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Lawrence Kudlow
Lawrence Kudlow
13 Dec 2014
Lower Oil and King Dollar Are Unambiguously Good

We all know that the American energy revolution, led by the new technologies of hydraulic fracturing and … Read More.

29 Nov 2014
Lower Oil Prices Are a Free-Market Victory

Seldom has so much good news been portrayed so negatively. Oil prices continue to fall in the U.S. and around … Read More.

22 Nov 2014
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Barack ĎAll of the Above' Obama

Comment

President Obama fought back against rising oil and retail gas prices in a speech in Florida on Thursday. But it was a curious speech. He started out by mocking Republicans, stating that GOP candidates are licking their chops as gasoline prices rocket up. He said, "They are already dusting off their three-point plans for $2 gas. I'll save you the suspense: Step one is drill, step two is drill, and step three is keep drilling."

Very clever. It's kind of what Newt Gingrich said in this week's Arizona debate.

But here's the curious part. Obama said, "If we're going to take control of our energy future, if we're going to avoid these gas-price spikes down the line, then we need a sustained all-of-the-above strategy that develops every available source of American energy — oil, gas, wind, solar, nuclear, biofuels and more."

That's a Republican policy. All of the above. George W. Bush used to say it. John McCain ran on it in 2008. And you hear Republicans talk in similar terms all the time. "All of the above."

Obama next took credit for record oil and gas production. He took a bow for more rigs and the approval of pipelines (including from Canada!). He then argued that his administration has opened millions of acres for oil and gas exploration.

Well, I don't know about the pipeline part. He sure hasn't opened Keystone XL. And most people in the oil business say the administration has been slow-walking offshore permits, restricting access on federal lands, and excluding Alaska and the Arctic. They also note the general nuisance of the EPA, including its recent attack on hydraulic fracking.

But people in the business will tell you that production is high, and that things began turning around years before the administration took office. Of course, the great energy revolution has come with all the new shale fields in the Dakotas, Pennsylvania, Ohio, Texas and elsewhere, which has led to a gusher of new oil and natural gas.

The fact that Obama sounds like a Republican doesn't mean that he's opened the barn door to all manner of new leases and permits. But the reality is that his administration has loosened things up a bit. Whether drill, drill, drill would produce $2 gasoline is an interesting debate.

But surely the U.S. is on the road to energy independence if the government is more hands-off.

The fact remains, however, that right now there's rising public angst over higher gasoline prices. That could become an economic problem, but it's more rapidly becoming a political problem for the White House.

A lot of consumers and motorists are trying to figure out why all this new energy production hasn't stopped prices from rising. The best answer I can come up with is Iran. As the Iranians rattle their sabers over the Strait of Hormuz, oil traders are taking long positions in the market. According to the Commodity Futures Trading Commission, traders with net-long positions of oil contracts worth $100,000 have increased from 181,000 in early October to 281,000 lately. (Hat tip to economist Conrad DeQuadros).

During this period, oil prices have jumped about $35, or 37 percent. Today the WTI contract for light sweet crude closed above $108. And it's worth noting that non-oil commodity indexes during this period have increased by less than 2 percent. That means the oil spike is a supply shock, not economic-demand driven. And since mid-December, AAA retail gas prices have increased about 11 percent from $3.22 to $3.60.

Undoubtedly, gasoline prices are following oil prices higher. And the oil-price jump is a function of trader worries that Iran might choke off the Hormuz Strait, leading to a substantial, if temporary, oil-supply shortage.

Obama cites the Iranian situation in his speech, and he's got an important point. We can debate the merits of Obama's Iranian policy. But the reality is that energy prices are rising on speculative trading demands over a potential worst-case scenario.

If that worst case scenario doesn't come to pass, energy prices could well retreat. In any case, even the oil and gas spike thus far is not likely to have a significant economic impact. All that oil and gas shale production from private, not federal, lands is a big reason why. The new natural-gas supplies have caused the price of natural gas to fall substantially. That means much lower home-heating bills for consumers. And the relatively mild winter so far is another factor contributing to lower utility bills.

The moral of this story is that America should continue to drill, drill, drill, and put up the Keystone XL pipeline, and work with Canada to build an energy-independent North America. But as long as the Iranian threat is unsolved, the future risk of higher energy prices is going to be a fact of life.

To find out more about Lawrence Kudlow and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

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Comments

5 Comments | Post Comment
Oil prices are high because oil companies can't be controlled. They squeeze out any competition they have. They'll raise gas prices so that people will start to invest in alternative energies. Then, they'll lower the rates and their green competition goes belly up. President screwball falls right into their trap. Also, no one talks about how they bought out and destroyed hydroelectric power. And not the kind from dams, the kind by burning the oxygen in water atoms.
Comment: #1
Posted by: Chris McCoy
Fri Feb 24, 2012 6:58 AM
This is pretty shallow editorial by such a talented and experienced journalist. Mr. Kudlow you need to see Spoiled to understand the depth and seriousness of America's energy problems.
Comment: #2
Posted by: Bert Woloszyn
Mon Feb 27, 2012 3:35 AM
Burning the "oxygen in water atoms" is a meaningless statementl; oxygen doesn't burn, it burns other things. What you can burn "from water atoms" is hydrogen, and it doesn't generate energy, it just moves it around. That hydrogen (and oxygen) took as much energy (more, including processing costs) to extract from the water as you get recombining it. It's like the old story of the guy who tried to make his blanket longer by cutting some off the bottom and sewing it onto the top.
Comment: #3
Posted by: partsmom
Fri Mar 2, 2012 11:30 PM
Alternative energy is in it's infancy, it must be supported, how much oil do people thing this little planet has?..........If you think alternative energy companies are scamming, put in better regulations and safeguards, guard the money...but you don't roll over and die, you don't give up..and you don't keep drilling oil off Sunset beach on the Gulf of Mexico.. have we not learned anything from the Exxon Valdez and the BP blow up?
Comment: #4
Posted by: Bloom Hilda
Sat Mar 24, 2012 7:38 AM
Hey, I have a new idea, new law, non negotiable, here it is:

Any oil that comes from America stays in America, no exceptions, no oil fututres, sales to Asia or Europe....It stays here for sale, 100% of the time.

There you have it, we produce it, we use it, end of story
Comment: #5
Posted by: Bloom Hilda
Mon Mar 26, 2012 11:33 AM
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