Did anyone else feel the urge to choke the living daylights out of Chuck Schumer this week? If not, you must have missed the Senate floor speech in which he re-opined the tired line that if only the Saudis would produce “half a million barrels more oil a day, the price [of oil] would come down a very significant amount.”
Why does this statement make my blood pressure rise and my fingers twitch?
Because the tiny impact area within ANWR – a size ratio equivalent to a dime on a 4 x 8’ table – is projected to produce ONE MILLION barrels a day, every day, if only we would drill. And because Schumer’s (true) statement that a greater immediate supply would reduce prices falls short of saying what is also true: that even the ANTICIPATION of a greater FUTURE supply would decrease prices in the Now.
Schumer’s other infuriating comment – that more drilling would “stop the speculation that keeps driving up the price of oil” – also missed the proverbial mark. Speculators wouldn’t “stop” if the Saudis drilled more, because speculation in free markets never stops.
Instead, speculators (also known as investors, also known as buyers and sellers, also known as people trying to earn money for their families and futures) would anticipate the increased oil supply, begin to sell for less, continue to drop prices as volume increased, and thus reverse the current market trend of charging a per barrel premium for what is currently a too-scarce commodity.
Perhaps “speculation” would then stop being a dirty word and be seen as what it really is: the natural response of the market to the forces of supply and demand.
For those not convinced that these tenets of ECON 101 are true, please note that we’ve already seen the evidence. As Larry Kudlow reported the other day on NRO, oil prices dropped $9 per barrel the day after the offshore drilling moratorium was lifted by the president. This is no coincidence. It is case-and-point and perfectly illustrates what speculation really IS – not a crime against humanity, but the market doing what markets tend to do: try to anticipate the future and adjust.
It is maddening that the same people who want to spend billions on economy-choking “climate change” measures that might (MIGHT!) reduce temperatures by one quarter degree over the next one-half century cannot see the wisdom of opening a tiny piece of ANWR in return for a sure thing over the next one to ten years.