20 thoughts on “A Pledge Too Far”

  1. My thought on Bachmann is that she is really running for Vice President. Since the usual (and flawed) thinking is that the ticket has to be “balanced,” she might be considered a good complement to Romney, someone to bring in the tea party (who would otherwise vote for Obama?).

    But I think it will end up being Perry, whether that is good or bad, and Perry will need somebody more like Giuliani to achieve the much-vaunted balance.

  2. A Perry/Cain or Perry/West ticket would be more interesting, IMO. Since the VP nominee often plays the role of attack dog, having a black man go against Obama would be very interesting, indeed. Plus, I think both men would bring a lot to the ticket.

  3. It is sad when a self-described conservative makes a statement that flies in the face of economic realities. As I have told my children the two dollar gallon of gas has gone the way of the thirty-five cent gallon of my youth. I am annoyed by pandering regardless of party affiliation, but I find it particularly annoying when it is delivered by a person hoping to represent the only political group that seems grounded in the realities of our economic predicament.

  5. As one commenter points out, $2 a gallon is still higher than the price when Obama took office. I don’t see that as entirely unrealistic.

    More importantly, she did not say she would “reduce gas prices,” she said gas prices would fall during her administration. Important distinction.

    Daniel Foster dismisses the ability of the private sector to lower prices and proclaims that the only ways to reduce prices would be ” seizure by force and nationalized exploitation of a large proportion of the world’s oil supply… massive federal subsidization of fuel costs… [or] fomenting of a second global recession.”

    In other words, he is the type of “conservative” who believes government is a much more powerful engine of economic development than private enterprise. The type of “conservative” who ruled DC during the Bush years.

    Bachmann, on the other hand, seems to be more of a private-sector optimistic in the Reagan mold.

    That makes the choice clear for me.

  6. Perry will need somebody more like Giuliani to achieve the much-vaunted balance.

    Interesting how Yankees see Perry as some sort of foaming right-winger, while people in Texas see him as a moderate (if not liberal) Republican.

  7. If the US removed the restrictions on oil production, both on land and offshore, the price of oil would drop. I can’t state how much it would drop but when you increase the supply, prices tend to come down. Funny how that works.

    We’re one of the world’s largest oil and gas producers and, to my knowledge, the only country that restricts domestic production. It’s utter foolishness bordering on insanity.

  8. I agree that the price of oil will drop if market forces are allowed to set the price. After all available, cost justifiable, sources are once again brought to the market, the price will decline. However there are not enough cheap sources left to bring the price below two dollars a gallon without some other artificial force, like a collapse of OPEC. And even that would only be temporary. Eventually even that bunch will once again look after their own best interests. Our next foreseeable source is locked in stone and deep below the ocean, and that and the increased in demand by a recovering world economy will keep the price higher that we have grown accustom.

  9. there are not enough cheap sources left to bring the price below two dollars a gallon without some other artificial force

    You assume that what you already know is all that mankind will ever know.

    That is unfortunately a common assumption.

    Statements like yours have been around for a long time. In the 19th Century, whale oil was the cheap source that could never be replaced. I don’t know anyone who burns whale oil anymore.

    Either you have faith in human ingenuity (otherwise known as the power of the free market), or you don’t.

    Those who do are often ridiculed by those who don’t. Sen. Shelby’s recent remarks about “faith-based” space programs, for example.

    But those who have faith in free people have generally been rewarded. Those who have faith only in the power of government, not so much.

  10. However there are not enough cheap sources left to bring the price below two dollars a gallon without some other artificial force, like a collapse of OPEC.

    If OPEC’s collapse would bring down the price of oil, that means OPEC’s existence keeps the price of oil up.

    Which implies OPEC is itself an artificial force.

  11. If Governor Perry wins and, ignoring the wisdom of Milton Friedman and Alan Greenspan, forced the Federal Reserve to radically reduce the money supply triggering a global recession and deflation may well drive oil under $2.00.

  12. “forced the Federal Reserve to radically reduce the money supply”

    Not printing more money out of thin air != radically reducing the money supply.

  13. And if Obama gets reelected and maintains his policy of restricting domestic oil and gas production while radically inflating the money supply, we may well drive the price of gas to $10 a gallon.

    Of the two scenarios, which is more likely, one based on conjecture on your part or Obama’s actual policies?

  14. we may well drive the price of gas to $10 a gallon.

    Funny you say that, I was just thinking that earlier today. Obama needs the price of gas to go that high on order to justify the expense of hybrids like the government motors Chevy volt.

  15. One of the problems with conservatives is few of them know what they actually are. McCain thinks he’s a conservative because he defends this country. He just doesn’t act like a conservative in the senate.

    Bachmann is a lawyer rather than a business person. I think we’ve had enough lawyers for a while. Cain is a business person without political experience. We can expect he will do the unexpected. I like them both, but they both have to do a lap as VP before I’d consider them for prez.

    I agree with Larry regarding attack dogs. I’d prefer West, but either would probably be fine. I like West because he has a good understanding of history. We need somebody with a long view. I just can’t agree with Perry on top… I think we’re being snookered again.

  16. Well, the short-term demand elasticity with respect to price is apparently quite small (d(ln Q)/d(ln P) < < 1), so it's plausible that a small upward increment in the supply curve could lead to a significant decrease in price. But I suspect Bachmann's reasoning has more to do with the recent experience with low gas prices in 2008. That was arguably a different phenomenon: in 2008 global demand shrank because of macroeconomic factors, which led to a sharp decrease in the price of gas. But as far as I have been able to determine, the demand shrinkage was only about 4% between the peak in early 2008 and the trough in early 2009. Oil supply in that brief period did not adjust rapidly to the decrease in demand, leaving a large (4%) supply-demand gap in late 2008, driving prices sharply down. However, it seems unlikely that the equilibrium (long-term) price of gas at late 2008 demand levels would be lower than $2 a gallon (i.e. if demand has stayed low, supply would eventually shrink, driving up the price of oil again). OTOH, we never really “see” equilibrium, do we? I don’t find Bachmann’s goal unrealistic, at least on a short-term basis, if we can create a bump upward in the supply curve by bringing online the various off-shore fields that are lying unexploited, and exploiting “unconventional oil” like shale and oil sands.

    Bumping up the world oil supply by 4% means bringing online an extra 3 million barrels per day. Is that even remotely feasible? Consider the Thunderhorse drilling platform in the Gulf of Mexico. It’s the largest drilling platform in the Gulf, and produces 250,000 barrels per day. So bumping up the world oil supply by 4% is like bringing about a dozen Thunderhorse platforms online. It sure seems to me that we can do that without taking over any Middle Eastern countries. But it would take an aggressive national commitment to do that, probably involving drilling in ANWR and drilling off the coast of Florida.

    However, not to rain on anybody’s parade, the reason that we don’t have a dozen more Thunderhorses online is as much economic as political. Oil companies, like all good capitalist enterprises, maximize net present value. That means that there is an economically efficient amount of oil to produce, and it’s close to what they are producing now. Virtually any oil company could pump and refine 10% more oil than they are currently producing, but if they sell it at half today’s price, they are losing money. That’s really the iron law that Bachmann is defying, not the false choice of recession/aggression/subsidies.

  18. I don’t think this is unrealistic, let’s try eliminating the EPA and sun-setting every regulation they have made and see what happens to the price.

  19. I can see fixing the artificial oil scarcity bringing gasoline to $2(2008 value)/gallon. Add in the inflation the current regime appears determined to press on us and $3/gallon would be hard to do.

  20. A collapse of China’s economic bubble would also crash commodity markets since they are a major consumer.

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