Tuesday, August 05, 2008

when it comes to energy and food its all about politics

So is this the end of the commodity boom or is this a correction on the long road to higher food, energy prices and inflation? Many will argue on one side or the other of the supply and demand curve, but my view is that when it comes to energy and food its all about politics. And the politics are very simple; since the 1970’s the US has embarked on a policy of adding no new available supply of energy. Instead choosing to view the amount of energy available as a pie to be divided up but not added too, a sort a zero some game. No new domestic drilling, generation, transmission and so on has been the net result. Supply constraints have been made up for by importing more and more foreign oil while domestic energy resources ,coal ,oil ,natural gas, nuclear and so on have been suppressed in hopes that higher prices would lead to some new form of non polluting ,cheap, non carbon based usable wonder energy ie… “the promise of fantasy energy” .

If we have learned one thing from our European friends that have endured excessively high energy prices for several decades is that energy consumption and use are a function of technology, and life style not price. No one in America seems ready to give up their SUV and trade it in for a horse and carriage. America after all is a country founded on the ideals of economic mobility, and “mobility” of the individual not class being the key idea. Even though many in the political class seem to want to eliminate this fact from American life the general population and this blogger have other ideas.

Energy prices have been determined and will continue to be determined by the politics of availability, Weather by accident or design if the world’s largest economy would make a major change( ie …try to increase the availability) in it’s energy policy it would have a major impact on glabal energy prices for decades to come.

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