Oil Prices Plummet When Ban on Drilling Was Lifted
I thought it was going to take ten years to see any change. Look, the market works this way (yes, even those mysterious “speculators” whom many say are the cause of this rise in oil prices): when the market thinks there’s going to be an expansion in supply in the future the price will go down because there is a new equilibrium set between supply and demand. And let’s get another thing straight, there is still a ban on drilling on the outer continental shelf - a congressional one that is set to expire at the end of September (think they’ll reup it?).
Oil prices have gone up for a number of reasons: the value of the dollar has gone down, the threat of war in the Middle East (Iran), the looming middle classes that are set to significantly grow in China and India, and our obstinate refusal to drill for any of our own oil which is just a manifestation of the environmentalist movement.
And no, drilling will not be the answer forever and ever. There is no, zero, zilch, nada, there is no answer for our energy needs that will last forever. In the meantime it makes sense to drill for an energy source that we have used to spur on economic growth for over the last century. Drilling is the answer.
In a dramatic move yesterday President Bush removed the executive-branch moratorium on offshore drilling. Today, at a news conference, Bush repeated his new position, and slammed the Democratic Congress for not removing the congressional moratorium on the Outer Continental Shelf and elsewhere. Crude-oil futures for August delivery plunged $9.26, or 6.3 percent, almost immediately as Bush was speaking, bringing the barrel price down to $136.
Now isn’t this interesting?
Democrats keep saying that it will take 10 years or longer to produce oil from the offshore areas. And they say that oil prices won’t decline for at least that long. And they, along with Obama and McCain, bash so-called oil speculators. And today we had a real-world example as to why they are wrong. All of them. Reid, Pelosi, Obama, McCain — all of them.
Traders took a look at a feisty and aggressive George Bush and started selling the market well before a single new drop of oil has been lifted. What does this tell us? Well, if Congress moves to seal the deal, oil prices will probably keep on falling. That’s the way traders work. They discount the future. Psychology and expectations can turn on a dime.
BigT
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‘Oil prices at $130 a barrel add $1 billion a day to the region’s current account surplus, according to Merrill Lynch’s latest report.’ “Oil Windfall Profits…” Guess who? http://arabnews.com/?page=24§ion=0&article=111801&d=22&m=7&y=2008
There is already huge oil field in Mid-America, just getting started with new technology, the boom is creating millionaires out of farmers and ranchers. Not Texas, not Alaska, not off-shore. It’s the Bakken, or Williston Basin. Google for it, but to start you off:
http://www.eia.doe.gov/pub/oil_gas/natural_gas/feature_articles/2006/ngshock/ngshock.pdf
http://westhawk.blogspot.com/2008/06/bakken-oil-formation-and-national.html
Thought you’d like it.
René
Comment by René — July 21, 2008 @ 8:11 pm