Yes, It Does: Why Resolving To Drill Here, Now, Will Lower The Price Of Gas, Now
About the Author: I am an ex-urbanite who escaped the city life and has lived for the past 27 years in a rural, mountainous area of Virginia that in colonial and early-American times was part of the "Backcountry." Politics: Democrat by tradition, but moderate-to-conservative views on most issues; I fit the description of "traditionalist." Please visit my Web site, Backcountry Notes, at http://www.backcountrynotes.com/ Read more from this authorHouse Speaker Nancy Pelosi recently pronounced that George W. Bush is a “total failure” as President. Coming from one of the top officials in a Congress that recently got a nine per cent (!) vote of confidence from the American people, I accept that as expert testimony; Nancy Pelosi certainly should know failure when she sees it. Nevertheless, as we say in the South, even a blind pig finds an acorn now and then, and it looks as if G. W. snuffled one up last week when he lifted the Executive Order banning offshore drilling for gas and oil.
Yes, yes, I know; as reported, the Bush43 order is mainly “symbolic.” But immediately following that announcement, the price of petroleum took a steep drop. Locally, we went from $4.05 per gallon to $3.90 per gallon in two days. Yes, yes, I know, there may be additional reasons why the price of petroleum plunged; but those reasons seem to be insufficient by themselves. According to Bloomberg, the factors at play were reduced tension between the U.S. and Iran; a slowing global economy; lower U.S. fuel demand; and rising supplies. But the lower domestic demand and the rise in supplies was not something major - - and even if the short term outlook has improved, why the steep drop in the oil futures market?
After all, the long term outlook for supply and demand hasn’t improved, has it?
Actually, yes it has, and President Bush’s order on June 15 is an important part of why the futures market fell.
Traders’ decisions about buying or selling commody futures are based both on current facts and on expectations about what will, or will not, happen in the future. One of the important factors which is driving the price of oil futures upward is the prospect of limited supply growth - - this point in time, traders assume that Saudi oil production has or will soon peak; that production will remain uncertain in troubled areas, such as Nigeria; and that the United States will not increase its efforts to drill for oil. The expectation of flat supply creates an upward pressure on the price of oil. Bush’s offshore-drilling order signalled a change in what will happen in the future; that is one of the reasons futures prices fell.
Resolving now to exploit our domestic reserves of petroleum will have an immediate and lasting impact. The pressure being put on our “total failure” Congress is increasing and it is clear that the American public has reached a consensus on this matter. Expectations are beginning to change. So, yes, it does: resolving to drill here, now, will lower the price of gas, now.
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The notion promoted by dems that drilling won’t lower oil prices (at least no very soon) is an idiocy. We need to do it, we need to exit the internationa oil racket - ASAP.
As far as those (supposedly) late financial results, the Dems & Pelosi should listen to the Chinese saying: “All great journey begin with a small step.”
It is the time to start the journey - with or without pathetic creatures like Pelosi.
Nice post. To my mind it’s obvious the drop happened because of Bush rescinding the Executive Order prohibiting off-shore drilling. Why the obvious is ignored by analysts I don’t know. Possibly it’s some strange idea that because he’s lame duck he can’t have an influence, but that ignores that on this issue he’s really just at the head of the parade. Americans have been in thrall to “environmental concerns”, but when you have to pay-at-the-pump perceptions change. I don’t think Americans are now any less concerned with the environment than they were six days ago, or two months ago, but I think they’re far less concerned with being PC correct, and I think they’re much more inclined to say to environmentalists now: “If you say, there’s going to be environmental damage, prove it.” There’s now a powerful public desire for new oil.
I think if congress keeps pushing this, if the congressional ban isn’t reimposed in September, I think oil futures will continue to drop, like a stone. I say that because prices are way out of whack with production costs. It’s irrational. I also think there’s market manipulation, but that’s a separate consideration. Conservatives, the ones who want more drilling, don’t want to go there. I speculate that this is an area where conservatives are wearing blinders.
I am always amazed at how gullible the far right republicans are and the endless ways you are used by your elected cronies to benefit the rich.