The Oil Pricing Squeeze Is On

Americans are now feeling the real squeeze between warfare zealots and anti-development environmentalists as the price of gasoline continues to skyrocket.

In a recent article for Bloomberg.com, Alexander Kwiatkowski notes that the most recent $5 spike in crude oil prices to a record high of $146.90 has resulted from . . .

concerns that Israel may be preparing to attack Iran, while a strike in Brazil and renewed militant activity in Nigeria threaten to cut supplies.

Oil rallied to a record high of $146.90 a barrel in New York after the Jerusalem Post said Israeli war planes practiced over Iraq, adding to speculation the country is preparing to attack Iran. A Brazilian union said it plans a five-day strike on platforms that pump 80 percent of the country’s crude and Nigerian militants pledged to renew attacks on oil facilities.

. . . .

Gasoline prices in the U.S. rose to a record. Futures for August delivery rose as much as 10.46 cents, or 3 percent, to $3.6155 a gallon on Nymex.

The average price of a gallon of gasoline at the pump in the U.S was $4.11 on July 8, according to AAA, 38 percent higher than a year earlier.

For an up-to-date and graphic plotting since 1947 of the effect of Mideast wars on oil prices, including how real oil prices have steadily increased since 9/11, go here.

Meanwhile, many politicos and environmentalists oppose ending oil development restrictions in the U.S., especially pertaining to offshore drilling, with one of the most hysterical and foolish commentaries appearing in a column in the San Francisco Chronicle, supporting the neo-mercantilist (corporatist?) drilling moratorium that was implemented by Bush’s father when he was president. And, a further editorial in the Chronicle fears increased drilling overall. (In contrast, Senior Fellow William Shughart points out here and here why freeing up markets is the solution to the oil pricing crisis. And, environmental harms are trivial so long as resources are owned and managed privately and not through government bureaucracies, with property rights for all parties fully protected from trespass.)

Barack Obama, Al Gore, Arnold Schwarzenegger, and Nancy Pelosi recently declared their firm opposition to any increase in offshore drilling, with Gore even equating offshore oil drilling to the invasion of Iraq. Never mind the fact that it is the federal government that invaded and now occupies both Iraq as well as the continental shelf.

Similarly, the chorus of warfarists continues its mantra for endless U.S. interventionism in the Mideast, guaranteeing a continuation of record oil prices on futures markets and at the pump, with John McCain claiming that the U.S. has “succeeded and we need to continue the strategy.” In Kansas City, MO, he stated:

I am happy to stand in front of you to tell you that this strategy has succeeded. It has succeeded. It has succeeded.

And later in the day he added that:

The strategy has worked and we now have the Iraqi government and military in charge in the major cities in Iraq. Al Qaeda is on their heels and on the run.

Meanwhile, Obama has set a 16-month timetable to begin withdrawing U.S. troops, and asked when the U.S. military should leave the country, Iraqi Prime Minister Nouri al-Maliki directly answered:

As soon as possible, as far as we’re concerned. U.S. presidential candidate Barack Obama talks about 16 months. That, we think, would be the right time frame for a withdrawal, with the possibility of slight changes.

Those who operate on the premise of short time periods in Iraq today are being more realistic. Artificially prolonging the tenure of U.S. troops in Iraq would cause problems. Of course, this is by no means an election endorsement. Who they choose as their president is the Americans’ business. But it’s the business of Iraqis to say what they want.

No sign of McCain retracting his view that the U.S. should remain in Iraq for a 100-years war and then even for 1,000 or 10,000 years.

In contrast, Obama’s proposal for a U.S. withdrawal from Iraq is indeed laudable and well-overdue, and would have a powerful effect on driving down oil prices. However, since he incredibly wants then to send these troops on to Afghanistan to fight the “real front” and even into Pakistan (also see here) while maintaining a major presence of the U.S. in Iraq, war will only at best be shifted to other fronts (and more probably widened and escalated), with oil prices likely to go even higher in the process. And on top of this, his opposition to oil development will only make matters worse. So much for the candidate of “change” and his “new strategy.”

Better to consult our Senior Fellow Ivan Eland on the need for the U.S. to exit Iraq and disengage overall from the U.S.’s ill-fated and hubristic worldwide empire of 800+ bases and policy of endless, invasive war. In this regard, the updated edition of his book, The Empire Has No Clothes, plus that by Robert Higgs and Carl Close, Opposing the Crusader State, are must reads. And on the folly of going to war for oil at all, see David Henderson‘s superb Independent Policy Report, Do We Need to Go to War for Oil?

David J. Theroux is Founder, President and Chief Executive Officer of the Independent Institute.
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