Is Cheap Oil a Right?

Over the weekend I had the pleasure of spending some time with my family. We were discussing the normal topics; school, upcoming trips, furniture, work, health, but it was only a matter of time before the issue of gas prices came up. As expected, my mother took the opportunity go against every Economics 101 textbook and demand price caps along with windfall profit taxes and subsidies to Americans. After all, why should we be paying this much while oil companies, speculators and the Arabs are all cashing in? When I tried to argue that the high price might be a signal for people to adjust, I was simply told there has been no adjustment since prices haven’t gone back down. After I tried to further evaluate my point, she posed the question, “Well, if its not speculators or companies, what’s making the price so high?” When I responded with supply and demand, all I got was a baffled look. There’s an understandable reason for her frustration, considering her relatively recent purchase of a home in exurbia, requiring a 100 mile roundtrip commute to work, and a new Toyota RAV4. After all, we like the comfort of being able to make plans and keep all uncontrollables constant.

Earlier this afternoon, I tuned into “Hardball” on MSNBC being hosted by Mike Barnicle in place of Chris Matthews. Anyone watching the program got the pleasure of seeing ten minutes of Jim Cramer’s analysis of the energy outlook for the United Sates. Jim Cramer has become a realist on the limited supply of oil while chastising corn based ethanol (championing Brazil at the same time) and voicing his enthusiasm for wind and solar energy. When Cramer said that he believes that Saudi Arabia doesn’t have the oil available to increase production, Barnicle simply gave him an inquisitive look and asked, “Well, where is the oil going to come from then?” which was followed up by several minutes of a very loud reality check by Jim Cramer that mentioned Chinese demand, $150 oil, and the relatively small impact of the common scapegoats such as speculation and the weak dollar.

These two examples are further evidence that the average American (trying not to assume that my mother and Mike Barnicle are average Americans) is both unaware of facts and unable to imagine a reality different than the one experienced over the past 60 years. While Presidential candidates and cable news focus on minor factors on the price of oil whether it be speculation, the outer continental shelf, the weak dollar, a gas tax holiday and ethanol, voices of reason like Jim Cramer and myself are left with the duty of removing the false assumptions that have been indoctrinated on the majority of people. As discussed earlier on this blog, peak oil awareness is imperative to proper mitigation. Without the support of the majority and the continued belief that cheap gas is a right, we will keep looking towards short-sighted and ignorant solutions that do nothing but make our greatest fears ever more possible.

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