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With oil and food prices skyrocketing, along with unemployment and inflation, we urge government leaders not to succumb to the temptation to artificially lower oil and gas prices to please their petroleum-addicted constituents.
This admonition follows last Friday’s grim scenario during which oil prices made their biggest-ever single-day surge, jumping 8 percent to close at a record-setting $139.12 per barrel on the New York Mercantile Exchange. Oil prices have risen more than 44 percent this year, with no end in sight.
The oil-price spike — accompanied by a rise from 5 to 5.5 percent in U.S. joblessness and a loss of 49,000 jobs last month — was accompanied by a corresponding plummet in the U.S. stock markets, with every stock on the Dow Jones Industrial Average finishing lower.
The rise in unemployment, along with food and energy prices, pushed up
the so-called “misery index” — the sum of unemployment and inflation
rates — to around 9.4 percent, “the highest levels since the recession
of the early 1990s, apart from a one-month blip in 2005,” according to
The Wall Street Journal.
In the aftermath, key industrial nations, including the U.S., China,
Japan, India and South Korea, urged the oil producers last Saturday to
boost their output to counter soaring prices threatening the world
economy. The oil consumers also pledged to develop clean energy
technologies.
“It’s not good for producing nations to see the U.S. struggling
economically. They depend on us to be a significant engine in world
economic activity,” U.S. Energy Secretary Samuel Bodman told the press
last weekend.
On Monday, Saudi Arabia called for a meeting of the Organization of
Petroleum Exporting Countries to address what a Saudi minister called
the unjustifiably high current price of oil. The minister added that
the kingdom would work with OPEC to “guarantee the availability of oil
supplies now and in the future.”
However, OPEC President Chakib Khelil has said repeatedly that the oil
producers will make no new decisions on production levels until the
cartel’s Sept. 9 meeting in Vienna.
World oil production has stalled since 2005, as rapidly industrializing
China and India have siphoned off more and more of the supply, thereby
ramping up demand.
While most people in the oil-consuming nations feel varying degrees of
outrage over the ever-increasing prices, their governments would do
well to avoid interfering with the spike and instead encourage the
private sector to develop new technologies that substantially reduce —
or even eliminate — our need for oil.
Right now, the demand is incredibly high for vehicles that use
alternative energy sources. That creates an incentive for inventors to
shift us from the 19th-century technology of internal combustion
engines, which belch carbon monoxide, to futuristic electric cars that
emit zero pollution and run for pennies per mile.
OPEC should not give in — like an enabler of an alcoholic — to consumer
demands to increase the supply of this black-hearted fuel. However, it
might be a smart course for the oil producers to lower prices, if only
to discourage competition from new technologies.
Also, oil corporations could boost their record profits even more by
taking a page from Wal-Mart’s playbook — and slashing prices to keep
those darn electric cars on the drawing boards.
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