Why Oil Companies Aren't Cheering

It is a new economy. Our gross domestic product is increasingly tech- and information-dominated. We are being assimilated by silicon. The effect is to remove the American economy's overall health ever farther from the cost of oil, and all raw fuels...Whipsawed by Oil, Mark P. Mills, , The NY Sun, 5/2/2006

Oh dear, bad news for oil companies, worse news for today's version of OPEC, worst news for Venezuela, Mexico and Iran. It's hard to politically manipulate a market where the main buyer's economy is increasingly not dependent on oil. In America, for instance, we are so loaded with coal, shale oil, and natural gas that we should be able to keep our (smaller, more economic) SUVs running for a very long time. Why are we still buying Arab, Venezuelan and Mexican oil?

Essentially, it's a luxury approach. It's easier to buy someone else's than produce our own. Or, if you're a Green Democrat, it makes you feel good to buy someone else's oil rather than sullying our "wilderness" by drilling for our own or processing shale. As with liberal/left politicos in England in the early 20th century, the willingness to dirty other people's back yards instead of our own has led to several wars to defend their right to keep their hands clean and to force us to do the same. Sad thing is that they've succeeded but at what future cost? The balance of electricity to oil in energy production now is 60/40 in favor of a form of energy which can be entirely domestically produced with coal, gas, shale oil and nuclear. This will not become more favorable to oil. By the time a foolish Congress figures this out, the Ameican economy, already substantially divorced from international energy politics (and markets), will be somewhere else.

Hope springs eternal, but for the owner of oil wells, this may be becoming less true.

Luther