Saturday, June 7, 2008

Read My Lips

Charles Krauthammer writes his annual column urging Congress to put a permanent floor beneath the price of oil - wisely counseling us to "pay ourselves first." He's rightly skeptical that it will come to pass. It looks like Plato was right: democracy is likely to devolve into the form of government in which people are inclined not to govern themselves and its "rulers" fight for the opportunity to reinforce that tendency. Will Obama be willing to harness or even compromise his popularity to propose remedies that will be tough for the American citizenry to accept? The evidence seems not to inspire confidence. It's hardly worth asking the same of McCain - a personally decent man, but a creature of the Republican party line of national self-indulgence.

In the meantime Energy Secretary Samuel Bodman dispels notions that rising oil prices are due to market manipulation. He notes that production has been flat since 2005 - "stalled" at 85 m/b per day. I seem to recall Princeton geology professor emeritus Kenneth Deffeyes announcing that he believed worldwide peak oil had occurred on Thanksgiving Day, 2005. He may have been off by a day or two...

2 comments:

Conor said...

Indeed-I read Krauthammer's column yesterday. I saw my family two weeks back for a brother's graduation, and we all cheered the high gas prices. Amtrak ought to get ready for a good financial year (and they could probably improve a few things with that extra money).

Daniel Nexon said...

Current increases in prices are probably minimally related to anything like "peak oil." Remember that refining capacity operates as a key constraint on fuel petrol, and that an enormous amount of money has been pouring into commodities because other investment instruments are not doing so well. Indeed, there are many signs that the massive price increases are speculative in nature--driven by a bubble in the futures market.

Also keep in mind that Bodman has every reason to suggest the problems lie in inadequate petroleum extraction.

If prices do stay this high because of fundamentals, expect production to increase as more expensive forms of extraction become profitable...