The invasion of Iraq, with its destruction of petroleum infrastructure, hundreds of uncontained attacks on production and transit facilities, and slowness to return production to pre-war levels has added a significant additional expense. So too has the saber-rattling against Iran, which experts say has affected the price of oil dramatically — by as much as $11 in one day.
Some experts estimate this premium to be as much as $30-$40 for every barrel of oil sold.
It doesn’t take a genius to understand that the United States can’t go charging into the world’s most volatile real estate and not adversely affect oil prices. It’s also true that speculators, commodity traders, and hedge funds have made billions of dollars by bidding up the price of oil, in expectation that the security premium on oil prices will remain in place for years to come.
Some of the increase, of course, is due to stepped-up demand from China, India and other world consumers. But it’s ludicrous to think that China and India suddenly came out of nowhere–in fact, their demand has been increasing steadily and slowly (and predictably) for years.
The NSN makes sense when it suggests that getting out of Iraq, talking to Iran, and working out a new counterterrorism strategy will combine to ease oil prices in the short term. Indeed, if it appears that Barack Obama might win in November, expect speculators to reverse their bets and start selling oil futures short–that is, they will start putting speculative downward pressure on oil prices in anticipation of an Obama victory.
The NSN makes less sense when it talks about “reducing [America’s] dependence on foreign oil and gas.” It’s possible to make a marginal difference, by shifting to alternative fuels, reducing demand, and increasing energy efficiency. But in a vast global market, such gains are likely to be offset by rising demand elsewhere. (Just imagine when a billion or two Chinese and Indians demand air conditioning! Which they deserve.) What’s ugly about calls for making America “energy independent” is that it shifts the blame (as NSN does) onto “oil-rich countries, particularly those ruled by unstable and corrupt regimes.” I have news for NSN: even if Saudi Arabia were run by Quakers, they wouldn’t sell their oil below market prices.