Some thoughts on oil prices and housing
The same Robert Zubrin who wants to go to Mars on a budget has some thoughts on the pernicious influence of the OPEC cartel, which he believes has been one major cause of many of the economy’s current problems. Excerpt:
This year, with OPEC-rigged oil prices averaging near $110/barrel, Americans will pay $900 billion for their oil supply, and the world as a whole will pay $3.6 trillion. These petroleum costs are up a factor of ten from what they were in 1999, and represent a huge highly-regressive tax on the world economy…
To see how this tax can destroy real estate values, it is only necessary to compare expenditures. In 2003, Americans paid $268 billion for new homes, and $197 billion for oil. In 2008, we paid for new homes at an annual rate of $134 billion, and $900 billion for oil…total net American investment in housing stock went from $785 billion in 2003 to an annual rate of $622 billion this year, a $163 billion decline that is dwarfed by the $760 billion rise in annual oil payouts over the same period…
in 2003 we spent 25% as much on oil as we did on houses. In 2008, we spent over 140%. This is why our housing market has collapsed. It is also why new auto sales have collapsed as well. Indeed the $760 billion increase in our oil payments is fifteen times the $50 billion decline in what we spent on new cars in 2008.
Reducing dependence on a cartel for an important commodity ought to be a no-brainer for a country with the size and resources of the United States. There is no shortage of interesting ideas on how to achieve that end. The repeated failures of the US government to act meaningfully on this issue amounts to gross negligence. It will be a better world when the phrase “strategic importance” ceases forever to appear in the same sentence with “Strait of Hormuz.”
November 11th, 2008 at 5:43 pm
You’ve got a great blog. I try to read it frequently. And this little entry is one of the reasons. You have put a lot of info in a neat, easily digestible package. Although, to be honest, it wasn’t the oil cartel that put the U.S. economy in a position to be vulnerable. But it certainly was a major culprit in pushing us over the edge. Now, we can only wait with baited breath for Obama to rescind the Executive Orders opening up exploration for new domestic sources of oil. Where is a good Revolutionary War II when you need one? (Rhetorical question only.)
November 11th, 2008 at 6:27 pm
As I am sure Dinocrat knows, there is, sadly, one political party in this country that wants the USA starved for energy. If The One has His way, the energy situation will get much worse before it gets better. I was surprised that surging oil prices didn’t take down the economy a couple of years ago.
November 11th, 2008 at 9:00 pm
“surging oil prices” the only kind of surge The One approves of, along with skyrocketing electricity prices. The One has stated that the surge in Iraq did not work; but, he is the President-elect of change, so we can expect him to change his mind on these things, too.
November 12th, 2008 at 4:50 am
And The Messiah’s first act will be re-establish the ban on offshore drilling.