This update is from Barry Rithotlz over at the Big Picture
In this post, he laments the fact that so many were so badly wrong about the true state of the oil economy. These same people, and their like, are still pontificating that the price of oil will come down, that things will get better, that all will be well. But man were they ever wrong.
The internet is the most important invention in hundreds of years as it allows individuals the freedom to learn for themselves rather than having to rely on the wisdom of self-proclaimed elites.
It’s been a while since I paid over $3.00/gallon for gas, but had that pleasure once again very recently, as prices have been creeping slowly ever upward. As the gas flowed, I thought back to a piece I’d written elsewhere some time ago (April ’06, to be exact) lamenting the fact that those who had gotten it wrong on just about everything else had gotten it wrong on oil, too. So, as oil holds over $80/barrel and gas inches higher, here’s another look in the time machine at what the Very Serious People were saying almost eight years ago (emphasis mine):
“…markets clearly expect lower prices. On the eve of hostilities, oil was selling for about $37 per barrel. At this price, Americans would be paying $270 billion per year for oil. But once it became clear that Iraq’s liberation was at hand, the price quickly dropped to about $28 per barrel, cutting our annual oil bill by $70 billion. With full Iraqi production, the price might drop to $20 per barrel or less, giving us the equivalent of an annual tax cut of about $120 billion per year. And this is a tax cut the entire world benefits from.”
“Under a free market, oil prices would probably fall to between $8 and $12 per barrel over the next 10 years — down dramatically from today’s price of about $25 per barrel. […] A major decrease in petroleum prices would boost U.S. and global economic activity. Home heating oil prices would drop by at least a third. Gasoline prices would drop to less than $1 a gallon. As a result, people and business in the United States and throughout the world would spend far less for fuel. From an economic perspective, the United States and many nations around the world would clearly win.”
“An unencumbered flow of Iraqi oil would be likely to provide a more constant supply of oil to the global market, which would dampen price fluctuations, ensuring stable oil prices in the world market in a price range lower than the current $25 to $30 a barrel. Eventually, this will be a win–win game: Iraq will emerge with a more viable oil industry, while the world will benefit from a more stable and abundant oil supply.”
The Wall St. Journal (link no longer available):
“Of course, the largest benefit–a more stable Mideast–is huge but unquantifiable. A second plus, lower oil prices, is somewhat more measurable. The premium on 11.5 million barrels imported every day by the U.S. is a transfer from us to producing countries. Postwar, with Iraqi production back in the pipeline and calmer markets, oil prices will fall even further. If they drop to an average in the low $20s, the U.S. economy will get a boost of $55 billion to $60 billion a year.”
There were numerous other forecasts in the $18 – $28/barrel range. Of course, the Very Serious People continue to hold sway in our national discourse on a host of issues (austerity now now now!). I’m not sure exactly why, but they do. It’s important to keep an accurate historical record — a chronology — of who said what, and when. Not that anyone’s ever called to task, but so the record is clear.