Flash in the (Oil) Pan

The biggest mistake the United States could make right now is to assume recent weakness in oil and gasoline prices means the energy crisis is over and the US can go back to our old energy habits and policies.

An editorial in Friday’s edition of The Wall Street Journal inferred that high oil prices were solely the result of weak US dollar policies which caused a speculatory oil price bubble. The author conveniently neglected to point out that while the dollar did drop roughly 40% since President Bush got elected, oil prices went up 500%. The author then recommended US auto companies not use their taxpayer bailout dollars to manufacture fuel-efficient automobiles because there would be no market for them with oil under $50/barrel, which is coming (according to him). Notably, the author neglects to mention the role high oil prices played in the current automotive manufacturing crisis as the US big three focused on gas-guzzling Hummers and SUVs as opposed to fuel-efficient intelligent design.

Another article in The Wall Street Journal this week tried to persuade people not to buy fuel efficient cars because the money they save on gasoline won’t be enough to make up for the increased insurance premiums smaller vehicles require due to safety considerations. In this article, no mention was made of the environmental costs nor of the fact it just may be better for US insurance companies to receive US dollars rather than to send them overseas to Saudi Arabia, Iran and Russia.

What short memories these folks have. It was only a few months ago that oil was close to $150/barrel. Let’s look at the facts. Oil is now in the $60s not because of some huge new supply coming on line. It is low because demand has fallen off a cliff due to extreme worldwide economic weakness.

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