Lower Oil Prices Are a Free-Market Victory

Real Clear Politics ^ | November 29 ,2014 | By Larry Kudlow

[Hojczyk]

Seldom has so much good news been portrayed so negatively. Oil prices continue to fall in the U.S. and around the world, but near everyone in the media is grumpy about it. The headlines today are among the silliest I’ve seen: Energy-company stocks are declining, oil deflation is an economic threat, the Fed might raise rates much later than expected, OPEC is dissolving, shale companies are going bankrupt, Russia is going bankrupt(!), and on and on.

Well, most of this is just humbug. Lower oil prices are unambiguously positive.

First, U.S. oil production has nearly doubled in recent years to 9 million barrels a day, and the Paris-based International Energy Agency (IEA) expects U.S. supply to rise by more than 1 million barrels a day next year. And it is this supply increase that is driving down prices. Saudi Arabia and OPEC have essentially thrown in the towel, surrendering to the inevitability of lower prices from exploding U.S. energy production.

This is not only a triumph of U.S. energy independence, it is a victory for the workings of the free market. Greater supply, not government cartels, is driving down prices.

And the latest oil-price drop of nearly $8 a barrel makes the economic outlook even rosier. Apart from the declining share prices of some oil producers, virtually every other aspect of the world economy benefits, including most world stock markets. (By the way, the IEA reports that most production in the Bakken formation, one of the main drivers of shale-oil output, remains profitable at or below $42 a barrel.) And here in the U.S., the oil-price drop is a huge tax cut that will primarily help the middle class.

[Sherman Logan]

I like your idea better.

IMO the most effective way, or, more accurately the most effective method we might be willing to use, to attack Islamism is to defund it.

I also would be in favor of the US providing incentives to American companies to frack across the world. Shale oil and gas are found very nearly everywhere. Such production in Ukraine or Brazil defunds the Islamists every bit as much as production in North Dakota or Alberta.

It also might do a lot to make poor countries more prosperous. That’s a good thing.

[conservatism_IS_compassion]

I also would be in favor of the US providing incentives to American companies to frack across the world. Shale oil and gas are found very nearly everywhere. Such production in Ukraine or Brazil defunds the Islamists every bit as much as production in North Dakota or Alberta.

It also might do a lot to make poor countries more prosperous. That’s a good thing.

It matters some, tho, just how a nation becomes prosperous. When oil became a valuable mineral, in America the preponderance of it was exploited on private land, and so private individuals gained dramatically from it. But when a government gets all the money, you have an entirely different effect - government hypertrophy.

[Sherman Logan]

Quite right, of course. As I understand it, few countries have much in the way of private property ownership of mineral rights.

Doesn’t make a difference when it comes to defunding Islam, though. A barrel of oil not from a Muslim land is a barrel of oil not from a Muslim land.