RUSH: Snerdley says we have a lot of people calling about oil today. I’m getting e-mails about this, too, and there obviously is some kind of campaign out there to have oil discussed. You know, the story out there past couple of days is ‘experts’ say that the barrel price of oil will soon hit $200 — and this is roiling the markets, they say. Now, I want you to stop and think about something, folks. If $200-a-barrel oil leads to the pump price of $10 a gallon at the gasoline pump, let me just ask you a simple question. Will the market support that? Will it?
Are you asking yourself at this point in your life, are you saying, ‘Okay, gasoline where I’m buying it is $4.50, $4.25.’ Maybe it’s three dollars in some places if you’re using regular. But are you asking yourself, are you telling yourself, ‘There is a price per gallon I’m just not going to buy it, or I’m going to really change the way I live.’ If it hasn’t caused you to change yet, if it hasn’t caused you to make changes — I know some people it has forced them to make decisions where they spend other dollars. But for those of you not affected by it yet profoundly, is there a price where you’re just going to say, ‘All right, bare minimum or I’m going to use mass transit,’ where you’re just not going to buy it? You may not have thought about it specifically and consciously but in your head, there is a price at which point you’re not going to pay it, because you can’t. You just won’t be able to.
I don’t care what the commodity is. It can be food; it can be gasoline; it can be hotel rooms. The only exception to this is health care, by the way. They can price health care whatever they want, and you will still go access it because you think somebody else is paying for it. But we don’t have national gasoline insurance yet, and we don’t have national corn food products insurance yet. So if gasoline gets to be ten bucks a gallon, and people don’t buy it, what’s going to happen? These people that produce these commodities cannot just arbitrarily price them as high as they want. You may think gasoline, oil companies, whatever, might look forward to $10-a-barrel gasoline; but I will guarantee you they could have all the gasoline they want at $10 a gallon, and if they don’t sell it, it’s worth nothing. Now, what happens…? If gasoline gets to $10 a gallon, what happens to jet fuel? Can we talk about that for a minute? Now, you don’t know the cost of jet fuel per se because you buy airline tickets. But jet fuel right now is as high as $7.52 a gallon, $6.50, $5.50, depending on where you buy it. There’s a much wider variety and price of jet A.
Well, what if jet A gets to $20? If gasoline is going to get to ten, jet A is going to be 15. Are you gonna fly? At the prices the airlines are going to have to charge, the rates that they’re gonna have to charge, the increases in their fares to pay for that fuel, are you going to fly? You won’t. What’s going to happen? The only people that are gonna fly are the people that have to and that’s going to be business. What’s going to happen to the airlines? They can sit there with all these empty seats, and what good does it do ’em? My point is that these scare tactics of the barrel price per oil getting up to $200 and gasoline at ten bucks a gallon and jet fuel to 15 or 20; if the market can’t support it, it isn’t going to stay there.
I’ve been through enough of these oil things and these so-called contrived shortages and these bubbles and so forth. I’ll never forget when I was 18 and I got my first car. Gasoline is a quarter a gallon, and there were gas wars, and it wasn’t long in the early seventies, shortly after I got my first car. Here came the contrived shortage from OPEC, and the price went up from 75 cents to a quarter. That was huge, a percentage increase. Fifty cents was a huge percentage increase — and then it came down. These things, they go up and they go down. I’m not sure this is a big bubble, but I’m going to tell you that markets work, and there is no way an astronomical, out-of-the-realm-of-possibility price for oil can be sustained or maintained if people will not buy it, or can’t afford to. It’s just that simple. Now, you can tax the oil companies all you want like the Democrats want to do with their new energy program, ‘windfall profits tax.’ You can do all of that. It isn’t going to produce a drop of new energy — and what we need is more supply. What we need is much more of this stuff, and there’s no substitute for oil. You can sit there and you can think otherwise. You can think we’re going to destroy ourselves. We’re not going to destroy ourselves. We’re not going to kill the planet. (interruption) I know it’s commercial time, but I’m on a roll. (sigh) Aw, jeez! Engineers, engineers.
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RUSH: Bill in Reading, Pennsylvania, nice to have you with us, sir. Hello.
CALLER: Hi, Rush. I agree with your market analysis. How much can the market bear, what kind of price. And I was scared when I read that article yesterday about $200, and what was especially scary was the same Goldman analyst that did it a few years ago is the one that’s doing it now, he predicted a hundred dollars and we thought that was too high and we’re suffering now, and if he’s right again, we’re really going to be suffering. And Congress can deal with it by just lifting that 25-year moratorium on drilling.
RUSH: I know. I’ve got some statistics here, and I’m going to get them after the break ’cause I want to spend a little time talking with you here, but after the next break I’m going to get to — I’ll just give you one. In 1985 our domestic production in this country, or consumption — well, make it production. Department of Energy, US oil production has fallen 40% since 1985 while consumption’s grown more than 30%. In real barrels, US oil production is now below five million barrels a day. It was approximately nine million barrels a day in 1985. So our production has been cut in half in 20 years.
CALLER: Wow.
RUSH: And, see, it’s been a slow bleed. That wasn’t a dramatic overnight thing, and so its impact was not immediately felt. Now, at the same time, we’ve stopped drilling, we have stopped exploring for new sources, even though we know that it’s there. According to federal government estimates, there is enough oil in the domestic areas, Gulf of Mexico and off the coasts and Alaska, 112 billion barrels. There’s enough American oil we could go get, 112 billion barrels, which would be enough to power more than 60 million cars for 60 years, but we have moratoriums on drilling for all this. The environmentalists are the only ones who are happy about this. This is an attack on capitalism. It’s nothing about environment. It’s nothing about saving the planet. It is an attack on capitalism and an attempt to cut this country down to size. And they’re succeeding with the help of the Democrat Party.
CALLER: Exactly. And it’s insane. It’s insanity because people are suffering in the meantime. And we could be independent for 20 years with that amount of oil when you’re talking about a hundred billion barrels.
RUSH: This is hard to say, but what you’ve just said is not arguable, more and more suffering.
CALLER: Yeah.
RUSH: More people are going to be suffering. And somebody is not obviously bothered by this.
CALLER: And it’s crazy, because I know seniors that had to leave their homes this winter because they couldn’t handle the heating fuel bills.
RUSH: Yeah, and of course who do seniors vote for? Democrats. Somebody is not that upset about all this suffering. Somebody enjoys it because they think it’s going to translate to votes, folks. It’s that simple.
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RUSH: I just got an e-mail from a listener who said that the price of jet fuel in New York at LaGuardia at the fixed base operator there, the signature flight support, FBO is where private jets go, buy their gasoline, they’re just gas stations, $8.08 a gallon for jet A at the general aviation terminal at LaGuardia, $8.08. Now, at some point — I just want to talk market economics here to you — at some point this price is going to reach a level that people can’t afford it or will refuse to pay it for whatever reason and that price will no longer be supported. Markets work. I can guarantee you that the Democrats are not going to come along with gasoline insurance like health care. If anything, if you let these people get their hands on this economy, they’re going to start rationing this stuff. Folks, there is a lot of suffering out there. I mean, the economy is not in recession, but these price increases in food and gasoline staples have happened so quickly rather than gradually that they have far outpaced any income increases or wage increases the American people are experiencing. So these are hits, these are huge hits, and a number of people have already had to make changes in lifestyle decisions, that impact vacations, things like going out at night to dinner, what have you.
A lot of people here have been dramatically impacted by this. Some people haven’t been yet. It’s not affecting the country nationwide but it’s affecting enough people. The prices are still at a level that people are still willing to pay them. Look at the NBA playoffs, these tickets are not cheap and their stands are full. Major League Baseball games, you know how much it costs to park at these things? You think prices are high in the grocery story, you know what they are at the concession stand, you’re a captive audience, they’re going to charge you ten bucks for a Vienna sausage they call a hot dog. They can do it. Where else you going to get it? If they catch you bringing your own stuff from home, they won’t let you take it in. Security, don’t you know. And so there’s still a lot of people able to pay these things, pay the freight, but at some point those people are just going to refuse to. It’s not going to make any sense. You ought to see what the ticket prices are going to be at the New York Yankees next year. A box seat behind the dugout, because they’re going in a new stadium, gotta pay for it, you have to pay for it, Yankees fans, what did I read the other day, $2,500 for one game for one seat. It can’t be the season ticket price because there’s 81 home games, it’s those dugout seats, dugout to dugout, first couple rows, 2,500 bucks.
Now, they’re going to be able to get it because they’re in a population center where there are enough people who can and will pay that for that kind of exclusivity. The cheap seats, upstairs in the upper deck, around $250 a game. The point of all this is that despite the fact that there are people who are able to pay whatever things cost if they want to, there is still a lot of suffering, and the suffering can be noted not by directly viewing it, but by simply looking at the world of politics. And you see all these proposals coming up to take the gasoline tax holiday this summer. Now, I find it interesting that the people who oppose this around the corner, around the block, are elected officials, in many cases in both parties, but primarily the Democrats. While wailing and moaning about how unfair the oil companies are to you in charging all these high prices, they don’t want you to get a little break, I don’t care how little it might be, 30 bucks a summer. You combine the federal tax holiday with the state tax holiday, you’re talking much more than 30 bucks, and you’re talking much more than 18.4 cents a gallon. But my point here is, there’s a lot of suffering out there, and I am sad to say this, but there are people who enjoy it, because they think they’re going to benefit from it, because suffering in an election year equals votes for the opposite party.
I know that sounds cynical to a lot of you because a lot of you vote for these Democrats. Well, I don’t know about you in this audience. A lot of people in this country vote for these Democrats because they somehow have been misguidedly believing that the Democrats are going to fix all these economic circumstances because they’re gonna raise taxes on the rich, and they’re gonna make things just as expensive for the rich as they are for everybody else. They’re not going to make things more affordable for everybody else; they’re just going to make it fair by soaking the rich. And you’re supposed to sit out there and say, ‘Yeah, yeah, you soak ’em! You soak ’em! That will make me feel better while my hot dog still costs ten bucks.’ Now, I have a prediction to make to you on this barrel price of oil in gasoline, ’cause I’ve been through this. I’m middle-age now, 56, fiscally, 18 emotionally, in a lot of ways, still have a lot of life in me. But I’ve been observant and I know that this is not going to last. It’s not going to keep increasing at these rapid rates like these experts say it is. It might for a while, but at some point, folks, it’s going to tumble. May not get back down to 80, I’m not going to predict where it’s going to go, but these steady, unstoppable, uninterrupted increases as far as the eye can see are going to stop because they have to, because they’re going to reach a level where nobody will be able to sell it at any level. The wholesalers won’t be able to sell it. The refiners won’t be able to sell what they refine. The gasoline stations won’t be able to collect any money for it. People won’t fly on airliners because they won’t be able to afford the tickets.
That won’t work. When that starts happening, what always happens, except in government, the price comes down. Now, in the government when people start riding the subways less, they raise the fares. In government, when they tell you to start conserving water because you’re in a drought and you follow their instructions, their revenue falls so they raise your water rates even after you conserve. So you’re going to get charged more by government for using less. It’s the exact opposite of supply and demand. There’s no supply and demand in government, and government is: You make it, and we take it. Thank you, Charles Rangel. The government objective is you make it, they take it. In the private sector when nobody’s riding an airplane, they gotta get people on the airplane. The airplane doesn’t make ’em any money sitting on the ground. The airplane has to be in the air, and it’s gotta have people in it, and, if people can’t afford to be in the airplane, the airplane is going to be on the ground. The only way to get people on the airplane is lower the price and I guarantee you this is going to happen. I’m a little cynical about when it’s going to happen. Might happen before the election, in which case it would benefit the Republicans. Might happen after the election, in which case benefit the Democrats. The time frame involved in this is per chance.
The oil market is so big and so complex, there’s no one company or person that can manage it, not even OPEC. They can dent it, but they don’t produce all of the world’s oil. So if OPEC limits their production, you’re going to have some countries that are not OPEC members, ‘A-ha, here’s our chance to sell more,’ and they’re going to pump more. There’s not one person, I don’t care what anybody tells you, there’s not one entity that can arbitrarily control the price of oil worldwide. The speculators have a lot of impact in this on the futures market, in the commodities market, but it is what it is. You can’t do anything about that. It’s just there. For example, for the last year, I have been hearing about, ‘The dollar, the dollar is falling, this is bad, why, it’s horrible, why, the dollar is going to stop becoming international currency, and look at that, Iran and some other OPEC countries are wanting the dollar to be dropped as the currency that everybody uses.’ Then all of a sudden outta nowhere, I think it was late last week, out of nowhere, a single story: ‘Experts believe the dollar has bottomed out and is now on the rebound.’ Really? Really? And notice how that changed everybody’s mood about this. Well, the people who are directly involved in that. It did, it changed their mood, ‘Oh, wow, we’re coming back!’ and Warren Buffett went out, I think it was Buffett, Buffett went out and said, ‘Hey, the crisis on Wall Street’s over. Individuals still have some trouble ahead in the credit and the subprime problem, but Wall Street’s been fixed because of the Bear Stearns bailout.’
So immediately, on Wall Street, ‘Wow, Warren Buffett said the worst is over!’ Somebody, someday is going to say the oil price topped out. Then it’s going to come down. Markets work, folks. They really do. And when you get to a point, if $200-a-barrel oil hits a year from now, I will guarantee you it cannot stay there. I don’t think it could stay at a price halfway to $200-a-barrel. It can’t be supported. Not on a mass basis. There are always going to be some people around the world, a precious few in every country who are going to be able to buy whatever they want, whatever it costs. They are a precious few, but there are not enough of them to affect the overall supply and demand. I just saw a picture. You automobile freaks probably have seen this. I’ve seen it twice now. Some United Arab Emirates sheik has this little Mercedes, looks like it’s an SL, convertible, two-door, pink with diamonds all over it. I mean, some people just have so much wealth they’re looking for outrageous ways to spend it. They are not going to be the ones that determine the market, because that sheik that has all that money to put diamonds all over his Mercedes got his money from oil being pumped out of wells in his country, and if there aren’t enough people that can buy it at the price at 200 bucks, it’s going to come down because the objective of all these commodities is to sell ’em except when the government’s involved and we subsidize people not to sell it, and we put it in silos and it’s all that sort of stuff.
But when we’re talking about the free market, all these artificial guesses with oil and so forth, you mark my words, I don’t know when, but it’s all going to come down. It’s going to come down at some more manageable level than now, and when that happens, just the fact that it’s coming down — and gasoline prices will drop as well. I know you’re hearing people, ‘We’re never going to go back to three-dollar gasoline,’ and you’re thinking, ‘Oh, no!’ We might. Nobody knows. What we have is commonplace in the media, a bunch of gloom, doom paranoia, stuff that’s designed to scare you to death, to create crisis. But at some point, these prices are going to come down, and when they start dropping, everybody’s attitude’s going to go up. ‘Wow, the price is coming down, all right, makes more sense.’ And things will level off and get back to more normal circumstances. My cynical nature is that all this stuff is going to happen so close to the election here, either before it or after it, that people are going to start attaching the fact that people are waiving magic wands to make it happen. But I am telling you this, and I say this with all honesty, and I know that it’s sometimes hard for people to hear, but if you doubt me, don’t. There are elected officials in the Democrat Party who are convinced they will benefit from the suffering associated with high food prices and high gasoline prices and throw incumbents — i.e., Republicans — out of office. If you think they don’t think that way — and they’re out there talking about how hard it is for you and how much they relate and how much they feel for you, and how much they’re going to fix this, and they’re going to get even with the people that do this to you. But they never do. They let you suffer. So that you’ll get so mad at whoever is in power at the time, whether they had anything to do with this or not, that you will get rid of ’em.
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RUSH: Let me give you some more oil data here. Again, according to the US Department of Energy, US oil production has fallen approximately 40% since 1985, while US consumption has grown more than 30%. So in real barrels, US oil production is now below five million barrels a day. It was approximately nine million barrels a day in 1985. So in 23 years — and see, it’s happened slow. The market impact here has been slow, it’s been gradual, but we’ve cut our production in half in 25 years — and, by the way, can I ask you a question, folks? In doing that, in those 25 years, global warming’s gotten worse, has it not? And in those 25 years the planet’s gotten dirtier, has it not? According to what these people say. In the 25 years that we have stopped producing oil by half, we have cut our oil production in half, in 23 years; in those same 23 years, the environmentalist wackos who are behind this keep telling us how rotten things are getting, how horrible things are getting, and we’re destroying the environment; the polar bears, the planet, you name it.
We’ve been getting the blame for it! Yet we’ve cut our production in half. And you can see one of the results of this is the price that we’re all paying for this stuff, oil-related products today. At the same time — now, this is going to really frost you — while in the last 23 years we have cut our production in half, the government has put billions of barrels of domestic oil and natural gas off limits to domestic exploration. According to federal government estimates, there is enough oil in the areas that we are now place off limits, 112 billion barrels to power more than 60 million cars for 60 years without importing a drop. It’s off limits. The government, because of the environmentalists. So we’re not producing this. We’re not getting this. We’ve cut our own actual production in half in 25 years, and they still blame us for destroying the planet. We keep hearing about ANWR.
Had President Clinton not vetoed exploration in ANWR in 1995 — oil was $19 a barrel in 1995 — America would currently be receiving over a million barrels a day from Alaska. Experts estimate that ANWR contains 5.6 to 16 billion barrels of recoverable oil. Okay, now at $123 a barrel — and, by the way, ten years ago they said, ‘Well, it will take ten years to get the first drop. We can’t do it.’ It’s been ten years or more. We’d have had it, it would be online. Now they say, ‘It would be ten years if we start. We can’t count on that.’ There are people, elected officials — Democrats and some Republicans and entire members of the leftist environmentalist wacko organization — who don’t want this country to be energy sufficient and independent. The environmental movement in this country is largely comprised of — the militant and wacko realm of it, consists of — displaced communists and socialists who want this country down to size because it’s not fair to everybody.
The Outer Continental Shelf in the United States contains over 44 billion barrels of oil, and 232 trillion cubic feet of natural gas. Eighty-five percent of the outer continental shelf is off limits to domestic exploration. Can I put it to you another way? Forty-four billion barrels of oil and 232 trillion cubic feet of natural gas are out there just off the coast, and 85% of it is off limits to domestic production. Yet we have this whining and moaning about dependence on foreign oil, and the resulting price increase. In the Gulf of Mexico, there is enough natural gas to heat 60 million homes for another 160 years. Can you imagine that quantity? Sixty million homes for another 160 years! However, more than 85% of the coastal waters adjacent to the lower 48 states — which extend up 200 miles from our shores — are off limits to oil exploration. You can’t get the natural gas if you don’t get the oil. It’s a by-product.