Liberty Reborn

Well, liberals are back at it. On one hand they say increasing oil supplies will not lower prices and on the other hand they are clamoring to increase oil supplies to lower prices. Confused? Don’t be.

Recently several prominent liberals have pushed for opening the Strategic Petroleum Reserves (containing a supply equivalent to 33 days of total U.S. oil demand) to try to relieve some of the pressure on oil prices. Why? Because they do not see the contradiction? Nope.

They are pushing for the reserves to be tapped because they know that doing so will have little (or even no) effect on the price of oil so they can grandstand later saying, “See! Increased supply did not work! Now do things our way!”

Of course anyone with an ounce of brains in their head sees the problem with the theory of using the petroleum reserves to lower prices. The problem is that tapping already recovered supplies does not elevate long term demand and solve long term supply shortages. And it is long term demand that is driving the price of oil.

Putting a few hundred thousand or even a million barrels a day into the economy from the reserves only means that that oil will have to be replaced to refresh the reserves from artificially limited supplies. And if that is the case and there is no truly new supply then the same shortage coupled with high demand continues to exist, traders and investors see this and the price on long term contracts remains unchanged.

It is a cunning ploy which, if implemented would surely fool a sizable segment of the population. But all it is is just another dog and pony show put on by liberals trying to manipulate enough people into seeing things their way and further harming our country with lies.

It doesn’t take a rocket surgeon to figure this sort of stuff out. The reason why, when you walk into your favorite store, you see that rack of clothes that are 50% off is because the store could not move the stock they bought at the existing price. There was not enough demand and there was an excess supply. So what they do is mark the leftovers down low enough and hope you might become interested on impulse and get the damn things out of their store.

But on the opposite end of the scale, think about the whole Tickle Me Elmo fiasco of a few years ago. Remember how people were lined up around the block for a crack at one of these hard to find gems to make their child happy on Christmas morning? Remember how many people were buying them only to be resell them on the internet for $1,000 or more?

Now, put those two extremes together and you have a great model about how supply and demand works to drive prices up and down.

The answer to high oil prices is to get more oil than we need. That means mostly drill and recover more. It also means partially conservation of existing supplies. But what it does not mean is federal subsidies for gerbil power.

By moving both the supply curve up and the demand curve down just a bit you can effect oil prices greater than most liberals understand.

This entry was posted on Monday, July 21st, 2008 at 12:07 pm and is filed under J.J. Jackson's Daily Opinion. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.