Wednesday, December 27, 2006

Economy May Slow in 2007 While Oil Rises

The problems that have led to high energy prices for the last two years have not gone away. Even if the price of oil falls because of high production or a sluggish economy, we're just not finding the oil that's needed to sustain the level of oil consumption the world has come to expect. Ron Scherer of The Christian Science Monitor has a story on the energy outlook (hat tip to Think Progress):
Remember this? Motorists complaining at the pump as the price of gasoline rises. Airlines bumping up airfares to cover expensive jet fuel. And delivery services tacking on surcharges, reflecting a record price for a barrel of oil.

But it's not just a description of this past spring. It's also the forecast for next year, probably just when school lets out for the summer and motorists are starting to put more miles on the odometer.

"We could see close to $85 a barrel on crude next year," says Phil Flynn of Alaron Trading in Chicago.

Maybe we'll luck out this year and the price of oil will only rise to $70/barrel by summer. If Bush's incompetence leads to a deeper quagmire in the Middle East, however, anything can happen. Weather or other factors can lead to higher prices as well. But trusting to luck the way farmers used to trust to luck three hundred years ago is not a smart policy. Even major corporations don't last long if they fly by the seat of their pants year after year.

For six years, Bush has had no energy policy and his optional war in Iraq has only made things worse. The Democrats in Congress will do what they can to develop an energy policy but much will depend on how much Bush is willing to deal with reality. We'll soon know.

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