Things have not been going well of late for the ideologues who also wax economic regarding inflation, interest rates, austerity, etc. They’ve been wrong at every turn. Luskin, Ferguson, Bowyer, Laffer, Kudlow, the WSJ editorialists, and so on…
…I continue to be amazed that folks who can be so devastatingly wrong, for so long, on such a broad array of topics, can continue to hold sway…Interestingly, these same folks were stunningly wrong about a decade ago about when they banged the drum for war against Iraq. Overthrowing Saddam, of course, was a high priority for the neocons, and they needed to drum up broad support to get folks on board. What better lever to pull than to claim that oil prices would drop through the floor once Saddam was out of the picture and Iraqi oil flowed freely?
Here was the conservative line on what would happen to oil prices after we ousted Saddam…
Rand Corp (by recollection): Under a free market [ed. note: The author’s article was all about our liberation of Iraq], oil prices would probably fall to between $8 and $12 per barrel over the next 10 years — down dramatically from today’s price of about $25 per barrel…
Fortune: No one knows for sure which way things will go. But if you have to make a bet, the most likely scenario is that a year from now, with a new regime in Baghdad and long-dormant Iraqi wells finally pumping out crude, oil prices will be back in the mid-20s.
Heritage Foundation: An unencumbered flow of Iraqi oil would be likely to provide a more constant supply of oil to the global market, which would dampen price fluctuations, ensuring stable oil prices in the world market in a price range lower than the current $25 to $30 a barrel.
National Review: “…markets clearly expect lower prices. On the eve of hostilities, oil was selling for about $37 per barrel…But once it became clear that Iraq’s liberation was at hand, the price quickly dropped to about $28 per barrel, cutting our annual oil bill by $70 billion. With full Iraqi production, the price might drop to $20 per barrel or less, giving us the equivalent of an annual tax cut of about $120 billion per year…”
WSJ: Of course, the largest benefit–a more stable Mideast–is huge but unquantifiable. A second plus, lower oil prices, is somewhat more measurable…Postwar, with Iraqi production back in the pipeline and calmer markets, oil prices will fall even further. If they drop to an average in the low $20s, the U.S. economy will get a boost of $55 billion to $60 billion a year.
Time after time.
Thanks, Barry Ritholtz