Oil Price Collapse Coming ***UPDATED, BUMPED***

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***UPDATE*** C. H. Smith and I are no longer the lone contrarians–read The New Business World article, “Oil Prices May Crash.”

Also, Hall of Record offers some intriguing charts comparing the oil price trends to recent crashes in tech stocks and the 1981-1986 world oil price collapse. As I said, “intriguing.”

And this from the Wall Street Journal:

Early signs of an easing in global demand growth and swings by Wall Street traders are pushing oil away from the historic $100-a-barrel mark, at least for now.

After rising as high as $98.62 a barrel a week ago, the benchmark oil-futures price on the New York Mercantile Exchange hit a low of $90.13 yesterday before closing at $91.17, a one-day drop of $3.45.

***End Update***

You might have read it here first, but I’m not the first to see this coming: oil prices could collapse before school is out for the summer.

As Charles Hugh Smith describes here, oil prices are closely linked to Middle East stability and the world’s perception of Middle East stability. For the past six years, the events following 9/11 have given us a sense of instability, leading to $100 a barrel oil. But several factors now threaten the speculators who continue to buy, and the oil futures market today looks like the tech stock bubble of 2000.

Two key events would pull the rug out from under the oil price house of cards:

  • General acknowledgment of US victory in Iraq
  • Chinese recession

China’s rep as a manufacturer has taken more punishment than Evel Kneivel’s femurs. Come to think of it, so have the murderous thugs who destabilized Iraq for the past four years. Now that former Iraqi “insurgents” have joined forces with American forces to drive out Al Qaeda in Iraq and to police their own neighborhoods, the world is beginning to realize and accept that it was wrong and Bush (and we) were right. MSNBC‘s main story, tonight, declares that Violence in Iraq has ebbed. A huge concession from a network vying for title of most liberal news source.

Here’s how I see the scenario playing out over a twelve to eighteen month period beginning just after Christmas:

  • Oil prices drop (month 1)
  • Oil prices become unstable (months 1 and 2)
  • Large speculators abandon future holdings to minimize risk (month 4)
  • Fluctuations (up to $15 a barrel per day) frighten potential futures buyers (month 5)
  • Some “expert” declares oil “over-bought” and the floodgates open (month 6)
  • OPEC, having originally cut output, increases output to maintain revenue as prices fall through $30 a barrel (month 12)
  • SUVs make a big comeback (??)

Yeah, I’m probably overplaying the hand. Still, don’t act surprised if, come June, you’re paying $1.45 at the pump.

Time to Redefine Poverty

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You’ll be hearing that mantra from the left pretty soon because poverty rates are lower under Bush than they were under Clinton.  That means the Republicans can look into the camera next fall and ask Americans, “Are you better off now than you were eight years ago.”  For those at the bottom of the econmic ladder, the answer must be, “Yes!”

Leftist economists still claim that supply side economics and stimulation through tax cuts  are fantasies.  They also claim that the rich get richer.  Well, the poor get richer, too.   The Census Bureau numbers prove it.   When the AP headline screams “pover rate declines significantly,” you know there’s something to talk about, and The Conservative Post wastes no time starting the conversation.

Bush’s tax cuts have resulted in large numbers of those who were just below the poverty line stepping over that line into lower-middle class.  As Captain Ed points out, the details of the report show that poverty among seniors is at its lowest level since the Eisenhower administration–before Johnson’s Great Society wealth confiscication schemes drove the old people to the poor house.  I would also give some credit to welfare reform under Gingrich’s Congress and Clinton’s administration.  While Clinton might have been brought kicking and screaming to the table, he had the courage to sign the legislation, which is, by far, the pinnacle of his legacy.

Moreover, this proves beyond reasonable argument that drug prices are not driving seniors into poverty.  Instead, the less invasive treatment available through drug therapy is keeping seniors economically and physically active, improving their standards of living.

Liberals will demand a change to the way the Census Bureau calculates or defines poverty.   The left wants lots and lots of poor people and lots more who think they’re poor, because people who can help themselves never vote Democrat. 

The next time you pass an empty street corner where a  homeless bum used to be, thank a Republican:  we’re making everyone’s life better.

Bush Policies Balancing Budget

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The White House announced yesterday that the 2008 budget deficit would be smaller than originally projected, as will the 2007 deficit. The reasons: 1) the economy is strong and 2) tax cuts stimulate taxable economic activity.

We’ve know that that tax cuts increase federal revenue (to a point) since John F. Kennedy explained it in 1961. The Laffer Curve was the final word on the subject and should have earned Arthur Laffer the Nobel Prize for economics.

Ed Morrissey is worried the Democrats in Congress will raise taxes and drive the deficit up. They’ll try, no doubt, but tax increases do not fly during election years. As Brent Baker points out at NewsBusters, the press is still trying to get Bush to commit to tax increases–proof that liberals have a pathological fixation on raising taxes that defies all economic reason.

I hope Giuliani and Fred Thompson continue to explain the relationship between marginal tax rates and federal revenue. They have done a great job so far. McCain and Romney might think like Giuliani and Thompson, but they don’t communicate economic reality nearly as well. The next president must connect with the American economic mind the way Reagan did. And he must not listen to the likes of Bob Dole when they come to ask for a tax increase.