I gassed up this week for $2.95 a gallon. I left the service station, giddily, with a rare case of reverse sticker shock.
That’s because pump prices in California haven’t been so low since all the way back in 2010. And I thought it far more likely that I would see $5-a-gallon gas than a return to petrol priced below $3 a gallon.
What we are witnessing at the gas pump not only in the Golden State, but throughout the entire United States, may very well be a “Black Swan” event, to borrow the concept developed by the author-scholar Nassim Nicholas Taleb.
Such an event has three main features: It is seemingly improbable. It has a game-changing impact. And it is rationalized after the fact by the intelligentsia, as if it could have been anticipated.
Well no one thought it probable this year that the nation’s gasoline prices would decline 27 percent from the all time high set in 2008.
Also, dramatically lower pump prices have, in effect, given Americans an extra $60 billion in disposable income, which almost certainly will have a tremendous stimulative effect on the nation’s economy.
And the precipitous decline in the cost of gassing up has been rationalized in hindsight by such experts as Tom Kloza, global head of energy analysis for the Oil Price Information Service, as “(p)retty simple economics.”
Indeed, the self-styled “dean of U.S. oil analysts” explained to the Washington Post, “We’re using less. We’re producing more. That’s why prices are falling.”
But what we are witnessing now at the gas pump is not just the usual ups and downs in domestic fuel prices; it’s not simply the result of a temporary decline in the global price on oil.
We’re seeing Taleb’s Black Swan. And it’s the most disruptive event in both the domestic and international fuel markets since the Organization of the Petroleum Exporting Countries in 1973 declared an oil embargo against the United States for supporting Israel in the Yom Kippur War.
Indeed, in its oil market report this month, the International Energy Agency in Paris stated, “It is increasingly clear that we have begun a new chapter in the history of the oil markets.” Or, to put it more pointedly, the U.S. is no longer subject to the tender mercies of OPEC oil sheiks.
The U.S. is in the midst of an oil boom, producing 8.9 million barrels a day in October, its largest output in a quarter century. And that production is expected to increase to 9.4 billion barrels a day in 2015, firmly reestablishing the U.S. as the world’s foremost oil producer for the first time in four decades.
But not everyone is celebrating America’s resurgence as an energy superpower. The environmental Left actually is bummed that Americans are paying less to fuel up at the service station. That’s because it thinks oil inherently evil; the Bhagavad-Gita’s proverbial “destroyer of worlds.”
And President Obama apparently feels very much the same way. Indeed, an “infographic” on the White House website notes that while “domestic oil production has climbed” since he first took office, “even as we drill more, gas prices continue to rise.”
The takeaway, according to the Obama White House, is that “we can’t drill our way to cheap gas prices” and that we must “increase our use of energy from renewable sources such as wind, solar, and hydropower.”
Well, the Black Swan event we have witnessed this year at the nation’s gas pumps have disproven the argument promulgated by Mr. Obama and his allies on the environmental Left.
We can, indeed, drill our way to cheap gas prices – and the economic boon that comes with it.
Especially, if we added to the U.S. fuel supply crude extracted from the oil sands in Alberta, Canada, shale oil beneath Alaska’s North Slope and black gold recoverable from California’s Monterey Shale deposits.