High Oil Prices: The Democrats Anything-But-Drill Tactics

On March 6th, President Obama announced that he was again dusting off the year-old Oil Speculation Task Force under the assumption that its the Wall Street's speculators who are driving up the price of oil. This is so typical of Democrats in general. If they aren't creating task forces, they're holding Congressional hearings and grilling the top execs from big oil companies over the high oil/gasoline prices. In doing so, they completely ignore the costs and supply/demand issues that actually go into the formulation of a barrel of oil:

• Production Costs are Rising. Every year, it gets more and more costly to extract oil out of the earth and its oceans. That's because the drilling is deeper and the latest extraction technologies (like fracking and sideways drilling) are very costly. Also, there's the added and increased costs involved in fending off environmental lawsuits and the costs to obtain EPA approvals and licensing.

• The Value of the Dollar. By international agreement, oil is only traded in U.S. dollars. If the dollar is weakened by excess U.S. spending and debt, it necessarily takes more dollars to buy a barrel of oil. The value of the dollar has nosedived under Obama because the Federal debt has risen by 58% in just three years.

• Supply Disruption. Like any other commodity (gold, corn, pork, and so on), the price of oil is determined by the trading activity that takes place at various commodities exchanges in the world. The people trading oil take into consideration both future supplies of oil and future demands for it in deciding what price they are willing to bid for a barrel of oil. This, with the ultimate belief that they will make money when they go to sell that oil they just bought. At same time, they take on a serious risk that they will lose a lot of money if their supply/demand assumptions are all wet. Right now, Iran's threats to block the Strait of Hormuz and disrupt oil supplies is the primary reason that the price of oil has risen well above the $90 a barrel mark. But, before that, oil had risen as a result of all the turmoil associated with The Arab Spring and because Obama had placed so much drilling potential off limits. Should all of these supply issues be resolved at the same time, the price of oil would collapse within minutes; but probably no lower than $70 a barrel.

Blaming high oil prices on speculation is just nonsense. Traders who trade in oil are making very educated buying decisions and that are not speculative. The real fact is that this President should look in the mirror when casting blame for high oil/gasoline price. He could lower oil prices in two ways: (1) by reducing Federal debt, and (2) by expanding drilling. Blaming speculators is just another form of diversion by another oil-company hating Democrat.