Rising Crude Oil Price Brings Out Nut Case Energy Crisis Solutions

By: Mike_Shedlock

The price of oil has been soaring and nut case solutions are coming out of the woodwork in response. I have talked about this twice recently in Congress Threatens Oil Producers and Congressional Insanity: Sue OPEC over Oil Prices .

But as silly as those actions are, it is nothing compared to the stark raving lunacy proposed by Martin Hutchinson in Time to do something about oil .

Operation Iraqi Freedom has been a smashing success, and only appalling Wilsonian wimpiness in the US government has prevented the United States from taking full advantage of it. Iraq's known oil reserves have been increased by about 100 billion barrels since the invasion, as competent US oil companies have been free to explore for new oil employing techniques more advanced than the 40-year-old dowsing sticks used by Saddam's oil operation. At today's oil price of $130, less a generous $20 for drilling and extraction, those additional reserves have a value of $11 trillion – approximately 10 times the most alarmist estimate of the cost of the war to date.

The problem is that the US did not secure itself a proper royalty on the new oil finds (even 10% would have been worthwhile -- $1.1 trillion over the next few decades.) Nor did it ensure, by setting up a privatized oil company and a trust fund for the Iraqi people diverting oil revenues from the Iraqi government, that the new oil finds would be exploited in an efficient manner and the supplies directed properly into the world oil market. Any future invasion of an oil producing country should avoid these two mistakes and thus make itself self-financing.

The obvious place to invade is Venezuela (even if current estimates of Venezuelan and Saudi reserves are wrong and there is in reality more oil in Saudi Arabia that could be unlocked if ExxonMobil and the boys were given free rein, the Saudis are nominally our allies, so an invasion would be considered unsporting by world opinion.) Since the 1.8 trillion barrels of Venezuelan oil deposits consist largely of the Orinoco tar sands, a Venezuelan oil-related invasion would impose an additional requirement: to keep the environmentalists away, in order that reserves could be exploited with maximum efficiency.

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In summary, a sharp rise in US and world interest rates is the best way to solve the problem of spiraling energy and commodity prices, which will probably not solve itself. If that doesn't work or is “politically impossible” it's time to prepare the 82nd Airborne for jungle warfare in the Orinoco Basin. For starters, Operation Iraqi Freedom was not a smashing success. The US has wasted a trillion dollar already in Iraq, oil prices have risen from $30 to $130, the US dollar is collapsing because of our insane spending and the war effort itself is consuming a significant amount of oil. Furthermore the US squandered the goodwill after 911, alienated our allies, and increased the risk of terrorism. Finally the US drove a secular Iraq into the likely hands of Islamic radicals. If ever there was a complete failure, it is this criminal invasion of Iraq.

Having learned nothing from the most spectacular political failure in US history, Hutchinson ups the ante with an insane proposal to either hike interest rates or invade Venezuela.

Nowhere did Hutchinson entertain the notion that Iraq's oil is belongs to the Iraqi people not to the US and Venezuela's oil belongs to Venezuelans.

Hutchinson sees nothing wrong with theft of Iraqi oil or Venezuela's oil. I can only imagine his outrage if Venezuela did not like what our insane energy policies were doing to the price of wheat or corn and bombed New York City in response.

The ideas espoused by Hutchinson are as dangerous as ideas can get. And when the world sees such proposals it's no wonder many countries despise us.

True conservatives do not go starting wars because they do not like the price of a commodity. True conservatives do not believe in theft. But the most absurd thing is that Hutchinson believes " The principal influence behind the huge rise in oil prices has been speculation " yet his solution is to invade Venezuela.

Since Venezuela is not the driving force behind said speculation, such a proposal is clearly deranged thinking. There is no other way of looking at it.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance, low volatility, regardless of market direction. Visit http://www.sitkapacific.com/ to learn more about wealth management for investors seeking strong performance with low volatility. You are currently viewing my global economics blog which has commentary 7-10 times a week. I am a "professor" on Minyanville. My Minyanville Profile can be viewed at: http://www.minyanville.com/gazette/bios.htm?bio=87 I do weekly live radio on KFNX the Charles Goyette show every Wednesday. When not writing about stocks or the economy I spends a great deal of time on photography. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at www.michaelshedlock.com.

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