Which is better, rising energy prices or falling? I think the answer is obvious: falling. If you want the people to become wealthier and to be able to do more things, then falling energy prices are great. There are also lots of great collateral benefits to falling energy prices, first among them being putting all the worst actors on the world political scene out of business. More about that later. Meanwhile, the alternative of rising energy prices means impoverishment of the people. Who could possibly want that?
The answer is that our President and all groupthinking progressives want higher energy prices. Somehow they have convinced themselves that if they can make you drive less and use less electricity and keep your home in the winter so cold that you need to wear three sweaters indoors, they will be "saving the planet," or something like that. Meanwhile, please don't notice while I exit this motorcade of thirty gigantic armored SUVs and get into Air Force One to jet off to Europe.
During the 2008 campaign then-wannabe President Obama was explicit that the essence of his environmental program was to increase energy prices. The famous quote is "under my plan of a cap and trade system electricity rates would sky rocket." He was talking specifically about electricity there, but the EPA under Obama has been overt and relentless in doing everything it possibly can to increase carbon-based energy prices in all forms and for all uses. For example, here is a 2012 roundup from the Heritage Foundation of various EPA rules and initiatives designed to drive coal out of the U.S. energy mix, thereby increasing the price of electricity. In 2010 a vast interagency task force co-ordinated by the White House came out with a big study on the so-called Social Cost of Carbon, according to which all usage of carbon-based energy is somehow a negative to society, with zero positive benefit counted for anything from mobility to computers to mechanized agriculture. And then, of course, we also have the EPA's infamous 2009 "endangerment finding," by which it determined that use of carbon-based energy was actually a "danger" to the health and safety of the American people. And on the oil and gasoline front, how about the EPA's recent rules relating to sulfur in gasoline, specifically designed to jack up the price of gasoline?
Well, so far at least the American people seem to have the upper hand over their government on this one. The so-called "fracking" revolution of new extraction technologies continues to increase the availability of oil and gas, and recently prices have started to fall dramatically. The price of a barrel of oil on the commodity exchanges has declined from well over $100 to about $80, and now the price of gasoline at the pump has fallen from over $4 per gallon to around $3.15. Although plenty of pundits on the left continue to believe that this is somehow a bad thing, President Obama seems so far to be keeping quiet about it -- a smart move with an election pending. Here is the take of economist and CNBC pundit Larry Kudlow:
[O]ne of the absolutely stupidest things I have heard in recent weeks is that the recent drop in oil prices is bad. You heard me right. Serious people on financial television are saying lower oil prices are a signal of worldwide economic collapse. Here at home that translates to recession, deflation, a profits collapse, and rising unemployment. I've been around for a while, and I've seldom heard such gibberish.
Thank you, Larry. Now, perhaps he should have a conversation with the idiots at the EPA.
But it's not just that falling energy prices make your hard-earned income go a little farther. Some of the collateral consequences are nothing short of spectacular. In particular, it seems like all the worst actors on the world political stage operate crony capitalist economies totally dependent on the oil and gas sector to fund the government. I'm thinking particularly of Iran, Venezuela and Russia. When oil prices are up, these guys fly high and use the revenue to throw their weight around. When oil prices are down, they go broke and fade away.
Here's a roundup from Reuters on the current predicament of Venezuela. Remember when they had billions to give away to buy influence in places like Cuba, Nicaragua and Bolivia? Well, now they are about to default on their international debt. Or maybe not -- they deny it; but according to the Reuters article the current price of Venezuela credit default swaps implies a default likelihood of about 80%. I'll go with the market prediction over what the Venezuelan officials are saying. Meanwhile, you literally can't buy anything in Venezuela.
Iran and Russia? Here's a roundup from the Guardian filled with words like "crisis" and "catastrophe." Actually, I'm sure they'll muddle through somehow, but the fact is that the profits from the oil are exactly where these guys get the resources to fund armies to threaten their neighbors and to build nuclear bombs. Low oil prices are a wildly cost-effective method to rein in their ambitions, far better than all the "sanctions" we can never really make stick, let alone than our threat to attack them with our own military forces.
So is it possible for our government to be as completely wrong on any aspect of public policy as it is on this one?