THE BLOG
05/16/2008 05:46 am ET | Updated May 25, 2011

Paul Krugman and the New York Times ' Pious Pontifications at the Pump

On May 12, upon reading Paul Krugman's bizarre Op-Ed "The So-Called
Oil Bubble,"
they must have been popping champagne corks at the
American Petroleum Institute. The New York Times, consistently off-base
when reporting on oil markets and their construct (please see "The New
York Times
' Hidden Hand on Oil's Agenda"
, 04.25 08)
permitted their resident economic guru to hit one out of the "Alice in
Wonderland" ballpark.

In an extraordinary piece of jejune analysis Mr. Krugman instructs us
that the rise in oil prices isn't the result of runaway speculation but rather
"of fundamental factors," and then repeats the standard oil patch saws
citing growing needs of emerging economies, difficulty in finding oil, etc.
Therefore "there's no good evidence that prices have gotten out of line."
There, words coming from the hallowed pages of the New York Times.
An oil flack's dream come true!

The nonsense continues. Speculation in oil markets is dismissed. According
to Krugman, higher prices due to excessive speculation would result
in a situation "in which supply exceeded demand. This excess supply would,
in turn, drive prices back down." So according to Krugman, in that this
hasn't happened, the vertiginously high oil prices as we now know
them are a legitimate reflection of market forces. Simple as that.
Economics 101. Oh, for the good old days.

That trading markets can be successfully manipulated is dismissed.
Think Enron and California utilities. Think CFTC investigation of
BP's alleged manipulation in crude oil trading. Look at India suspending
futures trading in foodstuffs markets because of the distortions that have
resulted. Think of the fire power inherent in Middle East sovereign wealth
funds, giving the capability to move oil and energy markets if they chose
to do so (are they, aren't they? an open question).

Then Mr. Kugman continues as though he had landed on this planet
from some outer celestial body made of blue cheese. Not a single mention,
not one, of the oil cartel, the Organization of Petroleum Exporting Countries
who control 40 percent of the world's oil supply and willfully and
collusively keep millions of barrels of supply off the market each day- and no
comment on what that has done to distort oil markets.

In repeating the oil industry mantra about the "difficulty in finding oil"
comes no coherent examination whatsoever of the veracity nor accuracy
of that statement considering the development and exploration work
being done around the world from offshore Brazil, to the South China
Sea and on.

He goes on to piously inform us that "France consumes only half as
much oil per capita as America" and voila, the last time he turned his gaze toward, "Paris wasn't a howling wasteland." What our good instructor overlooked
in his lesson is that in France, over 80 percent of its power grid is
sourced by nuclear energy. Ah details, and the good editors of the Times
dare not contest the anointed wisdom of their economics professor.

Then finally, and most dangerously, a baleful whitewash of high oil prices.
High oil prices are OK because "energy conservation becomes increasingly
important, in which many people may even -- gasp -- take public
transportation." That is the extent of discomfiture to the nation's citizenry
cited by Mr. Krugman. Certainly no heads-up from Krugman that the issue
here is not energy conservation, which is essential and must be acted upon
with or without high prices. The issue here is the price of oil and his
whitewash of a corrupted market (our OPEC friends, were they American or
chargeable under American law, would all be sitting in jail as massive
violators of anti-trust laws). What Krugman has done is
given legitimacy to a massive heist of billions out of our pocketbooks
into the voracious treasuries of the oil industry and the transfer of our
nation's wealth to malign regimes who are a danger to our values and future.

Mr. Krugman, you should be ashamed of yourself.