Thomas Nugent never disappoints – he once again reminds us that flunking Econ 101 is a prerequisite for writing on economic issues for the National Review:
Gas is just under $4 a gallon here in South Carolina … oil consumption is only up about 1 percent year over year … Investor’s Business Daily, the free-market newspaper, has pointed out that Democrats are a prime cause of killer oil and gas prices. About a week ago the Senate failed to end the moratorium on oil-shale development in Colorado. Republicans voted for removing that moratorium; Democrats voted against. But voters put more Democrats in office than Republicans, so here we are. By the way, that shale-oil reserve potential is about 1 trillion barrels. Then there’s Alaska and offshore, where another 50 billion barrels of oil are awaiting development. But this Congress says such exploration is off limits. The result? We’ll continue to export wealth to the tune of $600 billion per year by relying on foreign crude and OPEC for our energy needs.
In the batshit insane world of Thomas Nugent, the market for oil is domestic. In the real world, the market for oil is global. If we opened up oil-shale development in Colorado and ANWR today, the immediate impact on world oil supplies would be zero and the eventual impact would be very modest. To claim that the Democrats are a “prime cause of killer oil and gas prices” is beyond idiotic.
But let’s talk about the demand for oil. As Nugent writes “oil consumption is only up about 1 percent year over year”, it would have been nice to know whether he meant domestic versus world consumption and it would have been nice to know which years he was referring to. The Energy Information Administration provides an Excel file called World Oil Balance, which indicates both world and regional oil demand from 2003 to 2007. Both domestic and world demand increased by almost 3.5% from 2003 to 2004. Since then, world oil demand has continued to grow as domestic demand has not. Simply put – world oil demand has increased which has driven up market prices. While the US demand curve has likely increased over time as our economy has grown, the increase in price has moved us along the demand curve so that the net impact on US demand has been virtually zero. If a rising demand for oil is at least part of the reason for higher oil prices, could Mr. Nugent kindly explain to us how that can be blamed on Democrats?
Update: Rightwing troll FA reads claim that is not the Democrats that are the prime cause for higher oil prices and writes:
It is a statement of fact, and you have to be an unbelievable IDIOT to think otherwise. The FACTS are that Democrats have put a substantial portion of US oil fields off limits to drilling. These idiots have artificially limited the supply of oil driving the price up.
I guess FA thinks the folks at the Rand Corporation are idiots too. RAND notes that it would not have been profitable to develop the shale oil that Nugent was referring to unless oil prices rose to somewhere between $70 and $95 a barrel in terms of 2005 dollars. Simply put – until recently, private firms would have had no incentive to develop this source of energy. And even if they did, RAND estimates the impact on market prices would be around $0.04 a barrel once production reached 3 million barrels per day. RAND also thinks they would not happen for another 30 years. And FA dares suggests that I’m the “unbelievable IDIOT”! Go figure.