The Blog of toussaint

Just a quick word about the energy bill being debated.  There is nothing Congress can do in the short term to lower prices, so they need to focus on funding research into long term solutions like nuclear fusion, wind, bio-diesel etc.

But there is something the President can do today to lower fuel costs.  As much as he would hate to do anything Clinton or his father ever did, he could release some of the Strategic Petroleum Reserve. This step would have a few immediate effects: first, because the Reserve is spread out across the country so that no one could bomb one location to destroy it, the oil would reach the market weeks faster than when it has to be shipped in from across the world;  second, it would lower the price immediately because the price of oil is set by people figuring the difference between supply and demand(Econ 101:  increase supply and price goes down; this is one of the fundamental laws of markets).  Clinton and Bush made it a policy to release the same amount of oil by which OPEC would cut its supply; not always, but when the cartel got out of hand, they would respond.

 i understand the main objection to this strategy: that the Reserve is only to be used in extreme emergencies or in a time of war when for some reason we can not get the supply we need in the open market.  i submit that we are in a time of war and we can not get the supply we need and that, while maybe not extreme emergency, this is a crisis we have to address soon.  When the price of oil stabilizes, we can buy back the amount that we used.

The reason we had only .6% growth in the GDP last quarter is the price of oil. Growth in the market must be equal to the demand for new stuff or we go into recession.  There is oil cost in every single thing that we buy because it must be shipped to where it will be consumed.  Most economist do not look at GDP when making an analysis of the economy, the use NDP( GDP minus inflation).  Most of the inflation in the economy is caused by food and oil.  When they release inflation rates they usually only report to the major media outlets the core rate: that is the rate of inflation minus food and energy.  But real economists know that most of the money you spend that is effected by inflation is on food and oil.  The kinds of things the "core rate" measures don't hit your pocket nearly as hard.  Think about it:  when you look for your next microwave or DVR,  notice that the price you pay for the one to replace your old one will either be less than what you paid or you can get a model for the same price that has more features which adds up to a price decrease.  So call your President and tell him to use some "strategery" to help with these awful prices.