Record Profits

"Oil companies are recording record profits—on record sales. In a free-market economy, record sales often result in record profits. Notably, however, the real price gouger is the government. According to the Tax Foundation, in the last three decades government has collected more than $1.34 trillion (inflation adjusted) in gasoline-tax revenues—"more than twice the amount of domestic profits earned by major U.S. oil companies during the same period."

So what really accounts for high fuel prices? The answer is elementary—what economist Milton Friedman called "world market supply and demand for limited resources."

On the supply side, current world production is at about 85 million barrels per day, and new exploration around the world has kept that production pace steady. The U.S. consumes about 25 percent of that world production. About 45 percent of what we consume is produced domestically, and 55 percent imported from seven key suppliers: Mexico (17.9 percent), Canada (17.3 percent), Saudi Arabia (14.3 percent), Nigeria (13.6 percent), Venezuela (11.9 percent), Angola (4.7 percent) and Iraq (4.5 percent).

On the demand side, booming economies in China, India and the U.S. (yes, it is booming despite Demo claims) are competing for a limited supply of oil—and will be as long as the economy stays strong.

It is no coincidence, then, that President Bush has met with both Indian Prime Minister Manmohan Singh and Chinese President Hu Jintao within the past month. High on his agenda were energy consumption and competition—which is precisely why the President agreed to assist India with its nuclear-energy program.

China is sucking up all the oil it can import. Hu was in Nigeria and Kenya this week, securing oil leases, and China's reluctance to support UN sanctions against Iran and Sudan is clearly related to Beijing's dependence on oil from those nations.

The good news is that about 20 percent of daily production in the Gulf of Mexico is still disabled because of Katrina—good news because as that production comes back on line, domestic oil prices will ease. Additionally, high prices for any commodity tend to reduce demand, which brings the prices down. The price for crude has already started to drop.

The bad news is that Democrats continue to block construction of new refineries. In fact, not a single new refinery has been built in the U.S. in almost 30 years. Demos continue to block pin-point exploration in oil-rich wastelands such as ANWR. Most significantly, though, is that Demos have, for two generations, blocked the development of nuclear-energy facilities.

Even some of the most entrenched environmentalists have reversed their position on nuclear energy. "My views have changed," wrote Greenpeace co-founder Patrick Moore in conjunction with Earth Day last week, "and the rest of the environmental movement needs to update its views, too, because nuclear energy may just be the energy source that can save our planet... Every responsible environmentalist should support a move in that direction."

In addition to the good news and bad news about energy supply and demand, there is also worse news: the supply wild card. As The Patriot has noted previously, this major strategic consideration would justify our presence in Iraq. If Iran's fanatical Jihadi leader Mahmoud Ahmadi-Nejad decides to lock down the Strait of Hormuz, or al-Qa'ida attacks the Saudi oil fields, the consequences for the U.S. and world economy would be dire. In addition, if Venezuela's Hugo "Little Castro" Chavez chooses to sell his oil elsewhere, the U.S. would be in real trouble.

Energy is our most vital national-security interest.

Suffice it to say, energy is the life-blood of the U.S. economy. As such, it is our most vital national-security interest. A quick review of the top U.S. oil providers lends some perspective to the complexity of our strategic relationships with those providers. All the partisan political posturing aside, the real "crisis" at the fuel pump is about world supply and demand, however disconcerting that might be.

In the event that a supply wild card is played and the critical balance of our oil supply is interrupted, there will be no easy solution. We are 20 years behind the curve in terms of oil exploration and refinement and nuclear power development, and we will stay that far behind as long as Democrats continue to obstruct the enactment of an intelligent domestic energy policy."

Source - The Patriot