Back in the days Capitalism was taught in public schools as the best economic. For those of you who were taught that the various forms of Marxism (such as Socialism, Communism or Fascism for example) were just as viable as Capitalism ask anyone who graduated High School prior to the mid-80’s, they will back me up on this point.

 What the hell did they teach kids in Hawaii 40 years ago?? We learned that the way to lower prices was to increase supply or lower demand. Either they didn’t teach that in Hawaii or President Obama played hooky during those lessons, because he constantly demonstrates a lack of understanding of the basic assumptions of capitalism.

Just take a look at his little oil regulation speech made yesterday.

“We can’t afford a situation where some speculators can reap millions while millions of American families get the short end of the stick. That’s not the way the market should work,” Obama said in a Rose Garden speech, laying out a $52 million proposal largely aimed at beefing up the Commodities Future Trading Commission’s oversight and enforcement of the oil and gas markets.

Lets examine that for a moment.

First of all speculators are involved in trading all kinds of agricultural  products such as wheat, pork bellies, corn, soy oil, different kinds of precious metals, industrial metals as well as energy products. Heck, Obama’s progressive buddies were even looking at creating a carbon market (which failed).

Successful traders in any of these speculative markets make millions of dollars because of another capitalism tenet that the President never learned about, people who take the most risk stand to make the most profit, they also stand to take the biggest losses. Therefore Obama is correct when he says speculators can reap millions—that’s the way the market is supposed to work. But they can also lose their shirts. Look at what happened to Fannie Mae and Freddie Mac when the housing bubble, created by the progressive policies of people like Barney Frank and Chris Dodd, collapsed.

Let’s get back to supply and demand for a moment.  If we concede that Obama truly believes that it is the speculators causing oil prices to spike (OK that in itself is a giant speculation, but go along with me on this). If Obama truly believes that it is the speculators causing oil prices to spike then there is one easy way to punish the speculators, flood the market. Going back to the housing market example, the prices of houses collapsed when the market was flooded with foreclosures and demand tailed off because of the lousy economy.  It’s been almost four years and the value of houses is still below pre-collapse levels.

The best way to collapse the oil futures market is to start drilling for oil today! 
True it will take years to reap the oil from new wells, but remember what happened back in 2008.

After 9/11 oil prices began to rise.  After a small dip in 2006, the price increases accelerated in 2007 and 2008.

During the summer of 2008 the price/barrel hit $145.

On July 14th 2008 President Bush had his own Rose Garden speech.  He announced the lifting of an executive order banning offshore oil drilling and urged Congress to follow suit by repealing Congressional limits to drilling.

Speculators began to sell of their oil holdings the next day. July 15th saw $8/barrel drop, By the end of the week, crude oil fell 11% to $128. By the end of December 2008, the crude oil price fell to $30.28 a barrel. Not because of an increase of supply, but mearly the threat of an increase.

If Hawaiian schools had a better social studies curriculum, Barack Obama may have learned about the risk of speculation, and supply & demand. With a better education, instead of the political threats to speculators he made yesterday, Obama would have announced a major expansion of drilling on federal-owned land which may very well had the same effect on the speculation market as did Bush’s July 2008 announcement; a major sell-off and some traders losing their shirts.

One note however.  Hawaiian schools aren’t totally at fault. Between the ages of 6 and 10, the future president was living in Indonesia eating TirumaShihTzu and other tasty treats made from canine.