Black Gold

An oil discovery has made a big splash in the news (2). It's odd because oil is discovered all the time. This one is rather large but it's in deep water, 30,000 feet deep. That's over five miles.

People get excited because we're told that the US is too dependent on foreign oil and this will move us toward independency. If we had all our own oil, terrorism would just dry up. Nothing could be further from the truth.

The United States economy is global and is so inter-connected with other economies that words like dependency don't have any meaning. We are dependent on the rest of the world and they are dependent on us. You don't grow your own vegetables because it's cheaper for you to work at what you do best and buy them at the store. It's called specialization of labor. It affords everyone a better standard of living through Ricardo's theory of comparative advantage.

The luxury we afford ourselves today comes from the specialization of our economy away from labor intensive, low yield jobs. The US specializes in high tech services. This puts us at the top of the food chain. Adding oil into the market will certainly help us but it will also help other countries. Oil is a global market, after all. We will do better to concentrate on education and development rather than finding oil, that is, staying on top of the food chain.