South Dakota Sen. John Thune's op-ed in Politico yesterday was a good summary of how Barack Obama's policies are threatening America's energy boom, contributing to skyrocketing gasoline prices and putting the very weak economic recovery at risk. But, even Thune doesn't get to the heart of the problem.
Forbes columnist Charles Kadlec does, in his commentary today.
Thune spotlights several aspects of Obama's policies that are threatening the private sector-driven energy boom in America, including restricting access to domestic energy sources on federal lands and an avalanche of new regulations that will drive up the cost of production. He's right about all of that - the current increase in production is largely the result of private-sector efforts and largely despite the Obama administration's efforts to reduce domestic energy production.
But the rise in gas prices, while partly due to Obama's policies and partly due to the current unrest in the Middle East and the rising risk of war with Iran, actually has more to do with overall fiscal policy, Kadlec explains:
"But the fundamental culprit all choose to overlook is the weak dollar policy of the Obama Administration and Federal Reserve. And, because the Fed is given a pass, oil and gasoline prices are likely to be headed higher still. In fact, the recent surge in gasoline prices above $4.00 a gallon was fully predictable. I can say that without reservation because last November I wrote: '... it is the fall in the value of the dollar to less than 1/1700 of an ounce of gold that will drive oil prices back above $100 a barrel, sending gasoline prices north of $4.00 a gallon'.
"And now, with the value of the dollar falling to near 1/1800th of an ounce of gold and the Federal Reserve committed to its zero interest rates policy and perhaps another round of quantitative easing, it is just as easy to predict that oil and gasoline prices are headed higher still," he writes.
And there's plenty of blame to go around. Ironically, this is one thing Obama could blame on his predecessor, if he wasn't following the same exact fiscal path. Since 2002, Kadlec writes, both the Bush and Obama administrations "welcomed the decline in the dollar’s value on foreign exchange markets, believing in the false premise that a debasing of the dollar would improve the competitive position of U.S. companies." Add in the easy-money policies of the Fed and the result is that, since 2002, the price of gold — and the price of oil — have each increased five-fold.
Kadlec does the math and calculates that if the Fed had instead maintained the value of the dollar at 1/350th of an ounce of gold — instead of debasing the dollar to nearly 1/1800 of an ounce of gold – "the price of oil today would be about $21 a barrel, and the price of gasoline would be around a buck-thirty a gallon, right where they were on average for the 19-years ending 2002."
The problem is, debasing the dollar is a cornerstone of Barack Obama's spending-spree economic policy, and while it hasn't worked, Obama thinks it has and doesn't plan to alter course.
Instead, he'll point to the oil companies and claim they are making obscene profits on the backs of the American people. He'll demand higher taxes on the oil companies's profits so that they "pay their fare share" - even though the oil companies' profits are lower than many other industries - and hope voters don't realize that those taxes will drive gasoline costs even higher.
He'll pretend that Exxon and its fellow oil companies are the ones that make the most money off the sale of a gallon of gasoline, when the truth is Exxon makes about 2 cents profit per gallon, and government (local, state and federal) makes, on average, 48 cents per gallon sold (via taxes).
"So," Kadlec writes, "the next time you fill up your car, don’t get angry at the gas station attendant or the oil companies. Direct your wrath at the Federal Reserve and the governing elite who tolerate and defend the debauchery of our currency."
See more "Right Views, Right Now"