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Tuesday, March 8, 2011

What Should the US Do About Rising Oil Prices?

Unfortunately, this question seems of high importance when energy prices rise. However, people tend to forget about the problem when prices decline to normal levels. The fact of the matter is that high energy prices are a good signal to whip us into shape. The longer we wait to correct the problem, the more susceptible we are to volatility.

The truth is that oil is in low supply, and in high demand; thus reflected in its price. If the supply was of comforting amounts, 8% threats would be of little concern. Too much of the world is dependent on the Middle East for its oil imports, and too many in the west fail to realize the impacts of continued demand for the stuff. Does it not seem odd that most of our foreign relations and wars are focused in the very region that fuels our economy? We need a comprehensive energy plan - an all of the above approach. This is one sector of trade in which some degree  protectionism works. Energy production for domestic consumption trumps the status quo. America is abundant in natural gas, solar and wind corridors, and more.

We can leverage this opportunity even more by utilizing NAFTA to operate what I call a strategic North American Energy Alliance  (NAEA): tapping into onshore and offshore drilling areas, contributing to our strategic oil reserves, natural gas exploration and development, incentives for cleaner and sustainable drilling innovation, expanding the wind and solar corridors to power grids that connect the North American continent. Canada is already skilled in extracting oil from tar sands, most of which exported to the US. Mexico's control of most of the Gulf region contributes to their comparative advantage in oil, exporting to the US. Our contribution needs to be significant. We need to produce enough for domestic use, and then some for the export advantage to China and India. If anything, we need to act fast on a plan like 'NAEA' before China does. 
There are many ideas on the table. Bowing down to the Saudis should not be one of them. James Cramer, the energetic host of Mad Money on CNBC made this statement
First, Cramer said the government needs to sell oil futures contracts against our strategic reserves to stop the jump in oil prices. Second, the U.S. government must be vocal about its support for Bahrain and Saudi Arabia, which will help prevent unrest from spilling over into these regions. Finally, Cramer said Congress must pass the natural gas act to subsidize 18-wheelers converting from oil to natural gas.
The government and US based oil companies already sell oil futures. But, apparently its not a fix all solution. The price we pay at the pump could be so much more if it were not for the futures market. The fact that there is so much panic over near $4 at the pump means we are in serious trouble if the 'real' price comes to light. I'm in support of the Natural Gas Act, and of course for the US having its two cents about peace in the Middle East. However, the massive amounts of aid and imperialist like influence in the region is disturbing. We are disliked because of our influence, no matter how much we try to mask this with a message of peace. The aid flows stir violence to create an unstable society for the US to offer a promise of modernization ("a human right?"), all for the control of what lies beneath the sands of Arabia - that is oil. It's a long term agenda that will leave us in a world of hurt. It's better to hone in some domestic strategy opposed to meddling with so called buddies who play us blindly.

Here's a video of former Vice Presidential candidate Sarah Palin. Her remarks on the need for energy independence are spot on. Our abundance in resources are clear, and its about time we use this.



I'm also a strong supporter in an all of the above approach. T Boone Pickens also has a plan that will reduce our reliance on foreign oil.



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