Paul Krugman’s oil policy is just talk
August 5, 2008 · By Charles Anthony
Paul Krugman advocates talking to oil suppliers as an economic policy to deal with high prices:
“Now, whether, you know, Bush is responsible for high oil prices, I don’t think you can make that case. But we should remember that he promised, he said back in 2000, that he had, he knew what to do. He would be able to talk OPEC into opening the spigots and, you know, they haven’t managed to do that, so this is a failed energy policy, for sure.” Krugman also argued that the increased drilling would have an “insignificant effect on the price.”
So, let me get this straight: talking to oil suppliers to increase supply is a good economic policy but increasing that supply domestically can not be significant. Whether off-shore drilling can provide enough oil or not to affect price is argumentative. I guess we could consult a geologist to give us an idea of what physical volume could be expected in off-shore America. [Maybe the geologist could tell us that it would be environmentally damaging to the American coast but that is not what Krugman is talking about. He is talking about supply affecting prices.] Is Krugman a geologic expert? I doubt it and I know I certainly am not. However, talking to a foreign supplier to change supply is advocating stupidity.
If the oil suppliers had profit to be gained by increasing supply, they would do it without the need of any American talking to them. Only a foolish economist would fail to grasp this obvious fact. Many of the oil producing nations have said that they have increased supply as much as they can. Maybe they are lying but that is their prerogative. They have no obligation to increase the supply. If Krugman wants to play the part of a good liberal economist discussing the oil industry, maybe he should point out things like this:
Many of Saudi Arabia’s 6-million foreign workers labor under conditions that are sometimes compared to “modern-day slavery.”
Instead, Krugman is just talking partisan politics with his wind of educated economic authority behind his back. Failing to incorporate basic market mechanisms in his prescriptions makes him pathetic.
“If the oil suppliers had profit to be gained by increasing supply, they would do it without the need of any American talking to them. Only a foolish economist would fail to grasp this obvious fact.”
Do you think the oil producers would make more profit if they decreased the supply?
Of course, oil producers could conceivably make more profit if they decreased the supply. I just do not how talking to a foreign supplier qualifies as a responsible economic policy.
“Many of Saudi Arabia’s 6-million foreign workers labor under conditions that are sometimes compared to “modern-day slavery.†”
This article could be carbon copied to describe the conditions faced by foreign workers in Southern Alberta’s food processing plants.
According to consulting firm PFC Energy, only 7% of the world’s estimated oil and gas reserves are in countries that allow private international companies free rein. Fully 65% are in the hands of state-owned companies such as Saudi Aramco, with the rest in countries such as Russia and Venezuela, where access by Western companies is difficult.
LINK
That should explain Krugman’s logic.