09 March 2011


Since turmoil began in the Arab world the price of oil has steadily risen. This was preceded by a large increase in the price of food, which has been a significant contributing factor to unrest around the world. For the eighth consecutive month the United Nations index of global food prices hit another record high in February. While weather has been a contributing factor, government policies have exacerbated the situation. Corn prices have nearly doubled since a year ago, and corn is a vital element in many commodities such as animal feed, which in turn affects meat prices. This is a direct result of inane government policies that heavily subsidize biofuels such as ethanol, thereby diverting large tracts of agricultural land away from food production, not to mention paying farmers not to grow crops. Today there are growing food shortages around the world, and rising prices affect the poorest populations disproportionately as a much higher portion of their income goes towards food. There is certain to be price inflation at your local supermarket as well.

While oil prices skyrocket our government pursues policies designed to make the cost of fossil fuels high, based on the illusion that vast quantities of green energy are just around the corner. They are not, and our society is unavoidably dependent on fossil fuels. Meanwhile a huge portion of our balance of payments deficit goes towards the import of foreign oil, leaving us dependent on unstable and/or unsavory regimes around the world, even as abundant domestic resources remain unexploited. The EPA has done everything possible to frustrate domestic energy producers. Meanwhile the Interior department continues to maintain a moratorium on offshore drilling, even in defiance of a federal court order, frustrating not only production but costing thousands of jobs in the gulf region. Vast tracts of domestic resources remain off-limits. New technologies make possible the extraction of oil and gas from shale deposits around the country, but those efforts are being frustrated. Meanwhile roadblocks are being thrown in the way of piping in oil from the Canadian tar sands. We have domestic oil resources but production is being frustrated, denying us an essential resource that is bound to become ever more scarce and expensive as Asian demand increases in the coming years.

These increased costs will radiate throughout the economy, increasing the cost of transport of goods as well as the goods themselves, which means the cost of living will rise. That along with loose money policies will result inevitably in inflation, the likes of which we have not seen since the 1970s. It is time for these destructive policies to end and to maximize production to our full potential. Failing that we will pay a heavy price in the not too distant future.

No comments:

Post a Comment