Robert Pretcher is disgusted.

The Yale University graduate, New York Times bestselling author, and top market guru has proclaimed, "Oil should fall to between $4 and $10 a barrel based on a technical analysis called Elliott Wave principle."

The Elliott wave is a technical model based on the Elliott Theory. The theory was promoted during the 1930s by the man who conceived it: professional accountant Ralph Nelson Elliott.

The basic hypothesis summed up by Elliott extrapolates that "because man is subject to rhythmical procedure, calculations having to do with his activities can be projected far into the future with a justification and certainty heretofore unattainable."

So, the cutting edge discipline of advanced technical analysis reveals that gasoline prices at the pump should be hovering around 50 cents. Yet the pump price as of this writing is pushing towards a national average of $3.50 a gallon—about half a buck away from the national all time high of $4.00.

And it's not just the Elliott Wave that reveals oil on the world markets is vastly overpriced. Supply and demand is a driving principle of economics. No economy has ever been able to escape the realities of supply and demand—the defunct Soviet Union discovered that to their chagrin.

Facts

The last time a barrel of oil sold for $10 was during 1974; that year gasoline sold for a mere 50 cents a gallon.

The cost of getting some barrels of oil out of the ground is as low as $1 to $10 a barrel. The average cost to pump crude in Saudi Arabia? About $10 a barrel.

U.S. "energy crisis" self-imposed

Yet the supply and demand that is driving the marketplace for energy—particularly oil—is an artificial construct. Oil prices are not being market driven, they're being driven by political agendas.

Despite the fact that the technical analysis of what a gallon of gas should be worth is accurate, the economic numbers are terribly skewed by policy. For the most part the policy is being driven by the political structure in Washington, D.C. and western European capitals which are hell bent on restricting growth, diminishing wealth, jacking up the cost of energy and squeezing the middle class out of existence in favor of some of the more "religious" aspects of environmentalism.

The huge oil reserves of the United States of America have been declared virtually verboten by US agencies and many elected representatives. While bemoaning America's dependence of foreign oil, policymakers charge ahead restricting the domestic production of self-sustaining energy in the name of environmentalism.

Despite the fact that the U.S. is sitting on the largest coal reserves in the world, the largest natural gas fields on the planet, and oil reserves estimated to dwarf those in Saudi Arabia, the federal government—and some states like Florida and California—have legislated the crucial resources as "off limits."

Regulations and taxation have also been carefully crafted to limit the ability to tap into domestic energy resources, refine them and bring them to the marketplace.

No new gasoline refinery has been built in America for almost 40 years. The shortage of gasoline supplies in the United States has become chronic—to the point where according to industry figures America is now importing up to 13 percent of its annual gasoline needs.

Artificially suppressing the acquisition of oil and the refining of it drives up costs across every economic sector. Much of the oil pumped from wells does not end up in the gas tank of automobiles. Oil is used extensively in the plastics industry, to make synthetic textiles, to create pharmaceuticals, and in agricultural products affecting the baseline cost of food.

As the cost of oil is driven up, so is the cost of transportation whether by ground, air or sea. Food prices rise, consumer goods prices soar, the cost of doing any business escalates—even the cost of running government increases…and the driving force is not marketplace pressures, not supply and demand per se, but government policy, edicts, interference and agendas.

And for what? To achieve the fantasy of making America "green?" To mandate building fleets of electric cars that many will not be able to run because the cost of electricity will skyrocket to three or four times its present levels? To bring America to the point of food riots? To make untold millions of Americans reach the unenviable position of being unable to afford to stay warm in the bitter freezes of winter and cool in the sizzling summer months?

Advanced technology has saved America

The amazing advances in drilling technology furthered by Howard Hughes in the 1950s and 1960s and enhanced mightily since then has allowed drilling into oil reserves at depths undreamed of by wildcatters 100 years ago. Oil reserves can be tapped as far as 40,000 feet down. The costs of bringing oil to the marketplace has dropped precipitously and so has the cost to refine it and transport it to the end users.

Unfortunately, those savings have been offset by a twisted labyrinth of Kafkaesque regulations, permits, licenses, fees and taxes.

If oil prices were driven solely by the inflation rate, a gallon of gasoline would have reached $6.00 a gallon by the late 1990s. The cost was kept low by innovations by the petroleum companies and—compared to inflation—the prices of the commodity continued to drop.

Today, if free market production were allowed free reign in America there would be no energy crisis. Oil, gas and coal would be plentiful, a gallon of gasoline as low as 50 to 60 cents before any federal or state excise taxes were added, and energy itself would be less expensive than at any time in history.

Even electricity would cost about one-tenth of the current rate per kilowatt hour.

There exists an old adage that "Man will destroy himself."

In the case of the U.S. and its irrational domestic energy policy—a world superpower with an economy dependent upon easy access to expanding and cheap energy—America is destroying itself.

And that is why Robert Pretcher is disgusted.

www.helium.com/items/2070877-why-gasoline-should-be-at-50-cents-a-gallon-now

Jan. 20, 2011