Raise the Hammer

Ryan, I offer to you my simplistic theory of balance to explain recent oil price (which are in US dollars) movements.

The Iraq war (which war was largely about securing cheap oil for the US economy) started in mid 2003. The price of oil began its climb beginning in late 2003.

Is it possible that unintended consequences of trying to get cheap oil actually resulted in the complete opposite result?

Another interesting point to keep in mind is how the US government has been borrowing money recently.

According to the BEA, interest payments on government debt has steadily shifted to entities outside the US.

What this means is that other countries are now paying a greater share of the US government's bills. Here are the numbers...

2001 - 82.4 billion foreign , 261.7 billion domestic.

2002 - 76.6B : 238.5B

2003 - 73.9B : 226.7B

2004 - 82.5B : 226.8B

2005 - 103.9B : 241.4B

2006 - 135B : 241.6B

2007 - 165.1B : 246B

Since nothing is free in life, the American people will pay higher costs for oil if they want to fund their social programs using Chinese savings.

My last point about balance refers to how high oil prices inflict most of their damage to lower income people.

In the 4th qtr of 2006, the Bush government had its highest surplus (when excluding military spending, since that does not directly benefit the average person) since 2001.

This means that the average US citizen was paying x in taxes and only receiving x - 2.68% back in useful services (minus interest payments).

Curiously enough, oil prices fell from 77 to around 50 as this larger surplus was being produced.

Since that time, the surplus has shrunk to a deficit, a result of ever increasing handouts to people, based on the theory that spending money that isn't yours will help generate economic growth.

The result of all this free money has been pain, primarily in the form of higher oil and gas prices, but also in food and other basic staples.

More recently, as the government has shifted its support to the corporate sector (bank bailouts), oil prices have been coming down considerably.

Once again this can be seen as balance in action, since debt attributed to corporations does nothing to directly help the average person.

What the government takes from the people on the one hand (by increasing their outstanding debt), the universe gives back to the people on the other (in the form of lower oil prices).

Lastly, I predict that if another large stimulus package comes in aimed at the average person, you will likely see another spike in oil prices, all other things being equal. Nothing in life is free.