Results tagged ‘ Oil ’
I know we spend an inordinate amount of time discussing Michele Bachmann. The problem is, she’s everywhere and she’s frightening. Some of her statements can be excused as mere pandering to the base and that’s understandable. Some of them may be sincerely held beliefs. But some of them betray a fundamental lack of understanding of economics, policy and the world.
For instance, this past week Bachmann promised a crowd that during her presidency, she would ensure the return of $2 gas. Now, leaving aside the fact that $2 gas is no longer possible without a sustained subsidy regime that would add to the national debt, what is even more frightening is her obvious inability to understand how global commodity markets work and how important world partners determine pricing. Maybe this isn’t important to the base but it is important if you want to be President of the United States. Let me try to explain through an analogy.
This would be like me promising that if you elect me baseball commissioner, I will bring back $3 beers at the ballpark. Sure, you’ll love me for it and you’ll cheer because who really wants to pay $7 or $8 for a small cup of crappy beer. You’ll also quickly realize that my promise is impossible to keep.
See, the first problem is that as commissioner, I don’t have the ability to set prices at independent ballparks. I could ask the owners nicely if they would be willing to do it. I could even threaten to levy huge fines against them if they don’t. But, they have to cover the costs and as commissioner, I don’t have the power to set their prices.
Now, my second option would be to try to uncover stores of previously untapped beer being hoarded at the ballpark in an effort to increase the supply and drive the price down. However, the unit price is set by an external force, the big corporate brewer, and I have no control over them. If the cost to the brewer to produce the beer is $2 a beer and he then sells the product to the park at $3 a beer, the park has to then mark it up in order to pay the salaries of the person selling the beer, take care of upkeep for the concession stand and even put a little money back into the park.
Granted, beer is not a commodity like oil but gasoline, which we’re actually talking about here, is a refined form of a commodity much like beer is a refined form of commodities like wheat and hops. The same rules work on both and economics governs all.
Ultimately, Bachmann’s promise is all the more ironic because the only way to return to $2 gas is for some pretty heavy-handed government intervention. Correct me if I’m wrong but isn’t that what the Tea Party is supposedly dead set against? Logically, it makes no sense. However, when you consider her education and her inspiration, it’s pretty obvious that logic isn’t necessarily a strong suit.
With everything going on in North Africa, the Middle East, Japan and the US, it has been a while since we took a look south to see what’s happening in that infamous incubator of Ms. Universes, Venezuela. Turns out we picked the right moment to look that way because Hugo is once again bringing the crazy.
Most of the time when we have a bone to pick with El Presidente, it has something to do with his politics. Sure, we may lean to the left here at RSBS but I’m pretty sure I speak for both of us when I say that we see very little value in nationalizing companies. No matter which side of the political spectrum you hail from, though, Hugo may have finally gone too far this time around.
At this point I’m sure you’re getting a little curious to know what it is that the leader and founder of the Bolivarian revolution has done. Did he club a baby seal? Has he proclaimed cashmere to be a tool of the capitalist devils? Did he proclaim red to be the new black?
No my friends, it’s something much worse. Mr. Chavez declared a new public enemy number one in Venezuela: Breast Lifts. That’s right, in a country facing rising import prices, a greatly decreased oil production capacity due to state mismanagement and the specter of sovereign default, somehow Venezuela’s greatest problem is poor women getting breast implants.
Let’s face reality, Hugo. At this point in time Venezuela has exactly two things going for it: its exportation of baseball players to the US market and its spectacular track record in winning Ms. Universe contests. Do you really want to attack the industry that makes the latter possible? And what’s next? Decrying the use of precious natural resources in the making of baseball bats?
Although we here at RSBS are from being economic experts I hope we can be so bold as to propose a simple solution. At a point in time when crude is still selling at over 100 dollars a barrel, maybe instead of focusing on silicon and saline you should instead figure out how to increase oil production capacity. And if that fails, you can always turn your rage towards butt lifts.