Soon to be lapping up on a shore near you…

53 comments on “Soon to be lapping up on a shore near you…”

1. Enviromental whako terrorists did it,ask Rush. OR Maybe OBL was behind it. Or Iran.

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2. Didn’t his family business really get started with some deals with Getty Oil, I recall that from some alt zine in the Bay Area. just like Arianna’s Humble Oil ties through the Huffingtons, Cynicism knowa no bounds

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3. @ narciso:
   What’s cynical about it in Newsom’s case – whatever that case may be? It’s just a late permutation of Kropotkinism, which was itself a late permutation…

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4. I found this little tidbit, from the local paperhttp://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2000/08/11/MN13354.DTL&type=printable
   Newsom pere is also tied to Jerry Brown by appointment and to the Pelosi by familial tie. Btw, are they going to something about Chevron
   in their fair city,

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5. @ narciso:
   And that has what to do with the viability of his political positioning? Why doesn’t it make an anti-oil stance from him more credible?

   BTW, Rex, do you have a link to the “Cheney’s fault” thing?

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6. BTW, Rex, do you have a link to the “Cheney’s fault” thing?

   I heard it on an NPR interview.

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7. BTW,BP’s total liability under American law is capped at $75M.

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8. It does beg the question, CK. how did you end up on his mailing list

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9. 25 K, he’s aiming kind of low, you think

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10. @ narciso:
    I had the idea that someday he would send me something worthy of a post.

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11. Also added to RecBrow – here’s an article on Cheney’s supposed involvement:

    http://www.guardian.co.uk/commentisfree/michaeltomasky/2010/may/03/usa-dickcheney

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12. Mike ” Jesus Camp” Papantonio, that Air American TV wannabe who they are relying on, how about it was the this MMS, who gave the approval, not the previous one

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13. I guess you consider that adhominem, CK, but I think it just shows the
    level of his previous misjudgement, and conversely the media’s willingness for him to perpetuate the kultursmog

    With Newsom, he seems the prototypical ‘limousine liberal’ that isn’t even aware where fortunes are born from. and seems to want to curtail that opportunity to the vast majority of the rest of us, that makes him the perfect candidate for Lt. Governor as a DEmocrat

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14. @ CK

    Because there will be headlines, and those who are invested, or taken to be invested, in denial and in seemingly unbounded confidence in technology, corporate responsibility, or maybe theoretically self-correcting market mechanisms are going to be at a distinct disadvantage when the public is alarmed and furious.

    In recent days here, there has been discussion about Progressivism and progressivism and how those inclined in either direction have their heads up their asses.

    Well, this spill is where it all comes from. You can talk about Wilson and the Teddys (both R and K), but it takes and event or a series of events to actualize the ideas. This may be such an event.

    As I leftie, I hope so. But I also try to be aware of my confimation biases not to mention the possibility of over reaction.

    So what is the conservative policy path here?

    From theCato Institute this:

    As damaging as the spill is, one major accident every 40-plus years (the Santa Barbara channel spill was in 1969) is something we can live with, given that we get about one-third of our oil from offshore platforms, which provide an enormous benefit to our economy and to everyone who drives.

    http://www.cato.org/pub_display.php?pub_id=11742

    Now, while I strongly disagree with this, I can understand it. I can even admire the “this is where the rubber hits the road” quality of it.

    But I wonder if it is what CK is talking about in the above quote.

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15. But I wonder if it is what CK is talking about in the above quote.

    I know CK’s thinking fairly well;I believe he’s talking about Deniability in the PR sense. Sucessful Republicans like W and Reagan projected a sense that all the bases are covered whether it’s called compassionate Conservatism or “take down that wall” In truth,they are fairly helpless when things go wrong. Reagan’s instincts were excellent,however,in the case of the attack in Beirut. He pulled out,smart man. And Obama is our CIC in Afghanistan,a “Nation” that sucks in the armies of various empires to play with. Even Jed Babbin is selling this war Short.
    http://www.realclearpolitics.com/articles/2010/05/04/are_we_losing_in_afghanistan_105426.html

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16. @ bob:
    I’d say that’s a good example of what I’ve been trying to talk about.

    I’ve been impressed with how many conservatives have reverted to the tough love position reflexively: It shows you how ideological the right has become in the Age of Obama. I think a few years ago, there would have been a wider clamor, even in the base, to assert that of course conservatives are in favor of responsible environmental regulation and a balancing of interests, but it’s in the nature of the conservative coalition that it will include a bunch of very voluble people who are dismissive of environmentalist concerns and desperate to minimize them where not completely ignore them.

    I rarely say the next words, but Krugman was exactly right when he pointed to Limbaugh’s unfounded speculation regarding eco-terrorism as signaling awareness that the rightwing narrative had taken a hit.

    Over at the HotAir Greenroom, when you put up a post, you can choose to place it within a category. The category list was imported, with a handful of additions, from Michelle Malkin’s blog. The only option for environment and related issues is “enviro-nitwits.”

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17. Rex Caruthers wrote:

    In truth,they are fairly helpless when things go wrong.

    In truth, aren’t we all?

    Purely as a matter of practical politics, what you label “deniability” would, yes, be nice to have. What I’ve been inveighing against the last few months has been a rightwing radicalism, a kind of utopian constitutionalism, that to my mind isn’t really conservative at all. When it’s joined to an attitude that seems to say “environmentalists are all nitwits,” then the right makes itself hostage to the headlines.

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18. Except that Beirut was a marker that Mugniyeh took note of, and passed that information on to Bin Laden, the Marine barracks were
    followed by attacks on embassy annexes in West Beirut, by the whole
    sale kidnapping of reporters, church envoys, et al, that led us into Iran Contra, and downplaying the fact that this was a Iranian proxy operation run by Mohashtemi-pur and behind him, Moussavi

    I grant Krugman no points, as his idiocy, passed through the infosphere
    like swine flu, has been in large part responsible for this situation

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19. In truth, aren’t we all?

    Sure, but the “regulators” are more geared by their natural tendancy to “fix” everything,to “fix” a disaster.

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20. @Rex

    Sure, but the “regulators” are more geared by their natural tendancy to “fix” everything,to “fix” a disaster.

    The point I’m pursuing, is that these regulators are in fact the embodied expression of the people’s desire to remedy a problem.

    Pointing out the imprefections of regulators and regulations does not refute this, but rather points to the imperfectability of life, at least on this plane of existence.

    Antiboitics have saved many lives. The overuse of antibiotics is a serious problem that imperils many lives in the context of us assuming antibiotics exist and are effective. The answer to their overuse is not to not use them at all.

    The professed conservative strategy that it is better to just wait out a problem, is similar to just waiting out a bacterial infection.

    The problem is not the existence of regulations, but rather their inappropriate use. What constitutes inappropriate here is harder and messier to figure out than the case of antibiotics to be sure. But life is hard and messy.

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21. bob wrote:
    @Rex

    Sure, but the “regulators” are more geared by their natural tendancy to “fix” everything,to “fix” a disaster.
    The point I’m pursuing, is that these regulators are in fact the embodied expression of the people’s desire to remedy a problem.

    I’m the choir

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22. bob wrote:

    The professed conservative strategy that it is better to just wait out a problem, is similar to just waiting out a bacterial infection.

    The problem is not the existence of regulations, but rather their inappropriate use. What constitutes inappropriate here is harder and messier to figure out than the case of antibiotics to be sure. But life is hard and messy.

    “Life is hard and messy” ought to be the beginning of the authentic “conservative” position. The strategy you describe as being “professed” would be easier to dismiss as a leftist caricature if many on the ideological/libertarian right didn’t willingly play into it – free markets as Christian Science – and that the base finds easy to settle on when the headlines seem to be on its side, as when oil was at $150/barrel.

    But the left has its naivetes and phony easy answers, as well. If wishing made things so, then “drill, baby, drill” and “all of the above” would be enough said for the right, and “green jobs” would be enough said for the left. The latter is arguably even more fanciful than the former.

    Much of the modern impetus to regulate derived originally from the desire to replace what used to be called “judge-made law” (not to mention anarchic violence so familiar from Western movies) with statutory authority on a vast range of resource, development, workplace, and consumer issues. For those who think that present-day society is overly litigious as well as overly regulated, it might be worth considering what the secondary effects of massive de-regulation in a complex industrial/post-industrial society might be.

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23. AS part of the energy bill, there was more reliance on ethanol which made food prices, rise, there was little real new oil exploration, Green jobs are a dodge, introduced by all the usual supects

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24. If any of the worst-case or near-worst-case scenarios develop on the oil disastrophe, it would have been nice for conservatives to have had a sensible, credible strategy on the environment that was secure against tomorrow’s headlines

    My suggested strategy to the GOP: grow a pair.

    People hate $4/gallon gas a lot more than they hate shiny black otters.

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25. If any of the worst-case or near-worst-case scenarios develop on the oil disastrophe, it would have been nice for conservatives to have had a sensible, credible strategy on the environment that was secure against tomorrow’s headlines…

    There is no sensible credible strategy on the environment that is “secure” against all conceivable headlines. . . except return to a pre-industrial pastoral existence. Industrial civilization comes at a price, one part of which is expressed in large temporary costs as complex systems occasionally break down in horrifying ways.

    It’s surprising that the world has gone so long without a major spill, given the sheer amount of oil shipped every day.

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26. There is no sensible credible strategy on the environment that is “secure” against all conceivable headlines. . .

    Your reading suggests that I was thinking a political strategy could protect you against the actual event. That would obviously be absurd.

    If you’re running around saying, or strongly implying, that offshore drilling is environmentally non-threatening and conservationists should just get over themselves, then you’re asking for trouble. For instance, one of the most often repeated arguments for drilling was that “our” practices are so much safer than the practices used in the Persian Gulf or Africa, so a “real” environmentalist would want us to be going it instead. This is a phony argument anyway – since demand for oil means that all of the same drilling would be going on anyway – but the implication was that we (the advanced West) had everything handled and that only the “enviro-nitwits” were worried about oil spills.

    If cons had instead made some of the arguments ahead of time that drill-baby-drillers are now making retrospectively – drilling close in is actually safer, etc. – then they at least would have some credibility if worse comes to worst. There may have been someone conservative somewhere who, before the incident, said, “I support drilling everywhere even though I know that it will require enhanced regulation and safety measures to avoid catastrophic spills,” but I sure never heard that from anyone. Instead, it was always “de-regulate, set industry free, everything’s cool, drill baby drill, our team is red hot.”

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27. @ CK MacLeod:

    I was talking about the politics, as I understood you were.

    The point I was making is that conservatives (and liberals) cannot craft positions that are proof against all possible headlines because no one can predict all possible headlines, except to say that large scale systems will periodically generate them. Having an industrial civilization guarantees that there will be horrific accidents. And, as the world gets wealthier and more densely populated, the accidents will result in larger death tolls.

    Of course, in the absence of industrial civilization, the people who will die in those accidents would never have existed in the first place.

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28. Except that the pressure was against close drilling, because it would more likely affect the pristine beaches, now we drill in the middle of nowhere and we still get the business. If tankers collide in the Houston
    ship channel, you’d still have same problem, ditto for a hurricane in the Gulf Coast

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29. @ Sully:
    But that’s obtuse. If conservatives or liberals associate themselves with a realistic rather than propagandistic depiction of the choices before us, then they have nothing to fear from the headlines: The range of reasonably predictable ones – which include the possibility of occasional catastrophic incidents – will have been taken into account. Instead, we have a situation in which conservatives are increasingly associated not with the kind of realism you describe, but with denial. Radical anti-regulatory ideology also seems to prevent them even from considering an enhanced role for government oversight. What this also means is that, as Newsom, Krugman, and others area already pointing to, is that the next time Climate Change comes up they’ll be able to say, yeah, you’re also the guys who told us that offshore drilling was safe and clean.

    It’s still not clear to me whether this incident will change the terms of some future debate substantially. A lot hinges on how much damage is done and how it’s viewed. I think Ken’s attitude would do more harm than good if adopted widely, but it probably won’t be.

    Still, even if $4/gal gas starts building up the drill-baby-drill sentiment again, it will be somewhere from a little to a lot harder than it would have been otherwise to win on the issue, and the side making the argument that it’s not worth it considering the minimal impact on total price and supply will have a little more credibility.

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30. You’re being deliberately obtuse, CK, AGW is a fraud, plain and simple, the East Anglia revelations prove it. The fact that we haven’t opened
    up a new well in 30 years is more than a crime, it is a fiasco, Do not
    grant the NRDC, WWC, good intentions, they do not deserve it

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31. @ narciso:
    Narc, that’s the statement of an ideologue. You must be intelligent enough to realize that even if everything they ever did at East Anglia was fraudulent, it wouldn’t prove anything except that everything at East Anglia was fraudulent. Regardless of what you believe, you’re not in a position to make that assertion persuasively. You’re just saying “my team is red hot” and hoping for an echo.

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32. Yes it’s an ‘unforced error’ I’ve admitted that, and I would rather not have to defend BP’s record. But they used the 2004-2005 hurricane
    season to shill for AGW, they attacked the energy task force, although
    all of those recommendations have been born out, including the 2003
    brownout. You keep wanting to credit them good will and credibility, whereas they surely don’t return the favor. California is capsizing in Hank Johnson’s words, and this is what they focus on.

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33. Let me put it this way: Was all of that pre-Climategate “consensus isn’t scientific”/”there is no consensus” stuff from the right honestly meant, or was it just a tactic adopted during a period of relative political weakness? So now you’re going to expect people to believe that it’s “case closed” the other way? People who are several thousand times more expert on the subject than I am don’t agree with you. Why should I – or anyone – believe you over them? And more to the point of this post, how does it serve conservatives to adopt that attitude – that way of speaking about things that the speaker cannot know?

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34. Consensus is not science, Lindzen, Spencer, Lomborg, a host of others, have proven that. The placement of many of these monitoring stations, in ‘heat islands’. The fact they can’t prove there’s been any warming in the period in question. There are much more verifiable pressing issues that take precedence

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35. Don’t know Spencer. Lindzen is a believer, just skeptical about conclusions and proposals. You think Lindzen hasn’t considered “heat islands”? Not sure about Lomborg. The other fact issues etc. we are not going to solve here, so why bring them up? I agree with you about more pressing issues, but why should you care about my opinion? Conservatives shouldn’t be pushing a “side,” they should be pushing for a more trustworthy process and a more conservative way of dealing with its results.

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36. What’s the FOIA’s by Mcintyre, Michaels, and a whole host of others about, that one needed the breach at Hadley, to reveal. Well we’re talking the fact pattern, you want to credit the patina of objectivity behind Pachauri’s IPCC, They have painted almost every skeptic as an oil company shill, have flooded academia from pre K to Ph’d with their
    propaganda, it’s the scientific equivalent of subprime financing

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37. @ CK MacLeod:

    But that’s obtuse

    Obtuseness is, of course, always in the eye of the beholder. I’ve heard many people point out that there hasn’t been a catastrophic spill in the past however many years. But I’ve never heard anyone deny the possibility of a catastrophic spill.

    On the other hand, I have heard the AGW lobby, even “scientists” within that lobby, assert that “the science is settled.”

    Had I ever heard anyone claim that a catastrophic spill was impossible I would have reacted by saying that the person was certainly lacking in common sense or being misleading. I don’t recall many liberals saying that the “science is settled” folks were lacking in common sense or being misleading.

    We have now learned that catastrophic spills are possible, just as we learned a few months ago that at least a great deal of the AGW science was rigged rather than settled.

    Who was or is being obtuse?

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38. Obtusosity is in the eye of the beholder, that’s true, and annoying, too.

    Many people declared that new drilling methods made old fears obsolete, and that the environmentalists were exaggerating the dangers. You still hear that even up to the present moment – fingers crossed that those who suspect the spill has been hyped turn out to be right.

    Either way, I still think it’s clear that conservatives, mainly in order to please the base, have gone overboard on their denialism, just as people like Arnold and a few have gone overboard in the other direction.

    I don’t think it’s clear, by the way, that we learned a few months ago that “at least a great deal of the AGW science was rigged rather than settled.” We learned that aspects of the alarmist case appear to have been rigged. Not quite the same thing.

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39. Except CK, they were closing off a well, not drilling one, which is something quite different altogether. Anyways you are willing to credit
    their meme, even coming from someone like Newsom,. who doesn’t realize where his mealticket came from, and has shown other poor judgement as well in the past

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40. @ narciso:
    I don’t know what “credit their meme” means. Recognize that it exists? That it may be more politically effective than otherwise as a result of flaws in the conservative approach? If that’s it, then I plead guilty.

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41. “flaws in the conservative approach”

    Speaking of flaws in the “Conservative Approach,does the Conservative approach include bailing out the Fed at the expense of the taxpayer? This won’t make it to the Glen Beck show,but it smacks of Socialism considering the nature of the “Ownership” of the Fed.

    “— the American Enterprise Institute, is helping the Federal Reserve to develop a strategy to transfer $1.25 trillion in toxic mortgage-backed securities (MBS) and non performing loans onto the public’s balance sheet. Although it’s unknown whether Fed chair Ben Bernanke will act on the AEI’s recommendations, it does show that the Fed’s Quantitative Easing program (QE)–which moved the bulk of garbage assets from the banks to the Fed’s balance sheet–poses long-term problems that will need to be addressed. Bernanke never intended to keep these assets any longer than necessary. Now he is actively exploring options for getting rid of them.”
    http://www.counterpunch.org/whitney05042010.html

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42. @ Rex Caruthers:
    Actually, that kind of thing frequently makes it to the GB show, along with some simplistic non-explanation, maybe a reference to the Weimar Republic, and “things are going to get really bad, America – we’ll get through it if we emulate the Founders with Faith, Hope, and Charity…”

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43. Actually this sort of thing, would probably make it to the Beck show, it’s exactly the sort of thing that leads him to get more duct tape, ‘so his head can be put together, after it explodes” He doesn’t really believe in the system, anymore, not as it is currently constituted

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44. He doesn’t really believe in the system, anymore

    If you’re referring to our economic system,who does? Here’s a remark dear to my heart:

    “Think for a moment about what goes into a typical CDO. Start with a thousand different individual loans, be they commercial mortgages, residential mortgages, auto loans, credit card receivables, small business loans, student loans, or corporate loans. Package them together into an asset-backed security (ABS). Take that ABS and combine it with 99 other ABSs so that you have 100 of them. That’s your CDO. Now take that CDO and combine it with another 99 different CDOs, each of which has its own unique mix of ABSs and underlying assets. Do the maths: in theory, the purchaser of this CDO is supposed to somehow get a handle on the health of 10m underlying loans. Is that going to happen? Of course not.” AND

    “The nature of a fiat,debt-based money managed by a fractional-reserve banking cartel is inherently fraudulent. Fiduciary media created out of nothing but promissory notes is not real money! Real money is commodity money, gold or silver preferably, and loans have to be made only from prior savings of such money, not ex nihilo according to the whims of bankers legally empowered to turn us into indentured servants to a privileged financial class. The interest rates on such loans have to be hammered out in a true free market in capital, something we have not had since 1913 with the passage of the Federal Reserve (a prime example of a regulation gone astray”

    http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7675641/Nouriel-Roubini-forget-sub-prime-mortgages.-Its-the-sub-prime-financial-system-we-need-to-fix.html

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45. He’s the only commentator on TV, that I know of that even broaches the subject of the carry trade, and most of the other stuff you obsess
    on

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46. broaches the subject of the carry trade, and most of the other stuff you obsess
    on

    It’s a lonely and dangerous obsession leading to madness.

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47. @ Rex Caruthers:
    It’s interesting that Roubini brings up the Federal Reserve. As you will be aware, the Federal Reserve system was structured to serve two related purposes – to make capital available to those (especially farmers) who felt gravely disadvantaged by a system tilted to the needs, interests, and customs of the great financiers (mainly manufacturing-oriented, East Coast, urban); and to help secure the total financial and political system from the kinds of panics (and depressions) that were a regular feature of American history to that point, and whose effects were exacerbated under the conditions of industrial capitalism. Along with the income tax and elements of Wilson’s “New Freedom,” the Federal Reserves was supposed to help the nation-state stand on its own two feet and serve the interests of the whole people (collectively and as individuals or associations) rather than remain dependent on and subservient to the likes of JP Morgan and other immensely rich individuals.

    Similar intentions or justifications have been behind every major and minor innovation, act of omission, and compromise along the lines that Rex detests: LBJ couldn’t conceive of policy in the richest and most powerful country on the planet being held hostage to runs on Gold by pesky foreigners who were dubious of his and the nation’s far-sighted magnificence. Nixon and every president after him up to and including Obama and likely including the next one as well have similarly rejected “conventional” economic restraints of this type: There’s something heroic, or maybe Promethean, about the gesture, which on some level may connect with recognizably “modern” or “progressive” notions about everything else. We’re fulfilling the Underground Man’s prophecy, having “contrived to be born somehow from an idea.”

    What I’m suggesting, Rex, is that this fulcrum of your “obsession” may run very deep – much deeper than the gold standard per se – which may be why it’s so intractable.

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48. Now strictly speaking CK, leaving out the gold standard for a minute, the FEd’s record doesn’t seem so hot, when’s the last time they called
    a soft landing, lets leave out the Great Depression for a minute, how effective has this been.

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49. @ narciso:
    No objective assessment possible, since we don’t know what would have happened without the Fed. Additionally, the things we spend most of the time discussing in relation to the Fed are only a small part of the purposes it was meant to serve. It’s like saying, “the army screwed up in Iraq in 2003-6 so we might as well get rid of the entire Defense Department.”

    What’s clear is that the century during which the Fed existed also happens to be the century that the U.S. rose to international economic, political, and military pre-eminence, while tripling its population, increasing life expectancy by 20 years, etc., etc., so… on balance not so bad.

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50. the Federal Reserve system was structured to serve two related purposes

    CK,you omitted currency stability and predictability.

    What I’m suggesting, Rex, is that this fulcrum of your “obsession” may run very deep – much deeper than the gold standard per se – which may be why it’s so intractable.

    I have told you,I got my teeth into these issues quite a while ago. I also remembered my lessons from what was then called a Liberal Education,now it would be called a Classical Education,The unexamined Life,Appearance vs Reality,the nature of Hybris,tragedy,comedy,eros etc etc,including a reverence for learning and the learned,somehow I can’t shake the hold these forces from antiquity have on me,anyway, we have,in my opinion,been handed a grand illusion about our money,which does run deep,and we need a Don Quixote to spar with that windmill;and yours truly is the Sancho Panza of this drama.

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51. How much does that straw cost, CK, alright I’ll give 1920, but the next 80 some years, is a not a one off, 1999-2000, which popped the tech bubble and 2004-2006, particularly raise my ire, although the Volcker years toad the wet sprocket too

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52. Rex Caruthers wrote:

    CK,you omitted currency stability and predictability.

    Currency stability and predictability would have been part of making capital available in a more equitable and productive way – which is, after all, the underlying point of having a currency. The prelude, in addition to the Panic of 1907, was the “free silver movement”/”bimetalism” (Bryan and the Cross of Gold) – an attempt to confront the limits of gold but still within a precious metal-backed regime. I have no idea how it would really have worked. My assumption is that sooner or later the state would have broken bimetalism, too.

    Should have found a way to put this on a different thread… though maybe while I’m out walking the dogs I’ll find a way to link this to ecologism…

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53. Should have found a way to put this on a different thread… though maybe while I’m out walking the dogs I’ll find a way to link this to ecologism…

    I got a strong connection. OIL OIL OIL John Tamny and I are having a long distance love affair.

    Oil Isn’t ‘Expensive’, the Dollar Is Cheap
    By John Tamny

    {In his classic book, The Theory of Money and Credit, Austrian School economist Ludwig Von Mises plainly observed that “Whenever money is valued by anybody it is because he supposes it to have a certain purchasing power.”} Von Mises’s views on money loom large considering the nosebleed price of oil that American consumers continue to suffer.

    Though it’s well down from highs of $147/barrel that it reached in the summer of 2008, that the price of a barrel of oil still trades in the $79 range is a certain signal that something is amiss.

    {Perhaps unaware of the dollar’s undefined, floating nature, commentators continue to point to the oil price to support their suggestions of foul play on the part OPEC, too much global demand for what is allegedly a limited commodity, or greedy “speculators” keeping the price of the world’s fuel at abnormally high prices. Influential newsman Bill O’Reilly frequently fingers speculators when attempting to explain the price of oil to his viewers.}

    {In each instance commentators mistake the symptom of expensive oil for its true cause. Von Mises frequently touched on money values in his brilliant expositions on markets, and it’s because the dollar has no true value or fixed definition that oil is presently expensive. In short, oil is dear because the dollar in which it’s priced is cheap.}

    For background, it’s worth mentioning that not long after he was inaugurated as our 40th president, Ronald Reagan predicted a fall in the price of a barrel of oil. What made Reagan so confident?

    {Aware of the historical relationship between gold and oil,} Reagan deduced that oil was due for a correction based on a 20% drop in the price of an ounce of gold since his election. Sure enough, by December of 1981 the price of a barrel of oil was nearly 20% lower than it had been one year before.

    (Looked at over a longer timeframe, from 1970 to 1981 the price of gold rose 1,219 percent, versus a rise in the price of oil 1,291 percent.) (This wasn’t coincidental. With gold and oil both priced in dollars, and with gold serving as the best proxy for the latter’s value, a jump in the gold price neatly foretold the oil “shocks” of the 1970s that were merely dollar shocks.)

    {Given the strong price correlation between the two commodities, many economics writers took to explaining the gold/oil relationship in terms of a 15/1 ounce/barrel ratio. As the late Warren Brookes wrote in his 1982 book, The Economy In Mind, “In 1970 an ounce of gold ($35) would buy 15 barrels OPEC oil ($2.30/bbl). In May 1981 an ounce of gold ($480) still bought 15 barrels of Saudi oil ($32/bbl).}

    More modernly, in March of 1999 The Economist predicted $5/bbl oil in the future because “the world is awash with the stuff, and it is likely to remain so.” Instead, with the gold/oil ratio of roughly 25/1 historically out of whack, crude proceeded to rally beyond the 15/1 ratio; reaching $24/bbl by September of 2001.

    Considering oil’s aforementioned spike to $147/barrel in 2008, an ounce of gold then only bought 6.8 barrels of oil. What this meant at the time was that oil was due for a major correction as its price fell back to historical ratios. In that sense, oil’s collapse from nearly two years ago was less a function of reduced global demand and allegedly “benevolent” speculators, and largely a function of it returning to its normal relationship with the gold price.

    {Right now gold trades in the $1176 range, and the price of oil is roughly $79 per barrel. That an ounce of gold buys 15 barrels of oil signals yet again that the real price of oil has hardly changed at all over the last 10 years of allegedly costly crude. Still, $79 oil ensures $3/gallon gasoline as far as the eye can see, and it’s a fair bet that the price will stay there so long as gold continues to test all-time highs.}

    The good news, however, is that this can be fixed. As evidenced by the dollar’s major decline versus gold this decade, the dollar is very cheap. The dollar’s debased nature explains expensive spot oil prices, high prices at the pump, and most important of all, it helps explain a difficult job outlook. {With so much soggy money flowing into commodities least vulnerable to dollar weakness, the entrepreneurial economy where most jobs are created is losing out.}

    {So the answer is really quite simple. If we want cheaper gasoline, we need the U.S. Treasury to target a stronger dollar, and for it to even threaten intervention if markets unexpectedly fail to comply. If a $500 gold price is targeted as so many gold-watchers would prefer, the stronger dollar will sooner rather than later reveal itself in greatly reduced oil prices; roughly $33/barrel if historical gold/oil ratios once again prevail.}
    For now though, it’s a waste of time to bemoan what many deem “expensive oil.” Time is wasted because there’s no such thing as expensive oil, and there never has been. {Instead, we have a problem of Americans supposing that the dollar is fixed in value, when in fact the dollar floats.}

    {Oil hasn’t become expensive this decade; rather the dollar has become very cheap. Strengthen the dollar, and worries over nosebleed gasoline prices will quickly become a thing of the past. Absent that, to hope that something will become inexpensive when the unit of account in which it’s priced continues to fall is to indulge in fantasy.}
    John Tamny is editor of RealClearMarkets, a senior economic adviser to H.C. Wainwright Economics, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He can be reached at jtamny@realclearmarkets.com.
    http://www.realclearmarkets.com/articles/2010/05/06/oil_isnt_expensive_the_dollar_is_cheap_98450.html

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