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Slow Demand and Rising Gasoline Prices
By Byron A. Ellis – February 01, 2010

In a slow US economy, the average retail price of regular gasoline has increased significantly since February of 2008. It has increased by almost one dollar.

From the U.S Energy Information Administration

The inaction of the Obama administration on regulating crude oil speculation is vexing. High gasoline prices adversely affect U.S. consumers. It reallocates consumers’ budgetary outlays from food, clothing, education, and health care to energy and transportation outlays. In essence, it reallocates consumers earnings to “big oil.”

The administration needs to focus on eliminating crude oil speculation by the oil companies.

One reason why the public is dissatisfied with the Democrats is their inability to deliver on promised changes. Thus far, they’ve not demonstrated effective administrative capacity.

It is clear from Figure 1 that the increase in crude oil prices began soon after the preemptive invasion of Iraq. Thus, Middle East instability is a contributing factor to speculative crude oil pricing.

However, the administration has yet to demonstrate tangible capacity to establish stability in the region or to reduce speculation. Rather, the Obama administration continues the Bush oxymoronic policy of seeking peace through violence. Like Bush, Obama continues to militarize the Middle East and the world.

Figure 1 – Crude Oil Spot Price

The inefficiencies of the former Republican administration have not been corrected. In fact, the new administration appears to have adapted many of the Bush administration strategies. Thus, the ideological shift that voters wanted has not materialized. Under the Democrats, the wars have intensified; the monetary economy has been choked, and unemployment, poverty and the deficit have increased.

The cost of induced Middle and Far East instability will continue to adversely affect the U.S. economy and prolong “the war on terror” into the foreseeable future.

It is imperative for the West, and in particular the U.S., to understand Al Qaeda’s strategy. Their strategy is to use a few band of misguided zealots to goad Western military incursion into Muslim lands. They understand that Western incursion creates Muslim resentment and increases Al Qaeda’s recruits. Moreover, it disperses the U.S. military in the pursuit of non-state actors and increases its outlays.  Conversely, Al Qaeda’s cost per zealot is a small fraction of the West’s cost per soldier.

The U.S. cannot afford to be preoccupied with inefficient and costly wars, while developmental East Asian states are engaged in improving administrative capacity, technology, commerce, and sources of raw materials. East Asian countries have improved their economies, standards of living, and relationships with developing countries.

The current “war on terror” will prove to be unsustainable in the face of economic decline. The West should not be playing Bin Laden’s game.

Instead of using guns against struggling poor peoples of the world, the West would be better off in trying to understand their grievances and catering to their basic needs, such as building schools and hospitals.

In more than eight years, the current warring strategy has not produced the revenged sought by the West. In fact, it has increased Al Qaeda’ s recruitment. It has been said to thunderous applause  “The American people…understand the real gamble is having the same old folks doing things over and over and over again and somehow expecting a different result.” Apparently, politicians don’t understand the real gamble of not sticking to their promises.

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