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Don't Blame OPEC; Higher Gas Prices Are Almost Entirely Bush's Fault

What is making oil so expensive is not energy policy or even SUV's, dangerous as those are for the environment. It's Bush's massive deficits and his willful destruction of the US dollar that has gas selling at $2.30 a gallon and rising.

There's been a lot of hand-wringing going on among economists and politicians, and a lot of fuming at the gas pump by consumers over the soaring price of oil over the last two years.

Increasingly, concern is being expressed by treasury officials and economists about the negative impact soaring oil prices and related gas prices could have on the overall economy. Politicians--especially Republicans--are also fretting, since the thousands of extra dollars consumers are now spending on electricity, home heating and gasoline have, for all but the wealthiest taxpayers, more than cancelled out any minimal benefits they saw from the president's tax cuts.

What's wrong with this picture?

The focus of all this anger and angst is oil prices. As a result, everyone is looking at culprits in the wrong place, blaming wasteful energy use, OPEC production quotas, monopolistic oil companies and/or conniving oil traders.

In fact the real culprit behind these higher oil prices is the Bush Administration, which, thanks to its massive deficits and tax give-aways to the rich and corporations, to its war spending, and to its failure to combat unprecedented and ever-larger trade deficits, has been causing the dollar to plunge in value.

Oil is a commodity and it is priced in dollars. If dollars decline in value, then the price of oil will rise in inverse proportion.

One need only look at Europe to see what this means.

Over the period from February 1, 2003, just before the start of the Iraq War, when oil prices began to rise in earnest, to Feb. 1, 2005, the price of a barrel of oil in dollars rose about 30 percent, from $30.13 a barrel to $42.91 a barrel. But over that same period of time, the Euro, Europe's new combined currency, rose 21 percent against the U.S. dollar, from .93 Euros to the dollar in February, 2003 to just .77 to the U.S. dollar in February, 2005.

For Europeans, then, the net rise in oil prices over the two years of the Iraq War has been just 9 percent, or less than 5 percent per year--hardly the kind of energy inflation that would cause economic problems.

And this situation is likely to get only worse. Some Wall Street oil industry analysts are now predicting that oil could, before too long, hit $100 a barrel. What they are saying really is that the dollar is likely to fall in value by 50 percent.

Should that happen, though, the OPEC states would likely at some point along the way decide that it is ridiculous for them to continue pricing oil in dollars, since the piles of dollars filling their bank vaults will be losing value faster than their oil wells are being drained.

At some point, the oil producing states, including Russia and Norway, will inevitably switch to pricing their oil in a basket of currencies--a basket that would prominently feature the Euro and probably the Japanese Yen.

At that point there would be little left to prop up the dollar, and it could end up becoming little better than a Third World currency.

For the rest of this column and other stories by Lindorff, please go (at no charge) to This Can't Be Happening! .

homepage: homepage: http://www.thiwscantbehappening.net

Something wrong 08.Apr.2005 11:03

Oliver

If oil is traded in dollars and the dollar has had negligible inflation each year then oil should have only gone up with the inflation rate if it wasnt a supply problem. It shouldnt matter about the rest of the currencies. Meanwhile the Euro has done better against the dollar so they dont see this rise in oil prices as it is pegged on the dollar.
The supply problem is definitely the problem. China and India an Brazil are all hungry for oil and OPEC is pumping at almost maximum rates.And Bush has not even thought about conservation yet.

Conservation 08.Apr.2005 16:47

Bent_rider

You need Bush to tell you to conserve?

Yo, ride a bike.

conservation would do little 08.Apr.2005 21:04

nobody

Even our consumption were cut drastically by conservation we'd still crap out in a couple years due to India and China. We need to seriously stop driving everywhere! Why is it that companies are perfectly willing to outsource to India but flat out fricking refuse to let american work from their homes? It makes no sense other than from the perspective that these manager pin head idiots have no respect for the american worker and don't give a crap about anything but their wallets.

It's All George Bush's Fault 15.Dec.2005 04:17

Notta Libb

Check out a site dedicated to the absurdity and satire nature of saying "It's All George Bush's Fault!"

 http://www.itsallgeorgebushsfault.com

Regards,
Notta Libb