Over $105 A Barrel

Today the price of a barrel of oil went over $105 a barrel. OPEC, the Organization of Petroleum Exporting Countries, has recently stated that it has no plans to increase oil production. On an inflation adjusted basis, this is a new all-time high passing the previous record set back in 1980 during the tensions with Iran.

Now the good news: as a commodity, oil will react like other commodity prices and probably back off as oil traders over shoot its worth. Just as stocks and bonds trade up and down in price, so too can oil get a head of itself and start to back down.

I think everyone would agree that oil is a damn important commodity for countries all over the globe. Countries that we refer to as emerging have seen their consumption of oil increase with the growth of their economies and the growing wealth of their people. India and China are two prime examples of economic growth and the accompanied growth in the demand for oil. Several years ago I read in The Wall Street Journal that when China gets to the point where it is using as much oil per capita as Mexico, that the world would see an increased demand that would put pressure on the price of oil. I must have read that over 10 years ago, at least.

Oil can be used as a weapon as well as a commodity. The first oil embargo of 1973 was a clear warning to the leadership of the United States that oil could and would be used as a weapon to influence our policies towards countries around the world. Unfortunately, in a democracy, subtle warnings are not usually heeded. Henry VIII of England would have acted differently in 1973 than the government in Washington acted. While I did not know Henry VIII, I have this feeling that he would have taken the first oil embargo of 1973 more seriously than the administration in office at that time. Henry VIII would not have been pulled over a barrel.

In life there are trade-offs. We all know that had we, as a nation, taken the first oil embargo seriously and pulled together to formulate an energy policy that would have diminished OPEC’s ability to use oil as a weapon to manipulate our foreign policies, we would not be in the situation we are in today.

Who knows what kind of agreements were made with a hand shake and a wink that put us in the situation we find ourselves in today. We say we are the most powerful nation in the world. Some refer to the United States of America as a Super Power. What kind of Super Power would let itself become so dependent on a commodity that is so important to its economy and survival, that it could be held hostage by its own lack of a comprehensive energy policy? Certainly, the energy policy of the United States of American is not super.

Unless you have been off the planet for a while, you know we are in an election year. In November 2008, the people of the United States will elect a new President and House of Representatives. There is always a lot of talk about how one candidate of one political party is good at crossing the aisle and working with members of the other political party to get things done for the good of the people. Even Presidential candidates claim this quality. So, my question is: why haven’t we formulate an energy policy that would reduce or eliminate our dependency on foreign oil? If everyone is looking out for the good of the people of this great nation, why hasn’t it happened? The reason it hasn’t happened is money. Take a few moments and read a little book titled Sleeping With The Devil: How Washington Sold Our Soul For Saudi Crude by Robert Baer, 2003. This book does not tell everything, but it is a good start. I am sure there are other books out there as well. The first step towards energy independence is for the American people to know what has gone down, and who the players are. Given the facts, I believe the American people can make the right decision. Stay tuned.