Thursday, November 27

Why is gasoline under $2.50 a gallon?

A month ago the BBC reported that the Russian central bank--which had been propping up the ruble by buying billions of them per week--would no longer do so.  Not exactly an oh-wow story and you probably didn't hear it, but...

Anyway, the story went on to note that the ruble was falling because a high percentage of Russian export earnings is from selling oil--and the price of oil has been slowly but steadily falling.

Wait--the price of everything else in the world is constantly rising.  Why would the price of oil fall?  World demand hasn't dropped, so that's not it.  Instead, for the last five years or so oil production--particularly in North America--has been increasing.

And why has oil production in North America been rising?  Because two American-developed technological innovations--horizontal drilling, and hydraulic fracturing--have made it possible to extract oil that otherwise wouldn't have been recoverable.

These two breakthroughs, in turn, were invented and developed by the federal government.  So the next time, I can't finish that line with a straight face.  Cuz the federal government had nothing to do with either inventing the technologies nor with developing, testing or commercializing 'em.  Instead all the risk and investment was done by companies, using the profits from normal business.

Of course Democrats and Obama are happy to take credit for current low gas prices.  But an hour later they're back to demonizing any company that produces carbon-based energy.  For example, they've gone to great lengths to kill the use of coal to make electricity in the U.S.  Is there anyone who doesn't think they'd do the same to oil in a heartbeat if they thought they could get away with it?

In the meantime, enjoy being able to find gas for under $2.50 a gallon.  That's especially nice if you're on the road for Thanksgiving.

And as you're filling up you might keep in mind why that gas price fell.  And government had nothing whatsoever to do with it.


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