How Foreign Policy Affects Gas Prices
By Ron Paul
19/08/-08 "ICH"
-- - We've heard how the value of the dollar affects gas
prices – and indeed the price of everything. I was pleased that
my request for a hearing on such was granted by the Financial
Services committee and we were able to hear some very
informative testimony. Certainly domestic policies, regarding
off-shore oil drilling bans, ethanol mandates, refining
capacity, and CAFE standards are interventionist and harmful
enough in the energy market.
But how does foreign
policy affect gas prices? One important factor is that oil on
the world market has been priced in dollars exclusively since
1973. Only two leaders have gone against this arrangement -
Saddam Hussein in 2000 and more recently Mahmoud Ahmadinejad
with the recently opened Iranian Oil Bourse which trades in
non-dollar currencies. But since oil is otherwise exclusively
traded in dollars, this means that oil producers have vast
amounts of assets held in dollars. Especially since the War on
Terror and the PATRIOT Act, many oil-producing nations and banks
are concerned the
US
government may freeze assets based on flimsy pretexts. This
fear contributes to dollar weakness, and therefore also high oil
prices.
Recently I and other
members of Congress spoke out against H Con Res 362 and exposed
this seemingly innocuous bill for what it really is – a call for
a blockade and a build up to war with Iran. Thankfully it has
not come to the floor for a vote as I had fully expected it
would. But to even propose legislation like this, and get an
alarming 261 cosponsors, makes the oil markets jittery and
encourages more capital flight from the dollar. We only isolate
ourselves on the world stage with actions and attitudes like
this. After all, how can it be wise for the rest of the world
to bank on
America, when we tend to freeze
assets and blockade entire countries for no good reason?
Another major factor is
our intervention in international military conflicts. These
conflicts are often much more complicated, and have more to do
with oil than our own leaders are willing to acknowledge. Too
often the side we support points our weapons right back at us
down the road. The best policy is always free trade with all
and entangling alliances with none, but instead we isolate
ourselves by picking sides and making enemies out of our friends
or potential friends. In the recent conflict with
Russia and
Georgia, it appears that once
again the administration is going to pick sides and send
taxpayer money, when we are in a deep recession here at home.
There is no good reason for us to put a dog in every fight
around the world.
The contributing factors
in the price of oil are complicated and legion. The fact is, it
is an immensely valuable resource, and, as our demand for this
resource is great, our relationships with world leaders who
control it should be handled with reason and intelligence.
However, our interventionist mindset when it comes to foreign
policy never ceases to get us into sticky situations, for which
we pay a premium at the gas pump.
Ron Paul is a
Republican United States Congressman from Lake Jackson, Texas, a
physician, a bestselling author, and a former 2008 U.S.
presidential candidate.
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