Good oil, bad oil, snake oil

Last night, John McCain showed why he’s the wrong man to lead America. Forget the eye-rolling, the tongue juts and the slightly strained efforts to speak directly to Joe the Plumber: McCain’s big gaffe was his surreal attempt to describe a future in which America uses oil from Canada and the Gulf Coast, but not oil from the Middle East and Venezuela.

Asked to set a date by which he’d make America energy independent, McCain said instead that he’d aim - “within seven, eight, ten years, if we put our minds to it,” - to reduce America’s dependence on oil from places that don’t like us. “I think we can, for all intents and purposes, eliminate our dependence on Middle Eastern oil and Venezuelan oil,” he said. “Canadian oil is fine.”

That’s crazy on a number of levels. First up, oil is a fungible commodity that’s sold on a global market; a barrel is a barrel is a barrel, no matter where it’s produced. The interconnectedness of the marketplace means that there’s no practical way for America to wall herself off or to pick and choose the sources of her oil imports. (McCain, who last night declared himself a veteran free trader, really ought to understand this by now.)

What’s more, the nature of the oil business is such that even if America could gain enough oil from Canada and domestic sources to meet her needs - a mathematical impossibility - the cost of a barrel of oil would still be determined on the global marketplace.

That means that disruptions to the Venezuelan or Middle Eastern supply would drive up global prices, and consequently the price at the pump here in America, just as surely as if we were importing the oil directly. It also makes it impossible to starve our enemies of cash simply by refusing to buy their oil: the very act of consuming oil - even domestic or Canadian oil - ensures that our enemies will be able to sell their own supplies on the global market at the same price we’d have paid them directly.

There are only two possibilities here. Either McCain genuinely - but mistakenly - thinks that he can selectively reduce our dependence on oil from countries that aren’t our allies; or he knows full well he can’t deliver on his promises, but believes this kind of nonsense will play well with voters who don’t understand how energy markets work. Either McCain doesn’t get it, or he hopes we won’t get it; neither option inspires much confidence in his ability to run the country.

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