Bill O’Reilly’s Economic Idiocy Almost as Bad as Obama’s

Bloviator-in-Chief

I seldom watch Bill O’Reilly, because if I want to listen to somebody pontificate on subjects about which s/he knows little, I can simply re-run Joe Biden’s most recent speech…in any time-frame.  Thursday evening, O’Reilly was on when I came through the door, but since he seemed to be talking sensibly about the Fluke Fiasco, I listened briefly with interest, but in the very next segment, he went on to discuss the price of oil, demonstrating he’s at least as ignorant as Barack Obama pretends to be on the subject. Part of it is driven by the fact that O’Reilly is a panderer who tries to placate ‘the folks’ while serving his masters in the establishment.  His oft-mentioned Harvard degree clearly isn’t in economics.  As usual, O’Reilly failed to identify the actual causes of the high energy prices accurately.

Naturally, being a  panderer, he talked about “speculators,” but he failed to mention even one valid reason that makes up the bulk of the increased prices we’re experiencing at the pumps.  Since O’Reilly did such a masterfully incompetent job of explaining the issue, I feel duty-bound to correct the record, or at least explain it.  There are really five major factors controlling the prices you pay at the pump, and while speculation might be a distant sixth in importance, it really has little to do with what you pay most of the time. Rather than lead you in circles of pompous pandering, let me try to make it a good deal more clear.

By far, the biggest factor in the price of the fuel you buy at the pumps is the price of crude oil itself.  As the amount of oil being supplied to the market contracts, or the quantity of oil being demanded increases, you can expect a corresponding movement in the price you pay.  When producers get together as a cartel(OPEC) in an attempt to restrict production, this will necessarily constrain the supply, and you will generally see higher prices, unless you have some manner by which to throw a significant monkey-wrench in the mechanism, for instance being able to increase your own domestic production, or by augmenting the supply to the market from a reserve.  This should seem simple enough to most people who studied basic economics in High School, never mind earning a degree from that institution of fame we might call “Hahvaad.” The available supply versus the quantity demanded will always dominate the basic calculation.

Another factor that is nearly as important to consumers in a given country is the relative value of their currency in the world oil markets.  The US has enjoyed the distinction of possessing what had been (and still remains, barely) the world’s reserve currency and the currency in which oil trades are made.  Unfortunately, as our Federal Reserve has printed more dollars out of thin air in order to bail out the banks, and Europe, but also loan to our Federal Government to feed it’s insatiable hunger for dollars, we have seen the value of our dollar fall dramatically in the last few years.  This means that no matter what commodity you buy, it will take more dollars to buy one unit as compared to before.  In late 2010, when the Federal Reserve announced QE2(Quantitative Easing, Round2 – a.k.a printing vast sums of cash,)  Sarah Palin, the former Alaska Governor, took to the podium to warn Americans that all of this money-printing by the Fed would result in higher food and energy prices.

Some people, mostly jerks like Paul Krugman of the New York Times actually mocked the Governor for that prediction, and even Fed Chairman Ben Bernanke got in on the act.  After all, what would a former governor of Alaska know about it?  As you probably know by now, she was right on every count.  Everything she said came to pass with respect to the inflationary effects of “Quantitative Easing.”  Score another one for the lady who knows how to take down an elk, but also a pompous commentator.  She understands the energy markets, meaning she knew how the monetary policy of the Federal Reserve and the unrestrained borrowing of the Federal government would wind up effecting the general economy, but particularly the energy sector.

The next thing that affects the price of oil is the availability of substitutes.  For instance, a fair amount of the electricity generated in the US comes from petroleum distillates and residual products from the refining process.  There are just a few commercial alternatives, and apart from nuclear power, the vast bulk are fossil fuels, including oil, but also natural gas and coal.  The grand total of wind and solar energy production nationwide doesn’t provide what one nuclear plant does, so let’s call that source negligible in any commercial sense.  Coal accounted for more than half of all electric generation in the US prior to Obama’s arrival in Washington, but due to regulations being slapped on the energy producers, coal-fired plants are rapidly going extinct.  As this happens, plants that use other fuels are necessarily being forced to pick up the slack, running at closer to 100% capability, and some of those plants use…oil and its byproducts.  So you see, as you reduce the use of substitutes, it necessarily will cause an increase in the price of oil.  Like in any market where substitutes are available, the reduction of the availability(or use) of one will cause a corresponding increase in reliance upon another.  If beef prices go up, before long, people will shift to pork and chicken, and then the prices of these substitutes will move up also.

The fourth big factor affecting the price of fuel at the pumps is government taxation.  If you live in a state like mine, where we pay a federal and state excise tax by the gallon, it’s bad enough when the Feds increase the taxes, but if you live in a state where the tax is a percentage, you really get blistered by any upward movement in fuel prices, because not only do you pay more in fuel, but you also pay a good deal more in taxes on it.

There is another factor that comes to mind, and it has to do with the distribution of the product, and how temporary displacements and shortages like we saw in 2005 with Hurricans Katrina and Rita caused trouble depending upon where you were and what the distribution chain that feeds it looks like, but those sorts of problems are a result of what happens when Just In Time inventory management tries to contend with the unexpected that Mother Nature throws our way.

We currently do not find ourselves under that sort of instability in the distribution chain, and this only goes somewhat further in explaining why the fuel price spikes we saw under George W. Bush bear little resemblance to the structural causes of the high prices we face today.  Four dollars for a gallon of gasoline may not be entirely new, but resulting from something other than an ongoing distribution chain problem as a result of natural disaster, it is most certainly unprecedented in the 21st century. Today’s  closest analog occurred under the administration of Jimmy Carter, if that tells you anything.

Together, these five factors have much more to do with the price of fuels than anything Bill O’Reilly mentioned. Speculators play a role, but by the time you add up the five factors I’ve mentioned, what you discover is that while speculators can drive things a little in one direction or the other, most who trade in commodity futures wind up losing, at least according to the statistics.  Besides, they are an important part of the market too, and to pretend they have no other function but to somehow cheat consumers is a laughable bit of Marxist theory often pushed by panderers in both parties. Realize that listening to economic analysis from Bill O’Reilly is roughly analogous to getting investment advice from a fortune cookie:  It contains only meaningless platitudes that will gain you little more than a moment’s amusement, but will reveal no cosmic truths.

Now, think of Joe Biden speaking.  See my point?

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7 Responses to Bill O’Reilly’s Economic Idiocy Almost as Bad as Obama’s

  1. Skip ONeill says:

    I couldn’t agree with you more about O’Reilly.

  2. Misterjkane says:

    Buffo Bill O’Reilly reminds me of the Roman Catholic priest Charles Edward Coughlin, who was a big supporter of Franklin D. Roosevelt and promoter of FDR’s early New Deal proposals. Serious-minded conservatives and libertarians are on the horns of a dilemma. They are wise to ignore to Buffo Bill, yet his popularity demands that they expose his colossal ignorance at every given opportunity.

  3. Dagger82 says:

    Even with only the most cursory knowledge of dollars and cents, your short course in economics is crystal clear.  Of course, to ANY thinking person it begs the question, why would citizens sworn to represent the best interests of the electorate purposely deny that market forces are acting precisely as designed?  Have we come to such advanced state of society that decision-making is only concluded when absolute and irrefutable proof is presented?  That any devious or cunning falsehood or half-truth gives rise to indecisiveness and inaction? 

    Being a nation built upon Judeo-Christian belief and values, Americans find truthfulness to be at the pinnacle of honor to their God and themselves.  Historically, oaths sworn to God meant any violating action was so disgustingly egregious that even death was merciful in the face of truth.  And that is why every person committed to an oath deserved the highest trust from every one of virtue that claimed to know and understand ‘right’ and ‘wrong.’

    Since the President and his religious advisor, Jim Wallis, publicly stated that, in their view, this nation was not built upon Judeo-Christian values, I now clearly understand why truth is not integral to pledging an oath of office or explaining public platforms.  Many of today’s elected and appointed officials simply do not believe that “truth” has the same meaning as you and I.  And because that deeply imbedded belief that we hold can seemingly have no other meaning, we are simply baffled in the face of what we conclude or can prove is a “lie.”

    I doubt that Mark can conclusively explain exactly how these people do conceive their rationale for thought and action perceived by Americans to be truth.  I know that I’m unable to do so because I don’t know how they think.  The closest I can visualize is a condition experienced several years ago when stationed in Southern California.  We termed it “flexible values.”  It seemed many in that subculture of American society were able to live by a set of internal rules that were molded by daily experience and situations rather than something more stable.  In other words, rules that were set in stone (immovable, like the Ten Commandments) were too restrictive to allow for personal wants and availability.  Therefore, those individually adopted rules could be selectively modified at moments in time when the person(s) decided it was more logical to satisfy their own want than to deny themselves the pleasure or advantage.

    However one views the national dialogue – in debate, press release or conference, speech, publication, electronic media, blog, talk radio – accuracy of fact and conclusion must be borne by each of us individually.  Truth is no longer a standard that can be blindly accepted from any earthly being no matter what the position or oath.  It is sad that this “Great Experiment” has had the dearth of evil infiltrate its most highly respected positions of power.  But, we MUST recognize the tactic for what it is and reaffirm our own oath to our God.  Only then will we be sufficiently armed to combat the treachery with hope for its defeat. 

  4. the unit says:

    Well Fluke O’reilly. O’s goal is redistribution in the whole world, not really between classes in USA.  Watch this…long 14 minutes, but worth while to see light.  

  5. the unit says:

    This is what I’ve read about speculating on any commodity, including oil.  If a person( corporation or whatever) in January speculates and bids to pay 150 a barrel in March,  he only has to pay what was the going price on the day before. And of course can sell prior to avoid loss.  And I guess he does that.  And if he don’t so what, oil is there and will be bought and sold.  I don’t know the where with all with this.  I just pay at the station.
    Does seem like an advantage to somebody that I don’t have.
    Maybe my understanding is off base.

  6. donpurser says:

    Bill O’Reilly = bloviator extrodinaire!

    I was becoming pretty fed up with BORE’s rantings but the final straw for me was when BORE had Charlie Rangel On his show – after the Congressional censure – to discuss financial matters of national concern.  It was as utterly ridiculous as having Bill Clinton on your show to talk about matters of sexual abuse of women.  BORE lost me after that.  Rangel deserved and deserves scorn and shame for his misdeeds and should be most thankful he still has a job, unlike so many Americans who never broke any law, as did he.