The Coming Reid/Pelosi Recession

September 4, 2008
Our economy faces a grave threat because of the energy policy and energy politics of the leadership in Congress.  The recessions we went through in 1990/91 and 2001 will look like minor economic slowdowns in comparison.  Anyone who is old enough to remember the economy of the 1970s to early 1980s will understand just how devastating it is going to be for the average American.  It is too late to prevent a recession; the effects have already started.  However, if we act boldly now, we may be able to prevent the economy going into a major tailspin from which we would not recover for years.

As the unemployment numbers released today indicate, the damage from our lack of a coherent and comprehensive energy policy has begun.  Unemployment now stands at 6.1 percent, the highest it has been since 2003, and it will continue to rise.  The only question remaining is how high it will go and how many more hundreds of billions of dollars we will send overseas for imported oil before Congress acts to actually increase domestic oil production, which would create hundreds of thousands of new, good-paying jobs at the oil companies as well as in the ship building, drilling rig, steel, and other supporting industries.

Many have blamed much of the current state of our economy on the housing crisis.  The truth is that the housing crisis was, at least partially, just a symptom of the larger issue of oil prices and the failure to increase domestic oil production.  The correlation between crude oil prices, unemployment, inflation and interest rates is not well known but as the following graphic illustrates, rapid oil price increases are always followed by damage to the economy.  Rapid and prolonged oil price increases, such as we have experienced for several years now, can only lead to overwhelmingly severe damage to the economy if allowed to continue, such as happened back in the 70s and early 80s.

Chart courtesy of fossil.energy.gov (page 42)

Although the Democrats will do their best to blame it on the “failed economic policies of the Bush administration,” the blame lies squarely at the feet of Nancy Pelosi and Harry Reid.  Their intransigence over energy policy since President Bush took office in 2001 and failure to understand the laws of supply and demand are the root cause of high oil prices.  Their continued insistence on a conservation, efficiency, and alternative energy only solution to the rising price of oil has not, will not, and cannot work.  We must have more domestic production; there is no other solution.  

We do not now have, nor are we ever projected to have, an electricity problem; we have a domestic oil production problem.  All the talk about wind and solar is just a distraction, a feel good appeal to people’s emotions.  Our dependence on imported oil, along with growing demand in developing countries, has made oil a scarce commodity.  It need not be.  We have the resources offshore, in ANWR, oil shale, coal-to-liquids, heavy oil, and tar sands to reduce the price of oil and eliminate our dependence on imports, all that we lack is the political will to do it.

While other factors can and do effect the leading economic indicators with or without oil price increases, there is no question that it is the failed energy policies of the Democratic Party leadership that have allowed oil prices to rise from about $20 per barrel in 2001 to almost $150 earlier this year.  Allowing those same policies to continue will lead to economic ruin and we must do something about it now.  Every day we waste is going to deepen and lengthen the inevitable recession we will endure.