Liveblog of Pickens on Hannity Show II

4:08 PM: Sean announces T. Boone to be on in the next hour. Supposedly to talk oil prices and how oil is jeopardizing our national and economic security. $700 billion has to come up, even if the oil price isn’t anywhere NEAR what is needed for $700 billion.

6:20 PM: AARGH! Stupid WIS radio! I just realized that I’ve been listening to a looped version of the first hour! So that means no liveblog. But I’ll try to see if I can find a clip of the broadcast and analyze that. But because Hannity’s website sucks, I doubt I’ll be able to find this…

How Did the Pickens Plan Calculate $700 Billion?

Everyone today is throwing around the number $700 billion.  Obama, McCain, Hannity, Limbaugh, the media.  And presumably, the source of the figure is from T. Boone Pickens and the Pickens Plan.

But where did that figure come from?

Pickens himself says its “At current oil prices, we will send $700 billion dollars out of the country this year alone”. But he doesn’t cite any sources for that information, nor does he calculate how he got that number. A search of the internet doesn’t come up with any answers either. So I’ll have to do it myself.

The end result: It’s the highest possible price for all petroleum imports (not just crude), but is a flawed number that is at least 8% too large and probably off by even more.

How I got those results are under the fold.

Laws of Economics Still Work

Crude oil settled down at $128.73 today, completing a $14 fall over the past three days.

There are some out there who say this is because of George Bush’s announcement dropping the ban on oil exploration and development on the outer continental shelf. And by some, I mean noted political hack, Larry Kudlow.

One of the biggest problems with analysis out there is that everyone ignores the first rule of statistics: correlation does not mean causation. Just because A went up at the same time B went down, doesn’t mean that A caused B to go down. They could be completely unrelated items. Most medical “studies” do exactly this.

Saying that Bush caused oil markets to go down completely ignores other much more pertinent information. Such as demand dropping, more information coming available that was the opposite of what those evil speculators were betting including increased supply and oil imports, not to mention a strengthening dollar.

Note that in not one of those stories was the Bush did anything mentioned. In fact, all of those things happened independently of some inconsequential announcement that the President made. In fact, as long as the law on the books says that no new areas are open to exploration, then the price shouldn’t change one penny.

(Note: the fact that the President can make law is pretty much unconstitutional. If Congress repealed the ban and the President still had the executive order, then I’m pretty sure that the presidential order would be unconstitutional).

So the lesson to take out of all this is that, the markets still work, and the laws of supply and demand say nothing about what the role of a president at all.