Obama's Got Oil On The Run!

He's got oil on the run, alright! On the run up...that is!

Just before Obama announced his budget and energy plans, oil was closing in on $33 a barrel. Today, a doubling of that number doesn't look too far away with the oil futures now trading around $54 a barrel and climbing fast (See Oil Chart from WTRG.com). This is despite the fact that we and the rest of the world are in the midst of a recession and world oil consumption has come way down.

Apparently, the oil traders of the world have looked at Obama's energy plans and see oil as an investment and not the liability that Obama's plan should have created. The reason for this is that all of Obama's green energy plans are focused on attacking the coal and natural gas industries and not oil consumption.

I agree with the traders. We aren't going to see any substantial reduction in oil usage over the next two decades or even longer. By not increasing our domestic supplies, we will continue to become increasingly dependent on foreign oil as our own resources dwindle to a mere trickle. We will only pay more and more for what is an ever increasingly scarce commodity. For every barrel of oil we save in this country, the Chinese and Indians will eat that up exponentially as their economies and their affluence grows. We have millions of gasoline-powered cars on the road and it will take nearly two decades to replace them through normal attrition. The likelihood that hybrids will have the same long-term usable life as compared to the pure gasoline cars of today is somewhat questionable due to the high cost and frequency of having to replace batteries. Battery-powered cars will also be expensive and the electricity to charge them will only get more and more expensive under Obama's plan.

My guess is that we will continue to increase our demand for imported oil through 2030, or even longer, as this country grows and as our own domestic oil supplies wither away. I will bet, that in 4 years, we will be importing substantially more oil than we already are and the price will be well over $150 a barrel. I don't think it is unreasonable to believe that we may see highs in oil of $80 a barrel this year. This is especially true because the United States dollar continues to tank over inflation fears and the price of oil moves up as our dollar, a worldwide reserve currency, continues to sink.

Of course, this is a somewhat educated "guess-timate" on my part. If there is a substantial or greater collapse of the world economies this year, then all bets are off. In that case oil prices could fall dramatically.

The oil barrel image by yuan2003's photostream on Flickr with Creative Commons Licensing. Some rights retained. (Click to View Other Works).