An oil man in the White House again

There is rich irony here. Obama’s economic policy being saved by abundant and inexpensive fossil fuel. Even more interesting his how fast the president’s dwindling but still potent supporters have embraced cheap fossil fuels. Let’s do the thought experiment. If this exact scenario was playing out when Bush & Cheney were in the WH, how would our leftist friends describe it?

My opinion has not changed based on the politics. I have always been in favor of higher energy prices to stimulate alternatives. And I have always been in favor of stimulating American sources of energy. These two goals are not in conflict. I have written in favor of the American energy boom before President Obama was aware of it and I will continue to be in favor after he is gone. Natural gas has allowed the U.S. to cut its CO2 emissions more than any other major country in the last decade and American energy has given us much more leverage in the Middle East.

That is why I am suspicious of the Saudi move to cut prices. My suspicions are heightened when I see that they have cut prices in North America while at the same time raising them in Asia. It looks very much like the old monopolist trick of lowering prices in one place to kill the competition while raising them elsewhere to pay the costs.

The effect (and I think the goal) will be to smother American energy fossil fuel exploration and cripple the growth of renewable energy such as solar and wind. I am not sure how to respond. A general free market approach is not appropriate here, since we are facing a very unfree market challenge.

What I would like is for the U.S. to get a piece of this Saudi "gift." I wonder if there is a way to differentially tax imported oil. That way the Saudi price cut could go right into the treasury. We would still have the benefits of less expensive energy, but we would weaken the Saudi strategy.

We have an alliance of convenience with the Saudis, but they are not our friends. Our interests coincide at times when we want to stabilize the world oil supply. We are happy when low prices impact troublesome regimes in places like Russia, Iran or Venezuela. Lower oil prices will make it more difficult for Venezuela to subsidize Cuba, for example, which might bring freedom sooner to that benighted island.

But our interests do not coincide when Saudis seek to maintain our addiction to their cheap oil. What they give today they WILL take tomorrow and we will be poorer for it.

So we have an oil man in the White House again, but he is a very confused one. He is an oil man by chance and against his inclinations. A true oil man, or maybe energy man, would understand the complexity and take a courageous stand to limit Saudi oil imports. This would create lots of opposition on all sides, but when you are president you are supposed to fight for unpopular but righteous position. Bush would have the courage to do this, as he showed when he went against the tide with the surge. I doubt Obama does, but I hope he surprises me. After all, today is his last election.

Posted by Christine & John at November 4, 2014 8:02 AM
Comments
Comment #384946

The key element here is that under Obama, the development of cheaper fossil fuels has happened prudently. Unlike Obama, the industry wanted a much more rash implementation of untested technologies. We are lucky that safe methods have been developed, but we shouldn’t dismiss the fact that our “luck” was no accident. We’ll never know the counterfactual scenario whereby Bush presided over a similar situation. My best guess is that he would’ve permitted unfettered development without heeding the risks or consequences. We may have lucked out all the same (and reaped the benefits sooner), but we may also have ended up devastating our aquifers and other natural resources.

Posted by: Warren Porter at November 4, 2014 9:18 AM
Comment #384949

C&J, mostly J, while your posts are all pro free market you seem to be pushing gov’t to intervene, make some winners and losers, and so on - - -

I agree with Warren that with this fracking for oil and gas it was/is wise to take the slow road.

Nobody wants oil/gas in their drinking water. Were that to happen the incumbency re-election rate might fall below 85%.

‘Free Market’ really doesn’t have a ring to it, much like ‘trickle down theory’, ‘border security’ and some others.

Otherwise - - -

Posted by: roy ellis at November 4, 2014 4:10 PM
Comment #384950

Warren & Roy

Obama had little impact on fracking beside not allowing it on public lands. Most of fracking, then and now, is regulated by states. Obama has had very little to do with it and neither would Bush.

The development of fracking would have been similar under Bush, except maybe more on public lands.

Roy

I see the monopolistic government hand of the Saudis in this and I don’t like it. It is not a free market. The Saudi government and mostly other despotic governments are the ones running this show, which is why I am advocating our government take action in this particular case.

Posted by: C&J at November 4, 2014 4:59 PM
Comment #384951

Wow! The Saudis respond according to the laws of supply and demand by lowering their price to remain competitive in the US market and you call for protectionism. Strange.

I don’t trust the Saudis but from what I have read, the Saudis can ride out the lower oil prices better than most oil producing countries. They want to retain their market share. That seems entirely consistent with a “free market” economy. Protectionism, on the other hand…..

Posted by: Rich at November 4, 2014 5:45 PM
Comment #384953

Rich

The Saudis are a country, not a firm. Their motivations are more political than market driven. I believe that they are not responding to the market, but rather trying to destroy the market power of other competitors. They raised prices in Asia to lower them in North America.

They are seeking to ruin the market for renewables and alternatives.

Posted by: C&J at November 4, 2014 6:32 PM
Comment #384954

Corpocracy here, free markets there … . .

Irregardless, one can understand the Saudi need to manipulate the energy markets as fossil energy is the sole source of revenue for that dry, hot desert country.

I believe the reason the Saudi’s allow the jihadi’s to operate from their country is that they realize they are going to have to get along with the jihadi’s after the crude runs out. Scary!

In the interim they continue to hire some of the very best people to keep the wheels turning smoothly in the Kingdom.

There should be enough information on the pro’s and con’s of fracking by now to tender a good verdict. I’ve heard little on the negative side. But, if we get a red congress the pipelines are a done deal, IMO.

And, can you believe Ed Gillispie is leading Warner in Va. Does being a lobbyist no longer have negative connotations? Sad, sad.

Otherwise - - -

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