Get Ready For A New Era Of Oil Shocks

Prepare For A New Era Of Oil Shocks -- Martin Wolf, CNBC/Financial Times

Oil prices are up. Barack Obama is to blame. Drilling in the US is the solution. This is the mantra from the president’s opponents. All presidents tend to get the blame for high fuel prices. But with the price of gasoline nearing $4 a gallon, Mr Obama is getting it by the barrel load.

This may be good politics. But it is absurd. Oil, unlike natural gas, is a globally traded commodity, whose price is set in world markets. In 2010, the US produced 7.8 million barrels a day, percent of the world’s supply. Unlike Saudi Arabia, the US lacks spare capacity: it is a price taker. Responding to his critics, Mr Obama said: “We are drilling more. We are producing more. But the fact is, producing more oil at home isn’t enough to bring gas prices down overnight.” These remarks are correct, except for the last word. Producing more oil would have next to no effect on oil prices.

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My Comment: I am not sympathetic with this "let us tax oil" concept to alleviate our dependence on oil. I live in Canada, and the price at the pump right now (in Montreal) is $1.38/liter Can .... that's over $5.00 US/gallon. Has paying a higher price impacted our driving habits, gas consumption, and dependence on oil .... hmmm .... not at all. All that it has become is a tax grab for governments in the guise of weaning us off fossil fuels.