Vice President Biden, in humble contrition "confessed" that the Obama administration "misread" the depth of economic troubles it inherited. In doing so, in putting it into the terms he did, displayed a chilling lack of understanding of the economic landscape.
There seems no comprehension, and no mention, of how the cost of oil has encumbered the economy. Since February, or less than a month into the Obama presidency, the price of oil has doubled. It has moved quickly from some $33/barrel to over $72 barrel, and hovers around $66 barrel today.
The nation consumes some 20 million barrels of oil daily. A doubling of price to the current circa $66/bbl dollars means a daily additional "tax" on American consumers and industry of some $660 million. Simple arithmetic: 20 million barrels by $33 (the difference in today's $66/bbl price to February's $33/bbl) totals $660 millions a day. In rough numbers, making allowances for variations from these benchmarks both up and down, the massive total cost to the economy impacted by the doubling of oil prices from the end of February through the first days of July was nearly $70 billion. This real-time sum virtually neutralizes in large measure that portion of government's stimulus package that has been spent to date.
No it wasn't altogether "We misread how bad the economy was" it was more "We misread what was happening in the economy". Yes, and rightfully, alternative energy was seen to be a high priority of the administration. However, to the oil industry's cheer, there was little or no focus on the immediate and insidious impact of oil prices, their manipulation by OPEC and speculators who were given a pass, in spite of their machinations on oil prices and its profound impact on a faltering economy with mounting job losses and the steep contraction of discretionary spending due in large measure to the cost of energy.
Hardly any forceful initiative by the CFTC over the aberrations of oil trading worldwide, not only in the commodity exchange of New York, but in the offshore exchanges be it London, Dubai, Singapore, not to speak of the burgeoning over-the-counter market. The CFTC needs to pursue aggressive policies for far greater transparency in trading of oil futures -- to identify who and for whom trades are made, how much is being traded, and to what end.
And then the administration placated the oil industry and the likes of the American Petroleum Institute by blindly continuing to load up the Strategic Petroleum Reserve, purposefully or inadvertently, sending a signal that the doubling of oil prices is OK as far as it is concerned.
As the New York Times quoted a Deutsche Bank analyst today, "Crude oil prices appear to have been divorced from the underlying fundamentals of weak demand, ample supply and high inventories". Certainly the administration has its hands full, but clearly something is deeply amiss. The sooner Mr. Biden et. al wake up to this issue the better for all of us!