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Its About Oil Stupid

By: Steve Johnson

2/18/2008 - 14 Comments

“It’s the economy stupid”, was the phrase in American politics widely used during Bill Clinton’s successful 1992 presidential campaign.

Clinton used the phrase to convey his message and convince the populous that he could fix the problems of the current recession.

How we face another presidential election in 2008 with a similar looking recessions staring at us with the largest housing market decline as its teeth. With several major industries in decline, the economic problems look much worse then in they did in the 90’s.  The price of oil is perhaps behind a good portion of it, as the US economy has become increasingly dependent on oil imports consuming 380 million gallons of gas per day. The increase in the price of oil is creating massive inflation in the US and around the world.

One of the reasons the US has very low food prices compared to the rest of the world, is because we can transport it with cheap oil.  Cheap oil imports have fueled our economy for decades.

OPEC

The Organization of the Petroleum Exporting Countries (OPEC) is a group of countries that has a large supply of oil reserves. The principal aim of OPEC is the determination of the best means for safeguarding their interests, individually and collectively; by stabilizing the prices of international oil markets with the idea of eliminating harmful fluctuations which could result it heavy losses.

Since 2001, OPEC has illegally been lowering the oil supply in order to shift the supply/demand ratio - resulting in a quadrupling of the prices of oil.  They are in effect, a monopoly that is cheating the world of billions of dollars every year.

Robert Zubrin, in his book, Energy Victory (73, 11, 77), has this to say about OPEC;

“OPEC is effectively led and controlled by the Saudis.  They have this control because they are the owners of not only the largest oil export capacity, but the cheapest. Saudi oil costs only $1.50 per barrel to produce. …  It should be noted that these actions by OPEC were, and are, illegal. Collusion by suppliers to fix prices is not only a crime under US Law; it is banned by international law as well. “

“Saudi Arabia is the primary global financier of the Islamist terror cult. In 1972, Saudi foreign exchange earnings were $2.7 billion. In 2007 they topped $200 billion. “

“In other words, the OPEC-inflated oil price is simply a swindle. It does not benefit the world by preserving our precious petroleum fluids, and it is not necessary in order to make oil exploration occur. It is just a way to loot the world and radically expand the power of the group of cultists bent upon our destruction. “

Dollar Value

In all fairness, the ever decreasing value of the dollar has also been a major contributor to the increase in the price of oil.  The value of the dollar has lost 17% of its value since 2001.

Article Reference:  Inflation Has Devalued U.S. Dollar by 17% Since 2001

You see, since current worldwide oil sales are denominated in US dollars, changes in the value of the dollar against other world currencies affects OPEC’s decision on how much oil to produce. For example, when the dollar falls relative to the other currencies, OPEC-member states receive smaller revenues in other currencies for their oil, causing substantial cuts in their purchasing power.

So why is the value of the dollar dropping?

The value of the dollar is dropping because the world market is flooded with dollars and the US government continues to create more by printing money and lowing interest rates.  As the US government continues to spend more money then the country has, we continue to increase the money supply.

Inflation

In the next few years, inflation will probably rise to 10-20% and spread across the world. This recession will be a problem for everyone.

Solution

The solution is to stop the government from spending more money then we have and reducing our dependency on imported oil.  Whether that means, increase ethanol production or drilling for our own oil in Alaska. 

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