Posts Tagged ‘Keystone XL’

The Economy and the Price of Gas

Thursday, February 16th, 2012

The Costs of Bad Policy

Most have noted with disgust the rising price of fuel.  In most places around the country, the price per gallon of regular unleaded is creeping up on $4.00.  There has been some talk about an improving economy, but that’s mostly fluff.  The truth is that our economy is in miserable condition, and as I’ve previously reported, the price of energy has the most immediate deleterious effect on our growth.  As you look at the numbers for housing starts, as fuel ratchets up over $3.50, it begins to retard growth and investment.  This happens because it affects every stop along the production chain, from the raw materials to final distribution, delivery or retail sales.  Now that the price of fuels is driving markedly upward again, it is important to note the causes.  The first is the inflationary policies of our government, and the second is a whole host of worries over the world supply of oil, now threatened by an increasingly hostile and vociferous Iran.  These two factors threaten to drive prices over six dollars by summer’s end.

This would collapse our economy completely, and the only thing leveraging against it is that as prices soar, more projects will be canceled, and new construction will not commence, leading to a balancing reduction in demand.  This natural signaling would not be so bad if it weren’t for the fact that our economy is already flat-lined.  Anything that would cause a serious price spike at this juncture would likely ruin our economy for the immediate future, and might even push us off the economic cliff.

At present, the Obama administration is claiming unemployment numbers that are plainly rigged.  What they have done is to discount people who have expended their unemployment benefits, but who still have no job, and they consider them to have disappeared from the job market.  More, they’re started lop off people who have attained a certain age, and now consider them retired, thus removing them from the work force.  In short, they’re rigging the outcome of the quotient by reducing the number of people in the job market in statistics only, as many of the people they have excluded are still actively seeking work.

If the current rise in energy prices continues, it will put a downward pressure on economic activity.  As we’ve seen in each previous instance when this administration has claimed the economy was in recovery, the rise in fuel prices will tend to knock down the recovery.  An economy cannot grow with a shrinking pool of energy resources, and this president knows it, or should.  This is why such actions as the denial of the construction of the Keystone XL Pipeline was so astonishing.  The construction alone would have provided tens of thousands of jobs with decent wages, and it wouldn’t have been very long before we would be receiving the Canadian oil at the distant end, proposed to have terminated in Texas, in the refining centers along the Gulf Coast.

The presumably short-sighted thinking of this administration is so baffling that many have begun to conclude this is all by design.  What is clear is that we will not truly begin a recovery until energy prices are brought down by the government standing aside as the primary obstacle to energy development.  The federal government under this president has been pushing various “green jobs” initiatives that promise much, but have delivered very little, either in the way of job, or in the production of energy.  The scale of the problem is gargantuan, and no collection of windmills or solar panels is going to do much about it, but worse, since these are still not economically viable models, they actually waste money.

The immediate future of American energy production is weak, because we have a president hostile to the various forms of energy most Americans for the near-term future will employ, in the forms of coal, gas, and oil.   The problem is that these still represent the bulk of American energy production, with coal-fired power plants still accounting for at least half of all electric generation in the country.  Worst of all, Obama’s EPA is shutting down coal-fired plants, as three more plants are scheduled to be shut down this year in Texas.  Texas may see a summer of rolling black-outs that will have been the product of these mandates, and there is no way to build an economic recovery in that environment.

Be prepared to see fuels to continue their uphill climb through the spring, and as they do, you will see a repeat of the pattern we have seen numerous times over the last four years.  As energy prices increase, any alleged recovery will falter. It’s the unavoidable result of a policy that has set us up for repeated failure.  With the monetary problems in Europe, however, it threatens to be much worse.