The Oil Equation Revisited

Several factors go into understanding an event, and the oil crisis in the United States is no different. The first thing to be remembered about oil is that it is priced in U.S. dollars. What that means is that the price for oil on the international oil markets is quoted in U.S. dollars. For those of us, living in the United States, buying everything we need to survive using our own U.S. dollars, the price of oil has been going up dramatically. The simple reason for this steady climb in the price of oil and in turn the price of gas and diesel, is that the U.S. dollar has been falling in value in the foreign currency exchange markets. This is often referred to as a weaker dollar. But, that is not the whole story.

The demand for oil around the world has increased. India and China are two countries most commonly sighted for their rapidly growing economies. But, demand is only the second part of the equation.

Supply has been placed under a cloud of uncertainty. The region of the world where most of the oil comes from has been disrupted by several things, but most notably has to be the situation in Iraq. Additionally, OPEC, to my personal disbelief, is saying they are happy with the amounts of oil production. This is where politics and economics meet. We, the United States, is quite simply having the screws put to us. Our “friends” in the middle east have us now at a serious disadvantage. They control the supply of oil production and they are saying that the high prices Americans are paying at the pump for gas and diesel is not their problem. About now you should be asking yourself, “why did we come to the aid of Kuwait?" and, "why do we have troops in Saudi Arabia?” If you take that thought process a little further, you would be asking yourself, “who does our government in Washington represent when it comes to oil?”

Everyone in Washington is sitting on their hands as Americans struggle with the price of gas and diesel at the pump. If you want to read a good book about the influence oil and oil people have on “our” government in Washington, read Sleeping With The Devil: How Washington Sold Our Soul For Saudi Crude by Robert Baer, 2003. This book will give you some important information to consider when you are trying to understand the present energy situation.

The falling value of the dollar can be traced back to our own trade policies, and our own inability to negotiate fair trade policies for the majority of Americans. It is my opinion, that the trade policies that are negotiated on behalf of the American government do not take into account what is best for the majority of the people. We have a republic. We elect people to represent our interests in Congress. However, once the representatives get elected they forget who they represent rather quickly. Our trade policies with several countries is proof of that. Look what has happened to the U.S. dollar. Fair trade policies would have concerned itself with what will happen to the dollar if an unfair trade policy is signed. I don’t think that the future value of the dollar was ever a consideration in the trade policies of the United States. If it had been, we would not see oil priced at over $125 a barrel. Importing so much stuff from China is not good economic planning. There needs to be balance even in a trade agreements. Knowing how much we depend on foreign oil should have been a factor in the kind of trade agreements the U.S. government was signing with countries like China and Mexico. No nation can afford to export their currency in such quantities that it will not have an affect on its purchasing power in the world markets, not even the United States.

And finally, our own government policies and spending has contributed to the fall in the value of the dollar. The “war” in Iraq was a big drain on the U.S. Treasury and continues to be. To put it quite simply, there are too many U.S. dollars out there for the demand for dollars on the foreign currency markets. It is a simply supply and demand situation.

So, here we are at the beginning of the so called "driving season" and demand for gas is expected to rise while the supply is being held constant.

What does that tell you about the direction of price at the pump? Right, the price of gas must continue to go up. But, what if instead of driving more, Americans across the country decided to drive less, much less. What if we got together in our communities and declared a consumer war on OPEC. What if we, the people, came together voluntarily and car pooled and put our cars in the driveway for a day or two each week and did not drive them. What about a consumer revolt against the OPEC nations, nations that we helped with money and blood, and now we simply turn off our engines!!!

If you are waiting for some meaningful help from Washington, I can tell you it is not coming. Read Robert Baer's book, it explains why there will be no help from Washington. We can not throw oil in Boston harbor like the colonists dumped tea a few hundred years ago, but we can start a grassroots movement to turn off our engines and car pool or walk or take a bus. OPEC thinks they know the American consumer pretty well. Now is the time for the American consumer to fight back. We can also fight back in November by voting. This is a republic and you get to vote for who will represents you, so use it. But first, find out where your representative stands on issues that affect you. Stay tuned.

Stamp Painting in oil on gessoed paper painted in 1991. The title is UNITED STATES - HOSTAGE - ENERGY POLICY 1973 - 1991. The new title could be changed to 2008, because we are still being held hostage to our energy policy. The Bush Oil Co. is still the same.