Wednesday, May 7, 2008

$200 Oil

I should be working on my house and finishing the job of laying laminate wood flooring but I'm kinda tired after working all day. I've found that when I am tired, it is a good time to stay away from doing things that require accurate measuring and cutting. So I started thinking about the price of oil and how some are saying it might go to $200 a barrel. I don't know if it will. Who knows, it might. I just think it is interesting that a government that wants us to believe it can cure all our problems won't be able to do much about this one. Not like the "mortgage crisis" bailouts that are ongoing. This is not a problem that government is going to be able to make disappear with smoke and mirrors. With the mortgage problems the government can and has been doing things like assuming a lot of the risk from lenders, something that does not have an immediate downside. Sure you are removing the consequences from bad decisions resulting in more of the same behavior that will one day cause a much bigger problem. That, however, will occur down the road a bit, and no one will remember then what happened now. Some of us will bring it up and say "Remember in 2008 when they..."If anyone actually listens to the end of that sentence, they will remember what was said for about 30 seconds or until their next rant about how the government is not doing enough.

$200 oil is another thing though. Not much that smoke and mirrors can do there. The government could allow more drilling and maybe the political climate will change to allow that but I wouldn't bet on it. Even if they did open up drilling, it would be years before that oil was available, definitely not soon enough for our ADD electorate. The strategic oil reserve could be tapped for a while. I am sure no one would horde the temporarily cheaper oil. Price caps are a quick fix. The gas price would be cheaper and if you are lucky enough during the resulting shortage you might be able to get some. Gasoline rations would be popular. If oil goes to $200 a barrel things will change and the government won't be able to do much about the consequences we will all experience. Maybe people will build neighborhoods with corner stores and butcher shops like existed prior to the 1960's when it became easy and cheaper to drive to the local mega mart. Just idle speculation. I know people who are already downsizing their cars. Funny that the government wants to keep people living in houses they can't afford. Maybe $200 oil will remove the illusion that these snake oil salesmen politicians can fix all the wrongs and give you everything you want.

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