Can the President Lower Gas Prices?

President Obama has claimed that there is no "silver bullet" to reduce gasoline prices.  I beg to differ.  Any rational business, upon being told that a new competitor is planning to enter into competition with them, will first reduce prices.  Why?  Well, it's obviously not to match the prices of a potential competitor who isn't even in business yet.  The purpose is to demonstrate to the new kid on the block that (a) because of their much higher sales volume, the older business can still function at lower unit prices and (b) if the new kid wants to compete, he will have to sell at these new, lower prices, and suffer the lower operating margins associated with those lower prices. 

This is known among the cognoscenti as "raising a barrier to entry."  The point of the effort is to make accessing the existing market so expensive, in terms of the newcomer's return on investment and the length of time before the cost of the original investment is recouped, that it discourages new entrants before they even start.

This being true, there would be an immediate and dramatic reduction in the worldwide price of oil if President Obama opened up for serious drilling the American territories both offshore and onshore, as well as the Alaskan National Wildlife Reserve (ANWR) and everywhere else where we might conceivably find oil.  Within 24 hours after such an announcement, the price of crude would start to drop as current oil-producing countries tried to pre-empt any new activity by making it less attractive financially. 

Sadly, we seem to have a president who is so ideologically driven that he abhors even the thought of providing usable economical energy for the people who elected him, even if it will come online only long after he has left the presidency.

As unlikely as the concept seems to be, for once, and only in a limited sense, Obama is correct.  Even a blind squirrel occasionally finds a nut, after all, just as Obama is correct in saying that we need to reduce our consumption of oil.  Of course, he is tarnishing this astute observation by offering to replace it with algae burgers for our gas tanks.  Fossil fuels will continue to be the main source of our energy for the reasonably foreseeable future, and we have them in abundance.

While ordinary citizens (and not a few illegal aliens) are upset about the current trend of gasoline prices, and ask themselves if they will be able to afford to drive to work, it is necessary to remember that as energy prices climb, so does unemployment.  Americans might not have a job to drive to.

This nation's economy is based on energy which includes oil, but isn't limited to oil alone.  Coal, natural gas, hydroelectric energy, and nuclear all contribute.  Granted, the transportation sector is utterly dependent on oil, but the electrical energy generated in stationary power plants is in large part fueled by coal, hydro, and nuclear.  Energy-generation from coal is currently threatened by the EPA, with proposed rules making the construction of any new coal-fired plants nearly impossible.

Look around your place of employment, assuming that you're lucky enough to have a job, and count the number of pieces of equipment that would cease to function if Lisa Jackson, head of the Environmental Protection (racket) Agency has her way and coal is effectively eliminated as a source of reliable electrical energy in the face of increasing demand.

No more reliable, uninterrupted power for your calculator or perhaps your phone.  No more copies pouring out of Xerox machines.  No more coffee makers helping you to stay awake at your desk.  No more machines humming and producing in our factories.  Even pneumatic tools need electricity to compress the air that they depend on.  No more overhead fluorescent lights above the cubicles.  No more computers churning out press releases, accessing medical files, or analyzing data.  In that sort of environment, what rational employer would add to his or her workforce?

And consumer industries that are essential to day-to-day life would be impacted as much as those which could be classified as strictly business-to-business.  Imagine what havoc would ensue if the refrigerators and freezers in supermarkets where subjected to rolling brownouts or blackouts.  How would "food deserts" in urban areas, the object of Michelle Obama's very vocal concerns, deal with no reliable freezer capacity?  Ship in fresh food daily?  And how would the food be shipped without reasonably priced gasoline?  How exactly would it be delivered?  In Chevy Volts?  And even if Volts were used, where would they get their power?

Alternatively, the citizens of the country could simply cave in to the ideological fantasies of Obama, Jackson, and Company and pay $6, $7, $8, or even $10 a gallon for gas, to go to work and deal with having less cash left over to pay for groceries.

...That is, if there is any work left to go to or groceries to eat.

Jim Yardley is a retired financial controller for manufacturing firms, a Vietnam veteran, and an independent voter.  Jim blogs at http://jimyardley.wordpress.com, or he can be contacted directly at james.v.yardley@gmail.com.

President Obama has claimed that there is no "silver bullet" to reduce gasoline prices.  I beg to differ.  Any rational business, upon being told that a new competitor is planning to enter into competition with them, will first reduce prices.  Why?  Well, it's obviously not to match the prices of a potential competitor who isn't even in business yet.  The purpose is to demonstrate to the new kid on the block that (a) because of their much higher sales volume, the older business can still function at lower unit prices and (b) if the new kid wants to compete, he will have to sell at these new, lower prices, and suffer the lower operating margins associated with those lower prices. 

This is known among the cognoscenti as "raising a barrier to entry."  The point of the effort is to make accessing the existing market so expensive, in terms of the newcomer's return on investment and the length of time before the cost of the original investment is recouped, that it discourages new entrants before they even start.

This being true, there would be an immediate and dramatic reduction in the worldwide price of oil if President Obama opened up for serious drilling the American territories both offshore and onshore, as well as the Alaskan National Wildlife Reserve (ANWR) and everywhere else where we might conceivably find oil.  Within 24 hours after such an announcement, the price of crude would start to drop as current oil-producing countries tried to pre-empt any new activity by making it less attractive financially. 

Sadly, we seem to have a president who is so ideologically driven that he abhors even the thought of providing usable economical energy for the people who elected him, even if it will come online only long after he has left the presidency.

As unlikely as the concept seems to be, for once, and only in a limited sense, Obama is correct.  Even a blind squirrel occasionally finds a nut, after all, just as Obama is correct in saying that we need to reduce our consumption of oil.  Of course, he is tarnishing this astute observation by offering to replace it with algae burgers for our gas tanks.  Fossil fuels will continue to be the main source of our energy for the reasonably foreseeable future, and we have them in abundance.

While ordinary citizens (and not a few illegal aliens) are upset about the current trend of gasoline prices, and ask themselves if they will be able to afford to drive to work, it is necessary to remember that as energy prices climb, so does unemployment.  Americans might not have a job to drive to.

This nation's economy is based on energy which includes oil, but isn't limited to oil alone.  Coal, natural gas, hydroelectric energy, and nuclear all contribute.  Granted, the transportation sector is utterly dependent on oil, but the electrical energy generated in stationary power plants is in large part fueled by coal, hydro, and nuclear.  Energy-generation from coal is currently threatened by the EPA, with proposed rules making the construction of any new coal-fired plants nearly impossible.

Look around your place of employment, assuming that you're lucky enough to have a job, and count the number of pieces of equipment that would cease to function if Lisa Jackson, head of the Environmental Protection (racket) Agency has her way and coal is effectively eliminated as a source of reliable electrical energy in the face of increasing demand.

No more reliable, uninterrupted power for your calculator or perhaps your phone.  No more copies pouring out of Xerox machines.  No more coffee makers helping you to stay awake at your desk.  No more machines humming and producing in our factories.  Even pneumatic tools need electricity to compress the air that they depend on.  No more overhead fluorescent lights above the cubicles.  No more computers churning out press releases, accessing medical files, or analyzing data.  In that sort of environment, what rational employer would add to his or her workforce?

And consumer industries that are essential to day-to-day life would be impacted as much as those which could be classified as strictly business-to-business.  Imagine what havoc would ensue if the refrigerators and freezers in supermarkets where subjected to rolling brownouts or blackouts.  How would "food deserts" in urban areas, the object of Michelle Obama's very vocal concerns, deal with no reliable freezer capacity?  Ship in fresh food daily?  And how would the food be shipped without reasonably priced gasoline?  How exactly would it be delivered?  In Chevy Volts?  And even if Volts were used, where would they get their power?

Alternatively, the citizens of the country could simply cave in to the ideological fantasies of Obama, Jackson, and Company and pay $6, $7, $8, or even $10 a gallon for gas, to go to work and deal with having less cash left over to pay for groceries.

...That is, if there is any work left to go to or groceries to eat.

Jim Yardley is a retired financial controller for manufacturing firms, a Vietnam veteran, and an independent voter.  Jim blogs at http://jimyardley.wordpress.com, or he can be contacted directly at james.v.yardley@gmail.com.

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