Friday, March 8, 2013

$2 Per Gallon of Gasoline and Other "Lucky" Opportunities Await Us ... Are We Prepared to Seize Them?

Long ago I learned that luck is what results when preparation and opportunity collide.

In other words, circumstances often combine with chance to allow us to make our own luck. But we have to be prepared to take advantage of it when the lucky opportunity comes our way.

And we all know what it means to snatch defeat from the jaws of victory. Been there, done that, too.

So are we going to be lucky and see $2 per gallon pricing for gasoline soon and all the wonderful things that would entail for us and our American economy?

Or are we going to forego the unexpected and enormous opportunity to achieve energy independence and remain unwilling and unprepared to do what's eminently doable to fully and safely develop our North American energy resources?

In large part that's up to what President Obama chooses as his priorities the next few years. Let's hope he chooses wisely.

Cheap oil to the rescue, economist predicts is subtitled 'Falling energy prices will be like a tax cut:'

"Economist Robert Z. Aliber didn’t hedge his prediction on what a barrel of oil will cost one year from today.

“It will be at $56.65,” he declared, down sharply from its current level of about $90.

Aliber is a professor emeritus from the University of Chicago . . . and he (authored) the well-known tome, “Manias, Panics, and Crashes: A History of Financial Crises.”. . .

“We’re in for a massive price decline . . . . It will be like a tax cut for all of us.”

Families will have more disposable income, businesses will have much lower operating expenses, and trillions of dollars now tied up in gas tanks will flow into the broader world economy.

High oil prices are a huge contributor to our global economic malaise. Oil importing countries — including the U.S. — are running enormous trade deficits with oil exporting countries, from Norway and Russia to nations of the Middle East.

This ultimately creates a destructive deflationary drag on the global economy. Japan, for instance, must sell ever more inexpensive goods to raise the money it needs to buy oil, he explained. Meanwhile, oil-exporting countries mostly just sit on their oil money.

“Oil-importing countries will essentially spend the money now being saved by the oil-exporting countries,” Aliber predicted.

The housing market recovery and the booming stock market will mean a return of the wealth effect, meaning consumers, feeling wealthier, will spend more. . . . But what is going on in energy will be truly transformational, Aliber predicted.

The revolution, in fact, is already here. . . . BNSF Railway Co. plans to test natural-gas-powered locomotives. BNSF . . . is one of the largest guzzlers of diesel fuel in the U.S. If it were to switch to natural gas, the days of oil dominating our transportation systems could be numbered. See Berkshire's BNSF Railway to Test Switch to Natural Gas.

Somehow, just as doomsayers predicted “peak oil” would spell the end of economic growth as we knew it, America came upon this enormous glut of natural gas. This comes thanks to revolutionary new drilling technologies, including the often bad-mouthed “fracking,” and it is one thing on the horizon that could truly save us.

The gas glut has all kinds of industries switching over to the cleaner-burning fuel, from electric utilities to chemical manufacturers."

Discussion and Analysis
In the good professor's view, oil prices are headed down -- way down -- and fast. That's my view, too.

How far down is the question? And the best answer to that question is simply, "That's up to us. It's our choice to make."

Oldsters like me remember the 1973 and earlier pre-OPEC cartel pricing of a barrel of oil at $3. At that time gasoline sold for 30 cents or less per gallon. That same inflation adjusted pricing today would probably be around $2 per gallon.

That said, all of us remember the astronomical levels of just a few short years ago when $150 and more per barrel and $4 per gallon or higher was the price.

But that was then and this is now.

Thanks to American ingenuity, entrepreneurialism, financial capacity and world leading technology, we have an abundance of North American energy resources to develop and exploit, including natural gas, oil, coal and nuclear.

All we have to do is stop playing stupid political games and let the private sector invest its money to develop, refine and efficiently deliver our available energy resources to willing and ready customers.

And to do this no taxpayer funds will be required. Nor will any special government "help" or "expertise" be required. No help needed.

If the private sector energy companies are allowed to act on both their and their customers' behalf (that's the way free markets work), the price of gasoline or its natural gas equivalent could easily approach $2 per gallon (or at least scare the hell out of it).

And countries like Venezuela, Russia, Iran, Saudi Arabia and others would then have real hard nosed legitimate competition from U.S., Canadian and Mexican producers. Maybe even Venezuela too someday.

This would result in the end of OPEC monopolistic pricing and all the harm it's done to worldwide economic growth and security the past several decades.

In turn, an abundance of available low cost North American energy would act as a big jobs producer as well as provide a genuinely huge tax cut for consumers. In addition, it would mean a substantial cost reduction for domestic manufacturers and distribution companies as well, thereby enabling American consumers to further increase their spending power.

It would also help our nearby friends from Mexico compete effectively with Chinese and other Asian manufacturers for the dollar purchases made by North American consumers.

Summing Up

So are we prepared to seize the opportunity and get 'lucky' in order to achieve North American energy independence, or will we once again play stupid political games and somehow manage to snatch defeat from the jaws of victory? It's our choice.

So here's what I say. Let's all do what we can to ensure that our "public servants" make the right choice, even if it's already the completely obvious and the logical one to make. Let's insist that they get 'lucky.'

North American energy independence and gasoline at $2 per gallon may sound too good to be true, but it's there for the taking.

Sometimes being in the right place at the right time is what really makes us smart.

So let's all hope President Obama is prepared to seize this wonderful opportunity, and that he quickly chooses cheap energy over cheap politics.

That's my take.

Thanks. Bob.

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