Conservative Donnybrook

Earlier today I noted that the asinine commentators on CNBC were discussing the question of whether the energy bull market had run its course. This after two consecutive days of oil prices falling. TWO DAYS! Granted, oil dropped 7% over the past two days, but are you kidding? Two days marks an enduring trend? Ironically, today was the first day that it cost me more than $50 to fill up my 12-gallon tank ($4.15/gallon this morning). What a rude shock that was.

President Bush’s lifting of the executive order banning offshore drilling was and is a good thing. Although, it should be seen in context with a wider energy policy which seeks to develop and exploit new technologies, expands domestic onshore oil production, and diversifies our energy portfolio by bringing online more options like nuclear energy. This clearly should be coupled with conservation, even if the president will not command Americans to conserve.

In the last few months, there have been stories that indicate that the late oil price boom has not been driven solely by supply and demand, but rather by speculation in the futures market. These stories have noted that as oil prices soared, non-OPEC nations have dramatically increased production and more than met the demand. In short, supply has been outstripping demand. Simple economics confirms that this is probably true. If the commodities market, taking into account the future price of oil bets that oil prices will increase, more investors will enter the market and drive the current price up. In return, producers will increase production. At the same time, because oil consumption is extremely inelastic demand will decrease only marginally. The result is that there will be a surplus in production, which nonetheless will demand a price higher than the equilibrium point would dictate. Granted, demand is booming as previously second and third world nations modernize (India and China, conspicuously), the global demand for oil increases. But, growing demand does not tell the whole story.

The point, of course, is that effect prices at the pump today, one must craft a policy which will have an effect on the futures market. One way to do that is to commit to greatly increasing future supply. This is what the president has allowed oil companies to do. The big question in my mind is whether the oil companies will take advantage of the increased availability of drilling opportunities. Time will tell. If it appears that the United States is poised to enter the world oil market on a large scale in five to ten years, that should suffice to drive futures prices down and the price at the pump will follow. How much is anyone’s guess. Right now, I would be happy if it just stopped going up.

Now, if Pelosi and company will lift the Congressional ban, we might see some relief at the gas pump.

Israel has done something so foolish, so ridiculous, so mind bogglingly stupid that even their enemies were shocked. What has Olmert done, you ask, to provoke such harsh criticism? He, essentially, agreed to free terrorist-murders in exchange for the kidnapping and assasination of Israeli soldiers.

Now, before you recoil from my extremely provocative statement, stop and think about what has happened. Two years ago Hezbollah invaded Israel, kidnapped two soldiers and killed them. Israel, not knowing the soldiers had been murdered, fought a futile war with Hezbollah and lost. In the process, more than 1,350 civilians lost their lives on either side of the border. Hezbollah managed to keep hold of their catch, refuse Israeli entry into Lebanon and, in the process, win the war and throw the whole of Israeli security in doubt.

In response to the freeing of five living and dangerous terrorist-murders, a spokes-hole for Hamas’ prime minister said that the release “shows that the only successful way to free the prisoners is by kidnapping soldiers.” Now, Israel has a long history of this odd behavior. For many years they have freed terrorists in exchange for both living and dead captured Israeli soldiers. Never has this policy done a positive thing for the nation or its people. It certainly has not slowed the operations of Islamic terrorists.

What today’s folly has demonstrated is Israel’s lack of will to destroy the enemy. Losing the war two years ago was both an embarrassment and strategic blunder. But caving to terrorist demands simply to recover the remains of those who fought and fell is an affront to their families and their service. If this was to be the fate of Israel, then why did they fight Hezbollah in the first place? Make no mistake, the enemy is emboldened and ruthless. More destruction will flow from Olmert’s mistake.

So, is Olmert complicit in the death of two of his nation’s citizens? No, not these two. But a case sure can be made that his actions make him responsible for the next soldiers kidnapped and killed. And there are sure to be more to come.