There is no question that most of us are hurting right now with high fuel prices these days. It is definitely not a good feeling when most of our money is going into gas, food, and of course, the mortgage. For the low and middle income folks, there is no money left to buy discretionary items like cool iMacs and nice leather Louis Vuitton purses, and the like. Those days are over. How much is gas prices today? The last time I checked, the price is $4.65/gallon! Think this is a temporary phenomenon? Think again. Prices will go even higher to perhaps $6/gallon! A barrel of oil is $136 today and has doubled during the past year. While gasoline prices have only gone up 35% in the same period of time. It's just a matter of time that we see much higher prices at the pump!
How did we get into this predicament? The housing bust! But how is the price of oil affected by the inevitable bursting of the housing bubble? It’s simple. Oil prices are at nosebleed levels due to the devaluation of the U.S. Dollar and rampant speculation! In other words, it takes a lot more dollars to import a barrel of oil compared to just a year ago. But many people choose not to accept this fact and really think there is a shortage of oil like in the 1970s. People seem to believe that China and India are consuming every last drop of gasoline and thus driving up prices to unprecedented levels! Folks, there is no fundamental shift in supply and demand that would cause oil to double in one year! The fact of the matter is that Ben Bernanke is killing us by lowering the interest rates to such low levels causing the dollar to tank and by pumping massive amounts of liquidity into the markets fueling speculation!
Why has Ben lowered the interest rates so much? To save people from going into home foreclosure which will in turn save the banks from failing! He has also provided excessive liquidity into the financial system as a cushion so banks can continue to operate and function. But unfortunately, all these quick fixes are too late and has done more harm in the long run. Massive amount of people will still go into foreclosure and a good number of banks will still fail in the months to come.
To help offset the high gas prices, President Bush suggest that we drill more in the United States. I think this is absolutely absurd. Ok, let’s recap why we have high gas prices again: the devaluation of the U.S. dollar and the large amounts of liquidity available in the financial markets. So what is the upside to drilling more in the U.S when in fact that there is no global supply and demand problem? Perhaps we can save 20 cents to the gallon? Clearly a 20 cents savings is not going to help most Americans. So why drill more and unnecessarily pollute the environment? The bottom line is that Americans must be less dependent on oil, period! Pumping more oil merely encourages people to drive huge gas guzzler vehicles that are both wasteful and damaging to our children's environment!
The only solution to high oil prices is that Ben must raise interest rates to support the dollar and drain the excessive liquidity from the markets! When this happens, oil prices will drop $20-$30 almost immediately and prices will eventually return to reasonable levels around $60-$70. But can Ben really raise rates in a full blown recession along with the credit and financial crisis, deflating of home prices, and massive job layoffs? Not anytime soon.
So what can we do to cope with high gas prices in the meantime? Well, we can certainly change our behavior by the way we do things when it comes to oil consumption. Less demand will surely drive prices lower.
Consider the following to conserve on fuel:
1. Drive less by moving closer to work. If you are unable to afford a home in the Bay Area, then rent. If you would like to move, but can't sell your home, lower the price!
2. If moving is not an option, take mass transit, telecommute, or carpool.
3. Drive a hybrid or fuel-efficient vehicle.
We as Americans don’t really have any choice going forward but to deal with high fuel costs any way we can while witnessing the biggest housing bust and financial crisis in our lifetime. Did I mention the Great Depression of 2009? Oh my!
What do you think about the analysis? Could more drilling domestically really help us?
Related Posts:
Say No to Housing Bailout and Hyperinflation
Economic Stimulus Plan Will Fail
Drill here. Drill now. Pay less.
ReplyDeleteI think your comment on the increased gas prices is dead on. The value of the dollar sucks because Ben keeps lowering interest rates to keep. If we drill now, we won't see relief from rising gas prices for another 1.5 yrs. The oil companies and car manunfacturers need to get out of bed and the governments needs to say make a car that gets 300mpg or somewhere close.
ReplyDeleteVery good point about the mileage requirement, and thanks for your comments! The Big Three auto manufacturers will likely go out of business or merge soon. Obviously they didn't see this coming. RIP - GM, Ford, and Chrysler! I should not have covered my GM short position! Ugh!!
ReplyDeletecomment given by you on increased gas prices is dead on..
ReplyDeleteWill oil price get stablized if Ben raise interest now?
ReplyDeleteI doubt so because I feel that market is now dominated by speculators and they will do whatever they can to manipulate the market.
I agree with Frank, Drill Here Drill now!! We are not going to solve the issues with energy via Solar/Wind/Hybrids etc. for many many years. Thus we will be relying on oil to warm our homes, provide transportation etc. for years to come. We have the resources, why let others such as China start drilling off our coast for resources we ourselves should be tapping! To say "Why drill when we wont see any results for several years" is foolish and has been said sense the early/mid 1990's. If we has started back then perhaps we would not be in the present situation!
ReplyDeleteRD
Yes, you are correct that this problem will not be solved in the short term with hybrid technology. But in the long term, I do believe we should practice conservation and be less dependent on oil whether it's domestic or foreign. Sure we'll need oil for heating our homes. That's reasonable. But we shouldn't drill more in the U.S just because these gas guzzler trucks are inefficient and that it will cost more to fill up the tank. If people want to continue to drive SUVs, that's fine and that's their choice. It's just going to hurt the pocket book going forward.
ReplyDeleteAgain, high gas prices will immediately fall as soon as Ben Bernanke starts to raise interest rates. But that could be awhile.
I agree we should all work on conserving energy where we can.
ReplyDeleteBut... Even "IF" gas prices fall when rates start to rise again does not help our situation. We can not alow ourselves to be "Dependent" on others when we have the resources here. Let's face it our ecomomy is presently tied to Oil, your not going to see any type of cargo/shipping etc. delivered by a hybrid Semi for years if Ever. Let's become as self sustaining as we used to be, build clean Nuclear Plants such as the French do. Safely tap our own resouces wheter that be natural Gas or Oil. Continue to work on other solutions such as Hybrids vehicles/solar etc.
China/India/Russia are not going to ease thier consumption/demand for Middle Eastern Oil, thier economies are too dependent on it in the same way ours is. We have our own resources, lets USE them!!
RD
Email received from Mike Honda, Member of Congress.
ReplyDeleteDear Mr. Wong:
Thank you for contacting me to express your concerns about offshore drilling. I appreciate the opportunity to know of your thoughts about this important issue.
I was disturbed to hear Secretary of the Interior Dirk Kempthorne's May, 2007, announcement of his Department's plan to expand oil and natural gas leases to 48 million new acres in the waters off Alaska, Virginia, and the Gulf of Mexico. In addition, President Bush removed the long-standing executive ban on offshore drilling in Alaska's sensitive Bristol Bay region. These plans are a part of a last-ditch effort by the Bush Administration to give away precious natural resources to Big Oil, under the guise of responsible energy policy and national security, and they must be stopped.
I have been working with other Members of Congress to prevent the Bush Administration from carrying out these destructive and wasteful policies. We are writing legislation and taking action to prevent the expansion of offshore drilling. In order for the Bush Administration to sell leases along the Virginia coastline, Congressional approval would be required. I will work with my colleagues to ensure that Congress does not approve such a measure. In addition, to prevent the drilling in Bristol Bay, I have cosponsored H.R. 1957, The Bristol Bay Protection Act, which would permanently protect this unique region and its precious wildlife and ocean habitat.
I have long opposed measures to expand offshore oil and natural gas drilling. Expanding offshore drilling will not decrease fuel prices at the pump, imposes unnecessary hazards to ocean ecosystems, and enables the continuance of an energy policy that is fundamentally flawed. The United States faces serious problems because of its over-reliance on fossil fuels. Global warming, air pollution, and catastrophic foreign policy have all resulted from the misguided notion that our energy must come from oil. We cannot drill our way out of these problems.
In order to permanently protect our oceans and coastline, we must have a paradigm shift in energy policy. A comprehensive new energy strategy must invest in new technologies to improve fuel economy, research alternative sources of energy, and expand the use of renewable energy. Our energy policy must protect the environment, reduce greenhouse gas emissions, and promote national security. I am working with my colleagues on the Select Committee on Energy Independence and Global Warming to create such a policy. As part of this effort, I recently amended the National Science Foundation Authorization Act of 2007 to enhance climate science and global warming education, and to expand the understanding of greenhouse gas reduction strategies. In addition, in May, 2007, I held a Congressional Forum on Climate Science, Energy, and the Americas, which brought together distinguished scientists, scholars, and ambassadors to discuss the need for international agreements and collaboration in order to address climate change and renewable energy issues. Through these efforts, we are moving closer to a green energy policy, and away from our dangerous addiction to oil.
Once again, thank you for taking the time to write to me with your thoughts. Your comments help me to better represent the people of the 15th Congressional District of California.
Sincerely,
Michael M. Honda
Member of Congress