21 APR 08 / "Oil Nears $118"

With the price of a barrel of oil nearing $118 and the U.S. economy teetering on the brink of recession if not already in one, Americans are entering a period of financial uncertainty not seen since the 1970's. High energy costs are inflating the price of many products, including food and clothing; and are acting as a brake on economic growth. 'Stagflation' may soon ensue.

The Democratic presidential candidates not surprisingly blame the Bush administration for not adopting more conservation measures, but the Democrats have inhibited the supply of oil and gas and therefore directly contributed to their rising costs by:

• Preventing drilling in ANWAR.

• Preventing drilling offshore.

• Preventing the construction of a new refinery. (No refinery has been built in the United States since 1976.)

• Forcing a multitude of gasoline blends upon American consumers.

• Declaring there are alternative forms of energy, although none exist that match the capacity of oil.

Other factors are contributing to the high price of oil, of course:

• Increasing global demand, spurred particularly by China and India, while supply is constrained by the Organization of Petroleum Exporting Countries (OPEC).

• Falling value of the dollar.

Oil remains the lifeblood of the global economy. It makes sense to conserve energy whenever possible, but not to the extent that conservation limits economic growth or adversely affects lifestyles. Environmentalists declare there are alternatives that do not emit carbon dioxide when used, but none even come close to replacing oil as an energy resource. Our only alternative at this point is to do everything we can to increase the supply in order to lower the price. It would be beneficial for the United States to import more oil from Canada, Mexico, and Russia than from OPEC nations.

Ultimately, the global economy will reach a breaking point at which the high price of oil cannot be sustained. Recessions will ensue and the demand for oil will drop thereby reducing the price, but unless supply can be increased significantly it's not likely that the price will fall below $75.

All the industrialized countries are 'addicted' to oil, not just the United States because despite the clamoring of the environmentalists, the fact remains there is no substitute. The best scenario we can hope for is that a global economic downturn will reduce demand and force OPEC to increase supply to arrive at a more sustainable price in the $75 per barrel range.