That giant "popping" sound you heard

Wasn't the National Enquirer sticking a pin into The Breck Girl's inflated ego.

It was the sound of the oil bubble bursting.

From the Telegraph:

Bad news from the Baku-Tbilisi-Ceyhan pipeline - an installation that may not normally draw much of your attention, but which is a throbbing artery of global energy supply, carrying vital oil supplies from Central Asia towards a tanker terminal on the Turkish coast. On some remote, sun-baked plain of Anatolia, an explosion sparked a fire earlier this week, temporarily cutting the flow through the pipeline.

But guess what? Here's the good news: the oil price did not zoom upwards in response, not a blip, barely a flicker. Actually the price of a barrel of crude has been falling: from a peak of $145 in early July, it came down to $117 and was trading yesterday at $120. That's almost a 20 per cent drop in little more than three weeks.

If the trend continues into September at anything like the same rate of descent, most of the inflationary spike of the past 12 months will miraculously have been sliced away. This is a dramatic reversal, and it is worth trying to work out why it is happening and what it means.

Just possibly, it means that what investors refer to in shorthand as the great "oil up" story has finally revealed itself not as the fundamental reflection of scarce supply that its adherents liked to claim, but as a simple, speculative bubble that was always going to burst.

It was a speculative bubble but it was fed by real world issues of supply and demand.

China and India really are growing their economies by leaps and bounds and really are using far more oil than they used to. Supply really has been somewhat stagnant as well.

You see in every oil producing nation other than the United States it is the government which owns the oil and the government which is responsible for doing the exploration and development of new sources. Most of those nations have treated their state oil company like a giant cash machine which they can endlessly withdraw from without ever needing to make a deposit.

This is the case across much of the Middle East (you saw the story last week about how Iraq was going to begin to do oil exploration again for the first time in over 20 years). This is especially true in Mexico and Venezuela and the bill for all this neglect is starting to come due.

This formula of flat supply and increasing demand was, and is, a recipe for higher prices and the oil speculators read the tea leaves and bid the price of oil futures up. And up. And up.

This was 100% fine with the environmental wackos and the left wing of the Democrat party because it gave both groups what they wanted, or at least seemed to.

The econazis want to do away with any source of power which isn't "clean and natural" which to them means we need to use only wind and solar power. The econazis also want to reduce the human population to about what it was when Abram got the call to leave Ur of the Chaldees and go to a land which The Lord would show him, but they don't talk about that nearly as openly as they do about "renewable energy".

The political left (which is the Democrat party for all intents and purposes) like the high oil prices because it presents them with the opportunity to stage a giant power grab.

However somewhere on the road to nationalizing the oil companies and building lots of cool windmills something happened.

The American public saw gas hit $4.00 per gallon and they got mad as hell. Then those nasty right-wingers in talk radio and on the Internet started telling the public THE TRUTH about how much oil there really is right under US soil or just off the US shores and how the only thing standing in the way of drilling it and pumping it and putting in our gas tanks is the unholy cabal of the econazis and the Democrats.

This made the American public even madder and gave them someone specific to be mad at.

Then the public started demanding that we Drill Here, Drill Now and Pay Less (go and sign the petition if you haven't already done so) and polls showed that even a majority of Democrat voters wanted more drilling and then the president rescinded the executive order banning offshore drilling and then the Republicans in the House staged their rebellion (note to every friggin' Republican politician - this is why we elected Republicans in the first place, you lost in 2006 because you stopped acting like this) and even Obama, who is as dumb as a box of claw hammers, got the message (or at least whoever is pulling his strings go the message) and started talking about drilling.

So the speculators took a look at the developing situation and started bidding the price of oil futures down. And down. And hopefully down some more.

Of course there was one more factor in the oil bubble other than pure supply and demand, otherwise it wouldn't have been a bubble.

That extra "bubble factor" was all the "non professional" speculators who saw a rise in oil prices and listened to all the mainstream media talking heads predicting that it was only going to keep going up and jumped on the bandwagon.

An aside here about the mainstream media. They like stories about global warming and about $200.00 per barrel oil both because they are political leftists and because scare stories mean sales of newspapers and magazines and higher ratings for TV shows.

So these amateur speculators started piling on the oil bandwagon and the laws of supply and demand took over. In this case the supply of oil futures was flat and the demand for them was rising and so the price increased. The higher prices reinforced the idea in the amateur's minds that oil could only go up so they lined up to buy more and more.

So when it all of a sudden looked like we were too going to drill and otherwise develop our domestic resources (and we have enough to last us well into the twenty second century - at least) the amateurs did what amateurs do and they panicked and bailed. This is why the price of oil is dropping.

Of course the price of oil is not going into free fall because the professional speculators know that demand is only going to go up and because they can see that the Democrats are still in control of the House and Senate and if you look state by state at the electoral map Obama is still favored to win (but that may very well be changing as his numbers continue to fall, faster in fact than the price of oil). So America may not wind up drilling and that will start the price of a barrel of oil heading back toward the $200.00 mark.

So it all depends upon what we do in November. Forget the White House, that is a write off this time around, and concentrate on the House and the Senate. The Senate is especially important. If we can keep the Democrats from getting the kind of majority they need to close off debate then we can keep anything too terrible (like amnesty for alien criminals) from happening. Of course the Republicans will have to be watched like hawks especially if McCain manages to get elected otherwise he will provide the "moderates" (read RINOs) with cover to jump ship and join with the Democrats in shafting the American people.

If you doubt that there are "Republicans" who will join with Democrats to shaft the American people read this Wall St. Journal story about how a group of "Republican" Senators led by John McCain's wretched little butt-boy the phony-baloney corn pone jagoff Lindsey Graham (note to South Carolina, vote this asshole out of office even if it means electing Jesse Jackson in his place). Apparently McCain was running for president and was therefore too busy to personally lead this effort to cut the legs out from under the conservative House members and their protest so he got his detestable little lickspittle to do it for him.

So anyway the House is important. If we can limit Democrat gains in a serious way San Fran Nan will be outed as the airhead she is and the Democrats will elect a new and more pragmatic Speaker, who will be open to drilling. But the Senate is critical because it is there that a minority can bring the whole process to a dead stop and keep it there until there are oil derricks sprouting from the dead and frozen wasteland which is ANWAR.

So let's sum up. If you want prices to continue to decline then vote Republican in November. If you what them to go back up then vote Democrat.

Seems simple enough to me.