Oil War

Were you aware that the US and OPEC are at war? No? I’m not surprised. It hasn’t made the headlines of the MSM.

How did this happen? Primarily, through the deployment in the US of new oil extraction techniques of fracking and oil-shale recovery. The continental United States has more oil reserves than any other place in the world including the Mideast and the former USSR.

Supply and demand works, contrary to the skeed of liberal economists. We have the supply—in the ground, and in the last year, the new extraction processes have increased the supply of oil and that has begun to affect the world market.

The US doubled its production this last year. The price of Brent light crude, the world standard, has dropped 30% in the last year and currently is around $68 a barrel…down from over $100 a barrel this time last year. The price dropped nearly $10 just this last week.

As you can imagine, OPEC is not pleased. The increased US production is affecting their revenues. A large number of OPEC members are small dictatorships, kleptocracies according to some, and when the price of crude drops, so does the personal income of those dictators. That, must not be allowed.

Some would think these dictators would cut their production to boost the price of crude to maintain their revenue stream. That’s not happening. Some of OPEC’s members are smart. They are pushing another tactic, economic warfare. They have pushed their production to flood the market, lowering the price of oil, in an attempt to make the new US technologies unprofitable, too expensive to operate.

It’s a question of who blinks first, OPEC when they cannot withstand the drop in their revenues, or the US when the price of crude hits their stop-loss line, the point where the cost of extraction exceeds the net revenue per barrel.

The target of the oil war is to see who goes bust first. I think it will be the US. The liberals and ecowackos are on the side of OPEC. So is the Obama administration. The success of the US oil production is an achievement of the free-market process. Obama and the democrats cannot allow that example of free enterprise to proceed without opposition.

Lower Oil Prices A Free-Market Victory, Not A Threat


Lawrence Kudlow

Seldom has so much good news been portrayed so negatively. Oil prices continue to fall in the U.S. and around the world, but nearly everyone in the media is grumpy about it.

The headlines today are among the silliest I’ve seen: Energy-company stocks are declining, oil deflation is an economic threat, the Fed might raise rates much later than expected, OPEC is dissolving, shale companies are going bankrupt, Russia is going bankrupt(!), and on and on.

Well, most of this is just humbug. Lower oil prices are unambiguously positive.

First, U.S. oil production has nearly doubled in recent years to 9 million barrels a day, and the Paris-based International Energy Agency expects U.S. supply to rise by more than 1 million barrels a day next year. And it is this supply increase that is driving down prices.

Saudi Arabia and OPEC have essentially thrown in the towel, surrendering to the inevitability of lower prices from exploding U.S. energy production. This is not only a triumph of U.S. energy independence; it is also a victory for the workings of the free market. Greater supply, not government cartels, is driving down prices.

The latest oil-price drop of nearly $8 a barrel makes the economic outlook even rosier.

Apart from the declining share prices of some oil producers, virtually every other aspect of the world economy benefits, including most world stock markets.

(By the way, the IEA reports that most production in the Bakken formation, one of the main drivers of shale-oil output, remains profitable at or below $42 a barrel.)

And here in the U.S., the oil-price drop is a huge tax cut that will primarily help the middle class.

Sen. Chuck Schumer — who is still licking his wounds from the huge Democratic midterm losses in the Senate — is out there attacking ObamaCare as the wrong policy to halt the decline of middle-class incomes.

What he’d like to see is new big-government policies (wait, wasn’t ObamaCare a big-government policy?), including tax favors for targeted segments of the economy, presumably to bolster the middle class.

But guess what? We just had a free-market tax cut that will boost middle-class incomes and just about everything else.

The American energy revolution, combined with the market forces of supply and demand, is delivering something on the order of a $125 billion tax cut. Not only have wholesale oil prices dropped from about $100 a barrel to $66, but also gasoline prices have fallen from near $4 a gallon to $2.78 at the week’s close.

That’s a tax cut. With no big-government spending hikes.

While very few Democrats, including President Obama, supported the entrepreneurial, innovative dynamism of horizontal drilling and hydraulic fracturing, they’ve lately tried to take credit for the oil and gas shale revolution. No one’s buying it.

AEI’s Mark Perry actually wonders why the Democrats aren’t scheduling hearings in the lame-duck Congress to blame oil-industry manipulators and evil speculators for the drop in oil prices.

Of course, the far-left Democratic enviros aren’t sitting still. The EPA is now taking aim at the entire U.S. energy industry with its newly proposed smog rules — probably the most expensive regulations in history — even though the fracking revolution is producing much cleaner energy than ever.

So what we have is a clean-energy revolution, and it’s lighting a much-needed fire under the economy.

As energy prices are falling, GDP is being revised higher. Real economic growth in the third quarter shifted up from 3.5% to 3.9%, led by an increase in business fixed investment. The past two quarters averaged 4.2% at an annual rate.

Meanwhile, corporate profits, the mother’s milk of stocks and the lifeblood of the economy, continue to break records. After-tax corporate profits scored on the IRS basis and reported in the GDP revision hit a new high of $1.87 trillion, or 10.3% of GDP. Nonfinancial domestic profits came in at a record 7.3% of GDP and continue to show steady growth of 5% yearly.

As King Dollar rises, gold falls, inflation is barely discernible and oil prices have dropped, the year-end 2014 economic story looks a lot better, with the possibility of a rosier 2015.

No, we haven’t fully recovered. Not by a long shot. Year-on-year economic growth is still only 2.4%. It ought to be running 4% to 5%. And 200,000 new jobs a month ought to be twice that rate. For this we need more pro-growth economic policies from the new Republican Congress, especially lower corporate tax burdens and regulatory rollbacks.

But the entrepreneurial, free-market energy revolution has given us a big step in the right direction. Can we please be optimistic about it?

1980s Redux

When Hillary and Obama were kissing up to Putin, Hillary’s infamous “reset button,” the left irrationally assumed the Cold War was over; a long-dead confrontation between the West and the old Soviet Union.

They were wrong. the interregnum was just a period of regrouping and rearming…for Russia and the former communist that how rule her. Russia was too weak to maintain control of its empire in the 1990s—they aren’t anymore. They are rebuilding their empire once again; Belarus, Georgia, now the Crimea.

Why the Crimea? Because of Sevastopol, the old Soviet Union’s strategic naval base in the Black Sea. The base is in the Ukraine, although Putin, ‘scuse me, Russia retained basing rights.

http://www.washingtonpost.com/blogs/worldviews/files/2014/01/ukraine-protests-map-k.jpgIt wasn’t enough and the Ukraine controlled access to the area for food, fuel and power. Putin’s seizure of Crimea eliminated those potential risks…for Russia. Ukraine lost naval access to the Black Sea and the Mediterranean Sea beyond that.

On the other side of their common boarder, China is flexing its military muscles. They have laid claim to a broad undersea oil and gas region; a region also claimed by Japan, Taiwan and further south, by Viet Nam, and the Philippine Islands. Not long ago, China declared the region an aerial no-fly zone.

While neither Russia nor China can truly be called communist anymore; they’re more like state corporatists, they still have many political ties. This week, those ties resurfaced. China is giving Putin half-hearted support. It’s an apparent ploy for reciprocity if/when China moves to land troops on those disputed Pacific Islands or attacks Taiwan.

So, democrats and Washington liberals, the Cold War isn’t over. It’s just moved into a new stage; one Russia and China are, by rebuilding their military, prepared for, while Obama and the democrats have bee working diligently to demoralize and disarm our military and armed services.

The world has been and is a dangerous place. It’s not filled with rainbows and unicorns. With our navy and army reduced to pre-WW II levels, we’re setting ourselves up for another surprise attack—like Pearl Harbor and 9/11. The democrats in Washington, and some RINOs, can not care less.

By the way, what does Tom Clancy’s book, Red Storm Rising, have in common with this?


Return of the Friday Follies

It’s my habit to listen to one of my local radio stations in the morning.  One segment today had a local financial adviser, a PhD, as a guest and the subject was the price of gas.  After the unemployment numbers were announced today, the futures price of light crude dropped $2 in a few minutes.  Light crude is the source for gasoline.

People think that lowering gas prices (locally now at $3.169/gallon) is good…and it is for many. But it is important to understand the cause.

The price drop yesterday was triggered by the expectation of continued decreases in crude oil consumption.  When the job numbers are bad, as they are, there is less demand by business and, by extension, by individual consumers.  People and businesses will retrench, hoard assets, minimize expenses, and will reduce the cost of doing business until the economy recovers.

That last sentence is the key. The economy isn’t recovering despite the announcements coming out of the White House and their lib sycophants. As my Dad would say, “People are hunkering down to survive the times.”

Enjoy the low gas prices and remember they are low not due to more production but to less demand.


Ray Lahood, is a Obama lib from Illinois who unintentionally spoke the truth.  They envy the Chinese because it only take 3 people to make a decision instead of 3,000 or 3,000,000.

“The Chinese are more successful [in building infrastructure] because in their country, only three people make the decision. In our country, 3,000 people do, 3 million,” LaHood said in a short interview with The Cable on the sidelines of the 2012 Aspen Ideas Festival on June 30. “In a country where only three people make the decision, they can decide where to put their rail line, get the money, and do it. We don’t do it that way in America.” — Foreign Policy Magazine.

Yep, these wannabe dictators reveal themselves in so many ways. It behooves us to be aware and forewarned.


The employment announcement today added to an ongoing situation — 41 continuous months with unemployment above 8%.

“When we get an increase in general uncertainty, employers tend to postpone investment and hiring decisions,” Michael Gapen, senior U.S. economist with Barclays, told CNNMoney.

Well, duh!


Finally, this piece — the UN “Gun Ban” treaty. Ordinarily, I’d not give this much thought for a number of reasons. First, just signing a treaty doesn’t put in into force. Look at Wilson’s League of Nations for example. Woodrow Wilson devised the concept in his 14 Points at the end of WW1. 

The League was created but the US didn’t participate. Even though Wilson originated the idea and fought heavily for its creation, the US Senate did not ratify the treaty. A decade later, the League quietly folded its tent and disbanded.  It proved, like the UN, to be ineffective in blocking acts of aggression, it’s primary purpose.

This time, however, the passage of the treaty may be different.  We still have a democrat controlled Senate. No treaty can usurp the constitution. A treaty could not, for example, repeal the 2nd Amendment. The Constitution trumps treaties.

That was before Chief Justice Roberts turned his coat.

If the treaty is passed and Obama uses it to attempt more gun control using the Treaty as authorization, people will resist.  I don’t know what will happen if Obama uses force to enforce the treaty. No good will come from it.

When we no longer have confidence in the Courts to uphold the Constitution, our alternatives to resist tyranny become limited.

As I said, ratification of this treaty will bring no good to the nation.

Pseudo-science in the news and other stuff

I was listening to the radio this morning when an ad was played for one of our local TV stations.  To summarize the ad, it said, Fracking! We’re all gonna die!!!!”

Yeah, another liberal scare tactic to block a technology in use for domestic oil drilling.  Call it, “Global Warming, Redux,” or the Gulf spill that was supposed to kill all sea-life along the Gulf Coast…only it didn’t, no thanks to Washington, FEMA, the EPA, and the Coast Guard.

I expect they will interview some little known “expert” who will have a couple of studies on hand to support the station’s bias.  Of course, they will ignore all the other studies that indicate Fracking is safe and presents no extra hazard than those expected when drilling for oil.

I’m not going to get into the pros and cons of Fracking. That is not the intent of this post. My question to that TV station and all the others across the country, Why should we believe anything you present?  Your history of inaccuracy, your history of falsifying data to support your viewpoint, your history of creating a crisis where none exists, your history of ignoring contrary data that refutes your story, all that history is more than sufficient reason why we should not believe anything your broadcast.

Why don’t you just stick to factual news instead of presenting a story laced with pseudo-science? Why don’t you investigate KC Mayor Sly James?  It seems his son is getting a free pass by the KC Police?  How many times has the boy been in bar fights and let go? He was a witness at a shooting but not taken in with the rest of the witnesses.  Why is that?  Or why don’t you investigate Congressman Cleaver’s tax problems? You know, that car wash that he used to get a million dollar loan but now Cleaver claims the property is worth much less and he should pay less.  What’s all that about?

Or how about Congressman Cleaver leasing, for $1900 a month, a vehicle here in KC at the taxpayer’s expense? Doesn’t Cleaver own a car?  Why should we pay for one here at home?  If he travels on business here in his district, why doesn’t he just use his own car and charge mileage at the standard government rate? If it’s good enough for other government employees, why not Cleaver? I admit this last lease was cheaper. Before this current $1900/mth lease he was charging taxpayers $2900 a month.  What about that, Kansas City media?

I guess it’s too much to expect from the KC media outlets.  That’s why the KC Star continues to lose subscribers and continues to lose money.  And, as cable use spreads, I wonder just what the ratings of the local KC stations are?  Last I looked, a year or so ago, they were dropping right along with the KC Star.

I used to run a series of posts under the label, “Dinosaur Media Watch.”  The demise of the media continues. when they continue to lie and manufacture news, the slide will continue, too.

When the KC Star and the other local media outlets fade away, I can guarantee you, they won’t be missed.


I ran across this article this morning. Abolish the TSA.  As far as I’m concerned, it not a moment too soon.  And while we at it, Homeland Security as well. Both agencies ignore basic constitutional rights and act more like the Gestapo of old.

I refuse to fly anymore.  The last time, a number of years ago on business, was enough.  Now, if I can’t drive there (and I can drive quite a ways,) I’m not going.

As for reforming the TSA, I’ll accept whatever I can get.

Rand Paul Launches Campaign to End the TSA

New legislation would abolish government involvement in airport security

Paul Joseph Watson, Infowars.com, Thursday, May 3, 2012

Senator Rand Paul has issued a press release in which he vows to lead the charge to “end the TSA” and put a stop to the needless and humiliating groping of toddlers and grandmothers.

Earlier this year, Paul was detained by the TSA after refusing to submit to an invasive pat down after already having passed through a body scanner. The incident prompted national headlines and caused the Senator to miss his flight.

“It’s time to END the TSA and get the government’s hands back to only stealing our wallets instead of groping toddlers and grandmothers,” says Paul in the statement.

The accompanying article sent out to Campaign for Liberty members encourages recipients to sign a petition in support of Rand Paul’s ‘End the TSA’ bill.

The legislation would forcibly privatize the TSA and kick government out of airport security entirely. A recently passed bill actually allows airports to replace TSA screeners with private security but they have to go through a complex TSA permission process to do so, meaning only a handful of small airports have applied to evict the TSA.

Financial contributions are also being sought to launch a “full, targeted media campaign to convince representatives and senators to either get on board or be held responsible for this continuing outrage.” A previous ‘End the TSA Money Bomb’ started by Congressman Ron Paul following his son’s treatment at the hands of the federal agency has already raised over $1.6 million dollars.

The email points out that the TSA’s invasive and dangerous body scanners have been proven to be completely useless, most recently by engineer Jon Corbett who was able to fool the device by simply sowing an object into a side pocket.

The email lists a handful of recent TSA outrages amidst the deluge that occur on a weekly basis.

  • A TSA agent patting down a young girl at New Orleans’ Louis Armstrong International Airport in 2011. The video shows a cooperative family, and when the girl’s mother asks, “Can’t you just re-scan her?” the agent replies, “No” and proceeds to grope the poor child;
  • A cancer survivor in Charlotte was forced to remove a prosthetic breast;
  • A young mother of a two-week-old infant in Florida was harassed to open the bottles of baby formula she was traveling with on her flight, which would have spoiled the only food available to the infant;
  • Detroit TSA officers ignored a man’s warning about a colostomy bag, breaking it and forcing him to board a plane covered in urine.

I heard another story yesterday. A middle-aged woman approached the security gate with a box of cookies. She’s diabetic and prefers cookies to hard candy.  The last time she flew the TSA threw her hard-candy away.  Once again, the TSA refused to allow her to keep the cookies, when she asked why, she was told to shut up or she’d be arrested!

I personally watched an elderly lady nearly stripped of her clothing in the Milwaukee airport a number of years ago.  This was before the days of the body scanner.  The woman had a metal hip replacement.  She set off of the metal detector and was set aside to be wanded.  Nothing new there, it had happened to me. The rivets in my jeans set off the detector.

This woman, however, kept getting buzzed around her hip. She told the TSA agents, grown to four or five by this time, she had a replacement hip.  She was ignored.

Then they told her to take off some clothes. She was wearing jeans and a blouse as I remember. She has already taken off all her jewelry, her shoes, belt, glasses. Now they wanted her to drop her jeans!.

She refused.

When we boarded and the plane pulled away from the gate, she was still there, surrounded by TSA agents. I don’t know what happened after that but I suspect she didn’t arrive at her destination on time.

Bye-Bye, TSA. Ye won’t be missed.

More demand, less capacity

We’ve evidence this week that fuel prices can drop just on a rumor.  “Amid rumors that the US and UK would dip into their strategic reserves, the price per barrel dropped $2 a barrel overnight.”

While the Obama administration is deliberately blocking our internal production, even the rumor of a change in policy can dramatically affect the price per barrel of crude. 

Instead of looking toward regaining the stability of our supply in a dangerous world, our government is doing the opposite.

“…we are the only major nation to deliberately limit domestic oil production even as war clouds and unstable governments place foreign sources in jeopardy.” — Investor’s Business Daily.

Now we have information that two major east coast refineries may soon close.

Half the refining capacity on the populous US east coast is set to disappear. Sunoco has pulled the plug on two refineries already and warns that another in Philadelphia will close in July if no buyer steps forward.– UK Financial Times.

What we’re seeing is that even if the US opens exploration and drilling, we won’t have the capacity to refine that additional oil.  The lack of refining capacity will be as serious a situation as the lack of oil to be refined.  The refineries are being squeezed between the increasing delivery cost of the basic product, lowered demand due to the higher costs of that product—gasoline and diesel fuel, and NIMBYs and liberal environmentalists anxious to close the refineries and block the construction of new, more efficient replacements.

In short, it’s a negative feedback loop. Lower usage, higher costs means refineries can’t meet minimum margins and are closed.

We applaud when we hear, “Drill baby, drill!”  We will not meet our fuel requirements if there are no refineries to process that oil.

Updated: Have you noticed the gas prices lately?

Update (November 18, 6:30pm CST): My wife returned home an hour ago and reported that the price for unleaded regular has broken the $3 level—$2.999 at two separate stations.  I can’t remember how long it has been since prices were that low.


I made a few comments at a couple of internet sites this week that my local gas prices are approaching the $3 line.  Coming down towards that line, that is.  Earlier this week, unleaded regular at my neighborhood gas station was $3.049/gallon.  Yesterday it dropped to $3.029/gallon.  Some of my neighbors wonder if the price will drop through the $3 line before Thanksgiving.  (Everyone expects the price to rise on or just before Thanksgiving although I remember that has not always happened in the past.)

At the same time, I read on Drudge and other sites that the price of Brent crude rose above $100/barrel during trading. How can our local pump price drop while the world crude price rises?  

US and Canadian domestic crude production. 

There is a glut of US and Canadian crude that has offset the price of international crude. That glut is stored in a place call Cushing, OK.

Greg Knapp, a local radio host, interviewed an oil industry analysis, Loren Steffy of the Houston Chronicle.  That interview is available via MP3 here.

Steffy noted that US refineries are working to utilize this domestic supply. At the moment, they’re set up to use imported oil via tankers.  When pipelines can be redirected to accept oil from the Cushing Tank Farm, there will be an immediate impact on the availability of oil.  We will be less vulnerable to variances of overseas oil supply—like the recent  and ongoing civil wars in Libya and Nigeria.

Steffy does not expect the current low gas prices to last.  They, like all commodities, are subject to the law of supply and demand.  At the moment we have more supply that we have demand and that is driving the gasoline prices down.

The trend, however, is towards equalization.  If we have a glut, we will sell that glut either here in the US or overseas.  There is demand for our product as seen in the revitalization of the Dakota oil fields and the central western states of Colorado and Wyoming.

The bottom line is to enjoy these low prices while they last.  The US industry could manage these prices to all our benefit if—we can get rid of the opposition of the bureaucrats in Washington and their liberal political supporters.

I urge you to listen to the MP3 interview linked above.  It will be an education.                   

April’s Friday Follies

A local radio station, KCMO, interviewed Atlas Shrugged producer Harmon Kaslow this morning.  One interesting tidbit was that the movie opened in 300 screens across the country.  That number has now increased to 450 screens.
One area with the largest turnout is, surprisingly, in liberal Seattle, Washington. It appears that the folks there in the Northwest identify with the movie and see the FedGov’s lawsuits against Microsoft and Bill Gates with the trials of Hank Rearden against the crony capitalists in Atlas Shrugged.

Hmmm, strange that.


According to Rueters, which is not a conservative organization, US oil production is down 13%—mostly due to the denials for drilling permits in the Gulf.  Obama’s drilling and oil production moratorium was overturned by the Federal Court.  However, the Obama administration has continued to drag its feet complying with the Court’s orders.

With the price of oil reaching $120/barrel, much of that price increase is due, not to Libyia and the strife in the Mideast but due to the weakness of the US dollar.

How the Value of the Dollar Affects the U.S. Economy:

When the dollar declines, it makes U.S. produced goods cheaper and more competitive when compared to foreign produced goods. This helps increase U.S. exports, boosting economic growth. However, it also leads to higher oil prices in the summer, since oil is priced in dollars. Whenever the dollar declines, oil producing countries raise the price of oil to maintain profit margins in their local currency.
For example, the dollar is worth 3.75 Saudi riyals. Let’s say a barrel of oil is worth $100, which makes it worth 375 Saudi riyals. If the dollar declines 20% against the euro, two things happen. First, the value of a barrel of oil has declined 20% to the Saudis. Second, the value of the riyal, which is fixed to the dollar, has also declined 20% against the euro. To purchase French pastries, the Saudis must now pay more than they did before the dollar declined. To avoid this, the Saudis raise the price of oil, which they do by threatening to limit supply.

The growing U.S. debt weighs in the back of the minds of foreign investors. That’s why they may continue to gradually move out of dollar-denominated investments – slowly, so they don’t diminish the value of their existing holdings. The best protection for an individual investor is a well-diversified portfolio that includes foreign mutual funds. (Article updated April 12, 2011)


I’ve seen a sudden increase in blog hits the last two days.  Drudge linked a report about the Tea Party license plates proposed for AZ and MO.  However the article that was linked mentioned only AZ!  

I’ve had several posts on the Missouri plate and about my efforts lobbying (I never in my life thought I’d be a lobbyist!) my local state represent to get the bill passed. Now I’m seeing an increase of internet visitors viewing my blog searching for information on the Missouri bill and its progress.

Thank you, Drudge!