Sen. Barrack Obama, in addition to wanting to tax the living daylights out of you, has also decided, it is good you pay more for gasoline. Responding to the recent 180 by the President and Sen. McCain on oil exploration, Senator Obama said this:

Offshore drilling would not lower gas prices today. It would not lower gas prices this summer. It would not lower gas prices this year. In fact, President Bush’s own Energy Department says that we won’t see a drop of oil from this proposal until 2017. It will take a generation to reach full production. And even then, the effect on gas prices will be minimal at best.

Believe me — if I thought that there was any evidence at all that drilling could save people money who are struggling to fill up their tanks by this summer or this year or even the next few years, I would consider it. But it won’t. And John McCain knows that.

Now I realize Sen. McCain has said he doesn’t know much about Economics. Apparently, neither does Mr. Obama.

Well I AM an economist - so let me begin with some very simple observations. If you like, you can play along at home while reading…

How many people, in the year 2017, believe they will be buying gasoline? (Raise your hand - my hand is up.)

Okay, so we’ll ALL be buying gasoline. Oh and by the way, you and everyone else, is going to buy more gasoline - more in China, more in India, more in Pakistan, more in Africa, more in Latin America, as these areas continue to industrialize and consume more fuel.

World wide energy demand, according to economic experts, will increase 40% between now and 2020. Crude oil is just one component of that (about 60% of the total energy consumption) and the amount of crude oil consumed will continue to rise world wide.

Now, let’s say between 2008 and 2017, no new supply is found. In reality, that’s not going to actually happen, but just for illustrative purposes for the moment, let’s assume that.

If supply is fixed, and demand is rising - what happens to price? I know at least a few of you are raising your hands going “OH! OH! I know! I know call on me!”

Presume I called on you - yes, you’re right, price goes up. As the graphic demonstrates, when supply is fixed and demand rises, price must increase. More is always supplied at a higher price. Suppliers want to supply their goods for the maximum price possible. Consumers want to consume for the lowest price possible. When demand is increasing, and supply is constant, the price must necessarily increase to the level where everyone who truly want to “buy oil” has paid “the lowest price possible.” It’s like KISS concert tickets - supply is limited, so only the most die hard KISS fans are going to get in, and they’ll pay 200 dollars a ticket if necessary (or more.)

Now, as I hinted at - supply is actually not going to be constant - in fact, it may decline during this period. The bottom line is that the Saudis and other oil producers are having more and more difficulty getting maximum pump yields from their fields. This is somewhat of a normal consequence of pumping oil. Oil wells go through stages of production, you explore, you tap, you pump, exploit the oil until the yields drop, then abandon the well (even though oil may still be “pumpable” - it’s often not cost effective to do so).

If production world wide slips a bit - and demand rises - then it’s a double whammy…  a fire happens at the warehouse with the KISS tickets and burns at a rate of 1000 tickets a day. Demand skyrockets for the remaining tickets, and they try to sell as many as possible while the warehouse burns, but the supply always gets smaller.

So Mr. Obama - deciding not to explore for oil is not only dooming America to higher gas prices, you ensure that America will continue to be in a tenuous race for energy with China, Japan, Russia, our European Allies, and OPEC. We’ll have to continue to rely even more heavily on unstable oil-producing nations.

And to add insult to injury, Mr. Obama, our friends the Chinese are busy drilling OUR oil 60 miles off the coast of Florida, in a joint venture with Cuba. Where is your moral indignant outrage for that?

Here are the facts:

• U.S. law prohibits the development of approximately 38 billion barrels of undeveloped oil resources (19 billion barrels onshore and 18.92 billion offshore).

• U.S. law prohibits the development of approximately 180 trillion cubic feet of undeveloped natural gas resources (94.5 trillion cubic feet onshore and 85.7 trillion cubic feet offshore).

• According to a recent USGS survey, the largest known oil shale deposits in the world are in the Green River Formation, which covers portions of Colorado, Utah, and Wyoming. Estimates of the oil resource in place within the Green River Formation range from 1.5 to 1.8 trillion barrels. Not all resources in place are recoverable. For potentially recoverable oil shale resources, we roughly derive an upper bound of 1.1 trillion barrels of oil and a lower bound of about 500 billion barrels. For policy planning purposes, it is enough to know that any amount in this range is very high. For example, the midpoint in our estimate range, 800 billion barrels, is more than triple the proven oil reserves of Saudi Arabia. Present U.S. demand for petroleum products is about 20 million barrels per day. If oil shale could be used to meet a quarter of that demand, 800 billion barrels of recoverable resources would last for more than 400 years.

Still think we can’t change the price of crude oil Mr. Obama?

Drill here…

Drill now…

Invest in America. We need plentful energy if our society is going to thrive, survive, and be prosperous.

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