Since I wrote my essay on why politicians should resist manipulating the price of gasoline, pretty much every op-ed article of the last week has focused on the topic. I'm glad I have such influence on the national debate.
The most amusing claim I've heard this week is that President Obama has intentionally decieved the public as to how much oil the US has, creating a "myth of scarcity." The chart above has often accompanied these arguments.
I am especially amused by the claim that we have 2,303 billion barrels in "undiscovered resources." Wow! Curiously, I woke up this morning and realized I must be a millionaire, since I have 999,999 dollars in undiscovered cash. I plan to alert my banker at once.
I have no doubt, by the way, that we do have a good deal of undiscovered oil, but I'm amused by the specificity of the number provided. It's not just 2,000 billion barrels, or 2,300 billion, it's 2,303 billion.
What the people who make arguments from this chart don't make note of is that, if oil prices fell, most of the oil shown above wouldn't be recovered. We've drilled most of the easy oil that just bubbled up from the ground when we punched a hole, and the oil that remains requires more elaborate technology to extract, and is only viable if the price of oil remains where it's at today.
One irony that environmentalists don't appreciate is that, as the price of oil rises, it will lead to more production, not less. If oil hit 200 dollars a barrel, all of of that "technically recoverable" oil will suddenly be genuine black gold, and will be extracted. Even at the higher prices, demand is only going to keep rising as the rest of the world chases a western standard of living.
So, here's my prediction: If Obama is reelected, gas prices will rise. If the next president is Ron Paul, gas prices will rise. There may be short term down swings, but, in the long run, we should all start planning for much higher prices.