Short term pain, long term gain: Collapse in oil prices is good for America
LOS ANGELES — The Coronavirus pandemic has done more than physically sicken Americans. The quarantine lockdown has drastically reduced the number of people traveling anywhere. This week Americans saw oil prices collapse to historically low levels. Oil actually traded at less than zero dollars per barrel.
Entities that were used to charging sky-high rates for oil were paying people to take oil off of their hands. Gasoline prices fell to as low as 89 cents per gallon in some states. 49 states saw a drastic plunge in gasoline prices. Even California watched their gas prices fall from European Socialist levels to something almost resembling a free state in a Constitutional Republic.
Plunge in WTI and Brent crude prices should be good, long term
The plunge in West Texas Intermediate (WTI) and Brent crude barrel prices should have been a cause for celebration. (Brent crude rebounds from 2-decade low as the global oil rout stabilizes)
Instead, it led to an alternate Bizarro World where normally sensible people jeered and financially illiterate individuals cheered. Leading free-market conservative boosters Sean Hannity and Ben Shapiro lamented the price drops. The bartender-turned-Congresswoman Alexandria Ocasio-Cortez (AOC) celebrated.
How on earth could Hannity and Shapiro be wrong about this? Even more crazy is the notion that AOC was actually right.
To be fair, AOC did not suddenly become a scholar about anything. She is right for the wrong reasons. More accurately: She is right but she has no idea why.
Hannity and Shapiro bemoan crashing oil prices out of a sense of patriotism.
Both these pundits deeply love America and are concerned that plunging oil prices will cause thousands of Americans in the oil industry to lose their jobs. American oil companies could go bankrupt. They are not wrong. There will be pain and suffering for those who rely on high oil prices.
Those Americans who get financially crushed are our neighbors. They deserve all the empathy in the world.
AOC, however, is cheering their misery.
Socialism spreads misery, and AOC sees people as a bargaining chip, a means to an end. By destroying the oil industry, she believes that Americans will finally abandon Big Oil and move to a new green Socialist, utopian world.
Great American #JobKiller AOC celebrates the destruction of an industry that makes it possible for the Americans who actually like to work to live their dream… #SocialistShitBag https://t.co/6qEyOEvJMO
— James Woods (@RealJamesWoods) April 21, 2020
Forget for a moment that it takes a terrible individual to celebrate the suffering of her fellow Americans. AOC quickly deleted her Tweet celebrating the carnage. But sending her ill-advised pronouncement down the memory hole was a futile effort. Americans have known about her character the moment she was elected.
The fact that she types her social media screeds on petroleum-based products further exposes the depths of her idiocy. The bigger issue is that AOC has no idea how markets work.
Shortages due to increased demand or decreased supply lead to higher prices. The inverse holds true as well. As the late Dr. Charles Krauthammer pointed out, the House and Senate cannot simply repeal the laws of supply and demand.
The current supply glut is not because Americans have lost interest in oil.
Americans are under mandatory quarantine lockdown. They would love to get in their cars and drive somewhere. Authoritarian governors are preventing them from doing so. The moment Americans regain their freedoms, they will feed their automobiles with fuel.
AOC fails to grasp that the collapse in oil prices does not mean the collapse of the oil industry itself. There is no alternative energy source that has the combination of affordability and fungibility that oil has. Oil works because it works. Alternative sources have failed to replace oil because they do not work nearly as well as oil does. The stock market understands this. Even as the commodity of crude oil was crashing, oil stocks were holding steady or down slightly. Some oil stocks were even slightly up.
American oil wildcatters are not going to stop drilling.
In America, the equipment and the land will still be ready to drill, baby drill once our citizens escape from their gubernatorial-imposed home-confinement jail sentences.
The even better news is that President Trump is seeking to buy massive amounts of cheap oil to fill up the American Strategic Petroleum Reserves. This will probably turn out to be one of the best bargains in American history. Thomas Jefferson purchased Louisiana for pennies on the dollar. Manhattan, New York was purchased for $24 (Based on what New York has become today, some say we overpaid).
In 2008, as the Great Recession was working up a head of steam, Hank Paulson purchased distressed assets in what became “the mother of all trades.” Today, Trump is restoring America’s oil reserves for a pittance. Even better, he is increasing national security not through war, but through commerce.
As for love of country, the patriotism argument of Hannity and Shapiro is a strong one. But that very patriotism is precisely why those who love America should rejoice at the oil collapse. American workers are facing some short term pain. But America’s enemies are on the verge of being destroyed.
Iran is the world’s leading sponsor of terrorism.
Iran’s mullahs are intent on obtaining the material for nuclear weapons so they can blow up the entire world. The chant “Death to America” and refer to the United States as “The Great Satan.” Iran’s economy depends on oil. Their fanatical theocracy, based on the mullahs’ Shiite vision of radical Islam, currently teeters on the brink. Without oil, they have nothing. At long last, they are now being forced to choose between feeding their people and funding global jihad. Hamas and Hezbollah have had their budgets slashed.
Saudi Arabia gave the world the deadly strain of radical Islam known as Wahhabism. This radical ideology is what causes women to be stoned to death and gays to be thrown off of rooftops. Saudi Arabia’s radicalized theology led directly to Osama bin Laden, Khalid Sheik Mohammed, and the 19 hijackers who murdered some 3,000 Americans and other nationalities on September 11th, 2001.
Other terrorist attacks, from London to Bali to Madrid to Mumbai, all came from these radical Islamists.
Russia is a major geopolitical rival of America.
Liberals who have wandered off the reservation of sanity are still convinced that President Trump is a spy or the Russian government and Vladimir Putin. Lucid individuals understand that Trump and Vladimir Putin have totally different and contradictory objectives. They both want their own respective nations to be the world’s sole superpower. High oil prices allow Putin’s Russia to be a dominant player on the world stage. When oil loses influence, so does he. Despite his current attempts to have the Kremlin make him dictator for life, Russia is losing ground to China as America’s top strategic foe. Russia is more diversified than Iran or Saudi Arabia, but not by much.
But contrary to what most liberals like AOC feel, the biggest threat to the world is not climate change. Environmentalism is a hobby for bored, rich white liberals. Radical Islam is a murderous ideology.
In truth, climate change deaths are theoretical projections based on an ideological hysteria that is proven false 100% of the time. Deaths caused by radical Islam are serious because they actually happen. But radical Islam is funded by oil. Collapsing the price of oil is the best way to collapse radical Islam.
Even better, at the risk of disappointing environmentalists, radical Islamists have yet to find a way to spread global jihad through wind or solar power.
In the short run, some players in the oil industry will be harmed irreparably.
So in the long run, what is bad for America’s enemies is good for America. Oil is a zero-sum game. Bankrupting Saudi Arabia, Russia, and Iran is worth some short-term American pain.
So let the oil price crash and burn. The protesters in Russia, Saudi Arabia, and Iran get stronger as their governments’ iron fists grow weaker. Let those governments topple.
If America needs to intervene behind the scenes to make it happen, so be it.
If America ever needs to take military action against Islamists again either directly or through proxy friends such as Israel, we will be ready. Our munitions and military run on oil.
Finally, when we put our enemies out of business, the American oil industry and America itself will still remain strong. And America will manifest that strength in ways John D. Rockefeller could have only dreamt of.
— Lead Image: A West Texas oil pumpjack at sunset. (Image via Wikimedia)