The Smug Baldy Speaks

Welcome 2009. I thought I’d comment on something that doesn’t seem to be getting a great deal of play in the media just now.

During the landmark 2008 US Presidential Campaign, Republicans across the US took a strong, wrong-headed stand on energy. What was their proposed solution to soaring gas prices? Simple - open previously off-limits areas around the US coastline to oil exploration and drilling. They even had a three syllable catch phrase that started at the GOP convention and was repeated at rallies across the country as the general campaign wore on. “Drill baby, drill”, they chanted, with the same wild-eyed conviction that a mob chasing the Frankenstein monster might have as it cried, “Kill, kill, kill.”

But then the bottom fell out of the US economy as the sub-prime mortgage bubble burst and investment firms on Wall Street lost billions in the blink of an eye. What may end up being the worst financial crisis in US history began. The US Treasury was granted enormous power as a $700 Billion (that’s $700,000,000,000.00 if you’re interested) bailout of various corners of the financial world was passed in congress. But within this turbulent storm of a fiscal meltdown, there was, to me at least, one interesting thing.

The price of oil began to fall.

And fall.

And fall.

In July and August 2008, one of the biggest features of the US consumer economy was an ever-increasing domestic demand for oil, combined with the fact that we import over 40% of that oil from foreign sources. By October and November, the economic pain Americans felt translated into cost cutting, and we began starting to drive and fly less often. By mid December, unleaded gas fell to $1.50 per gallon in some areas of the country. Cheap gas was here at last.

Interestingly, it wasn’t an increase in domestic supply that caused the worldwide oil price drop. Similarly, the difference wasn’t the “signal” that Republicans had wanted to send to the countries that “don’t like us very much” of our intent to drill off the outer continental shelf, and thereby increase domestic supplies.

Nope, in that crazy dance of energy supply and demand, the current economic crisis has shown us one thing most clearly: Demand drives energy prices at least as much as supply. Americans on a large scale were forced to conserve due to tough economic times, and oil prices plummeted to compensate for the decreased demand. Now that gas is cheap, Americans are starting to buy more. In response, the prices have begun to creep up again.

Drill Baby, Drill? That may be something to consider once the supply of oil begins to dwindle, but in late 2008, we saw what can happen when we conserve instead. The main problem is, however, that mobs don’t get wild-eyed over responsibility and clunky slogans like, “Conserve Baby, Conserve.”