The Republican Lead Drilling Everywhere Policy is Shear Bull Shit


	Seed Newsvine

The proposed "drill everywhere" strategy being put forward by a wide mixture of Republicans including President Bush and endorsed by most Republicans in Congress and presidential Candidate John McCain can only be described as panic. In an election year the Republicans are trying to hide 7 years of inaction with a strategy that doesn't even recognize the core reasons for $130+ oil. It also betrays their supposed belief in market economics. According the free market economics the market itself should make the corrections as $4.00/gallon should cause a reduction in demand which will in turn lower the price. Obviously they don't believe this is good politics so the free marketers are pushed back out of the limelight. They also want the public to ignore seven years of policies that encouraged consumption, thus; they return to the increased production strategy that sounds better politically but completely fails to address the perilous problem America has with oil.

Oil is at record levels because of two factors. The first is the decline of the dollar. Since oil is traded in dollars a decline in the value of the dollar will have an upward pressure on oil prices. The second factor is speculation. The prices are controlled by the commodity exchange market. At present there is no supply problem. In fact, OPEC has raised its production levels significantly because they have always recognized that prices at this level will only encourage consumption and alternatives. However; OPEC is no longer in control of the price. Instead, prices are being driven by hedge fund managers in the oil future's market. Every one of the so called supply problems of the past two years has been temporary but the future's market is powered by rumors, conjecture and these news blips. There has not been a single dramatic supply issue or a major shift in demand in the past year; certainly nothing that justifies a four-fold increase in the price. It is being propelled by huge amount of money being infused into the economy by the Federal Reserve Bank. With the credit derivative market dried up, this liquidity is going into the commodities market. The hedge funds that were making their profits in the credit market are now making their money in commodities.

The drill everywhere policy completely ignores the factors driving up oil prices. Short term (5 years) it will have no effect on the future's market. Long term it will only serve to keep America dependent on oil. Seven years of devaluing the dollar coupled with policies that encouraged consumption are propelling the future's market. The irony of this policy is that in the end the high prices themselves may do more for decreasing demand than anything on the supply side. Unfortunately it is a painful way to encourage conservation.

About the only thing they accomplish is providing a strategy they can at least live with politically and for this the proponents earn our Bull Shitter of the Week Award.

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