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April 4, 2011

Obamanomics Amateurism on Display

Steven R. Berryman

Now I rose only to Freshman 101-level economics at Lycoming College 34 years ago under the late Dr. Robert Rabold, a former presidential economist, so he claimed. President Barack Obama claims that America, by shifting away from imported oil, will make new jobs.


That’s just an absurd pipe dream.


Add some good old fashioned economics to some 8th grade math and 10th grade psychology and you discover that what passes through media scrutiny – let alone peer review – assumes that all classical energy policy evaluation can be obfuscated.


[That means you will not seek any confirmation and assumes you are dumb.]


No wonder they hide presidential records on education, papers published, (birth certificates) and the like!


The Frederick News Post just ran a related (AP) story on page A-3 yesterday – “OBAMA: SHIFT FROM IMPORTED OIL AND NEW JOBS WILL COME.” In it the president is quoted from his weekly radio address, and related Internet posts, as saying that “reductions in energy dependence will bring down the price of gasoline, and has already contributed to the creation of 1.8 million new jobs in the past 13 months.”


Note that he has stopped saying the infamous “jobs created or saved.” My guess is that is because now so many state-subsidized “public sector” jobs will be going away as contributions from the federal government dry-up.


Truth is: We intentionally seek out, and do seek to maintain continued future availability through contracts, the cheapest oil available on the world market, and that’s for a reason. We compete internationally with companies that gain benefit from the cheapest components of production possible.


Cheap oil is just that; anything for an edge.


As American unions have assured that we will never have an edge via our human labor component – even turning blind eyes to illegal immigrants – raw materials become that much more significant to us.


Your president would tell you, without depth, that anything “green” or “alternative” is a part of the answer to this myth of job creation and reduction of energy dependence concurrently. Balderdash!


By definition, alternatives like corn-ethanol or bio-diesel have production/transportation costs associated with them that make them – while politically salient – less efficient when viewed fairly in totality.


Diverting corn to fuel products drives large food commodities upwards to both your consumption on the table, as well as your price for red meat since corn is used as feed for cattle.


Econ 101 says less corn – because of diversion to energy – raises prices based on “the demand curve” of supply vs. demand.


Yes, yes, this amounts to “robbing Peter to save Paul.”


Green engines for cars may mean special technology developed to reduce carbon emissions. This always costs for “Research & Development,” and has yet to produce a less expensive to manufacture engine that also performs better, for instance in the power or torque ranges.


But look only to self-sufficiency itself for oil. We are naturally rich in some cheap oil that is running out. Cheap is economically defined as: 1:) easy to get to in the ground or offshore in shallow water; 2:) high in quality so less expensive to refine; and 3:) located near to refineries or pipelines, thus reducing transportation component to the final product.


America actually gets richer in some ways as the price of oil on the world market goes up. Leaving Exxon’s exuberance out of the equation, coal as a substitute becomes more mine-able as its value increases relative to petroleum. Real alternative fuels, where we maintain a natural advantage, as in oil-shale, become feasible to refine and “crack.”


But the net effect of taxation of the people to subsidize alternatives that are not inherently cost-effective is just transferring wealth, and for political gain by this administration.


Making Americans pay more for food to be able to feel better about price or emissions at the gasoline pump is but fantasy for the shallow thinkers.


Absent real outrage from economists, and absent any outrage by journalists using only their “101 level” gut instincts, this farcical energy policy “leadership” will simply continue.


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