Okay, enough politics. Back to the Money.

The big topic this week -- and for the last few weeks I suppose -- is the huge run up in the price of oil. Larry Kudlow of the National Review has a great piece that states that $55 a barrel crude is simply unsustainable and repeats suspicion that I've voiced privately but never blogged: that the price of oil is being kept artificially high by speculators. His money quote:

It is rumored that hedge funds have used low interest rates to leverage and borrow for the purchase of oil market contracts. Big oil companies may also be speculating on higher future oil prices, with or without leveraged borrowing.

Interesting if true.

I also suspect that the Saudis are starting to get worried about sustaining this as well. They are, after all, one of the primary beneficiaries of this windfall. In this story reported by CNN, the Saudis have decided that prices are too high and that perhaps, OPEC should open the spigot. Why? Maybe this piece in of all the places The New York Times will help. In it Secretary of the Interior Gale Norton hammers home the point that we can pull an enormous amount of oil out of ANWR without doing a whole bunch of damage to the environment. If you couple that with another piece in the Wall Street Journal from about a month a go and you can see the sheikh sweat: Money grafs by Peter Huber and Mark Mills:

The cost of oil comes down to the cost of finding, and then lifting or extracting. First, you have to decide where to dig. Exploration costs currently run under $3 per barrel in much of the Mideast, and below $7 for oil hidden deep under the ocean. But these costs have been falling, not rising, because imaging technology that lets geologists peer through miles of water and rock improves faster than supplies recede. Many lower-grade deposits require no new looking at all.
To pick just one example among many, finding costs are essentially zero for the 3.5 trillion barrels of oil that soak the clay in the Orinoco basin in Venezuela, and the Athabasca tar sands in Alberta, Canada. Yes, that's trillion--over a century's worth of global supply, at the current 30-billion-barrel-a-year rate of consumption.

Then you have to get the oil out of the sand--or the sand out of the oil. In the Mideast, current lifting costs run $1 to $2.50 per barrel at the very most; lifting costs in Iraq probably run closer to 50 cents, though OPEC strains not to publicize any such embarrassingly low numbers. For the most expensive offshore platforms in the North Sea, lifting costs (capital investment plus operating costs) currently run comfortably south of $15 per barrel. Tar sands, by contrast, are simply strip mined, like Western coal, and that's very cheap--but then you spend another $10, or maybe $15, separating the oil from the dirt. To do that, oil or gas extracted from the site itself is burned to heat water, which is then used to "crack" the bitumen from the clay; the bitumen is then chemically split to produce lighter petroleum.

In sum, it costs under $5 a barrel to pump oil out from under the sand in Iraq, and about $15 to melt it out of the sand in Alberta. So why don't we just learn to love hockey and shop Canadian? Conventional Canadian wells already supply us with more oil than Saudi Arabia, and the Canadian tar is now delivering, too. The $5 billion (U.S.) Athabasca Oil Sands Project that Shell and ChevronTexaco opened in Alberta last year is now pumping 155,000 barrels per day. And to our south, Venezuela's Orinoco Belt yields 500,000 barrels daily.

So what, exactly, does all this mean? That folks in The States are seriously looking at cutting off the money river that's been flowing to the Mid-East simply because it is not in out strategic interest to do so. Subsidizing whack-job dictators is not really good business. And besides, it offends our American sense of self-reliance.

So I say, poke a hole in the Alaskan ice. Even if the Saudis open the spigot.