Governor Palin has been very outspoken about the need to become energy independence by opening up drilling both on and offshore in Alaska and through the country. Energy independence is interrelated with multiple levels of security. Producing more of our own energy helps protect us from the threats of dangerous regimes who are also energy producers and helps shields us from higher prices of oil when their is instability in those countries. Energy independence also produces American jobs providing economic security. Additionally, there is an interrelatedness between energy independence and monetary security. This is yet another issue that Governor Palin has been prescient on. On October 9, 2009, Governor Palin wrote a Facebook post in response to discussion that an international currency should replace the American dollar as the global currency. She discussed how the devalued dollar, energy independence, and the national debt are all connected:
The British newspaper The Independent reported today that Gulf oil producers were negotiating with Russia, China, Japan and France to replace the dollar in pricing oil with a basket of currencies. According to the Wall Street Journal, Arab oil officials have denied the story, but even the possibility of such a talk weakens the dollar and renews fears about its continued viability as an international reserve currency. In fact, today a United Nations official called for a new global reserve currency to replace the dollar and end our “privilege” to run up huge deficits. We can see the effect of this in the price of gold, which hit a record high today in response to fears about the weakened dollar.
All of this is a result of our out-of-control debt. This is why we need to rein in spending, and this is also why we need energy independence. A weakened dollar means higher commodity prices. This will make it more difficult to pay our bills – including the bill to import oil.
In his book Architects of Ruin, Peter Schweizer points out that the Obama administration is focusing primarily on “green energy,” while ignoring our need to develop our domestic conventional energy resources. We’re ignoring the looming crisis caused by our dependence on foreign oil. Because we’re dependent on foreign nations for our oil, we’re also at their mercy if they decide to dump the dollar as their trade currency. We can’t allow ourselves to be so vulnerable to the whims of foreign nations. That’s why we must develop our own domestic supplies of oil and gas.
Governor Palin recognized that there is a relationship between a devalued dollar and higher energy prices. At the time that note was posted, oil was around $70 a barrel and gas prices were at about $2.46 a gallon nationwide. More than a year later, in November of 2010, following the Fed’s decision to engage in a second round of quantitative easing by essentially printing hundreds of billions of dollars, Governor Palin shared these words to a trade association meeting in Arizona (emphasis mine):
The Fed hopes doing this may buy us a little temporary economic growth by supplying banks with extra cash which they could then lend out to businesses. But it’s far from certain this will even work. After all, the problem isn’t that banks don’t have enough cash on hand – it’s that they don’t want to lend it out, because they don’t trust the current economic climate.
And if it doesn’t work, what do we do then? Print even more money? What’s the end game here? Where will all this money printing on an unprecedented scale take us? Do we have any guarantees that QE2 won’t be followed by QE3, 4, and 5, until eventually – inevitably – no one will want to buy our debt anymore? What happens if the Fed becomes not just the buyer of last resort, but the buyer of only resort?
All this pump priming will come at a serious price. And I mean that literally: everyone who ever goes out shopping for groceries knows that prices have risen significantly over the past year or so. Pump priming would push them even higher. And it’s not just groceries. Oil recently hit a six month high, at more than $87 a barrel. The weak dollar – a direct result of the Fed’s decision to dump more dollars onto the market – is pushing oil prices upwards. That’s like an extra tax on earnings. And the worst part of it: because the Obama White House refuses to open up our offshore and onshore oil reserves for exploration, most of that money will go directly to foreign regimes who don’t have America’s best interests at heart.
Again, Governor Palin saw the effect of a weakened dollar on energy prices. Now the price of a barrel of oil is just below $100 a barrel and nationwide gas prices are hovering at about $4 a gallon. A study just released by the Congressional Joint Economic Commission, a bipartisan and bicameral committee, shows that the devalued dollar has added $17.04 dollars to the price of a barrel of oil and 56.5 cents to the price of a gallon of gas.The Weekly Standard reports:
The weakening of the dollar since 2008 has added 56.5 cents to the price of gasoline, the congressional Joint Economic Committee (JEC) has found. The average price of gasoline would be $3.40 per gallon, instead of the current average price nationally of nearly $4, if the dollar hadn’t declined.
When the Federal Reserve uses loose money to boost the economy in the short-term, consumers pay the price,” the study said. Because oil is traded in dollars, oil prices increase to compensate for the falling value of the dollar. And the price of gasoline at the pump also increases.
“Since the Fed launched its program of quantitative easing in late November 2008, the value (trade-weighted) of the U.S. dollar has declined 14 percent,” the study calculated. “The declining value of the U.S. dollar has added $17.04 per barrel to the price of oil (Brent Crude),” thus driving up the price of gasoline.
“Arguably there are other factors affecting the price of gasoline than just the price of oil,” according to the study. “[G]iven that oil is the primary input to gasoline and the close correlation [between oil and gasoline prices],” JEC Republicans said it is possible “to determine how much of the current price of gasoline is attributable to the declining value of the dollar.
Suffice it to say, Governor Palin was right again, and she saw it nineteen months before everyone else did–the value of the dollar effects energy commodity prices which can affect prices throughout the economy. Printing hundreds of billions of dollars is no solution for an economic boost, and in fact, it has done just the opposite. This brings us full circle, as Governor Palin said in November, the money the Fed has printed essentially is re-directed towards foreign countries for their oil, when we have the opportunity to drill for it here to provide security on multiple levels. Addressing America’s energy problem requires a strong energy policy and a prudent monetary policy, just as Governor Palin has promoted.