Why the Oil Price Is High
How to explain the oil price? Why is it so high? Are we running out? Are supplies disrupted, or is the high price a reflection of oil company greed or OPEC greed? Are Hugo Chavez and the Saudis conspiring against us?
In my opinion, the two biggest factors in oil's high price are the weakness in the U.S. dollar's exchange value and the liquidity that the Federal Reserve is pumping out.
The dollar is weak because of large trade and budget deficits, the closing of which is beyond American political will. As abuse wears out the U.S. dollar's reserve currency role, sellers demand more dollars as a hedge against its declining exchange value and ultimate loss of reserve currency status.
In an effort to forestall a serious recession and further crises in derivative instruments, the Federal Reserve is pouring out liquidity that is financing speculation in oil futures contracts. Hedge funds and investment banks are restoring their impaired capital structures with profits made by speculating in highly leveraged oil future contracts, just as real estate speculators flipping contracts pushed up home prices. The oil futures bubble, too, will pop, hopefully before new derivatives are created on the basis of high oil prices.
There are other factors affecting the price of oil. The prospect of an Israeli-U.S. attack on Iran has increased current demand in order to build stocks against disruption. No one knows the consequence of such an ill-conceived act of aggression, and the uncertainty pushes up the price of oil, as the entire Middle East could be engulfed in conflagration. However, storage facilities are limited, and the impact on price of larger inventories has a limit.
Saudi Oil Minister Ali al-Naimi recently stated, "There is no justification for the current rise in prices." What the minister means is that there are no shortages or supply disruptions. He means no real reasons, as distinct from speculative or psychological reasons.
The run-up in oil price coincides with a period of heightened U.S. and Israeli military aggression in the Middle East. However, the biggest jump has been in the last 18 months.
When Bush invaded Iraq in 2003, the average price of oil that year was about $27 per barrel, or about $31 in inflation-adjusted 2007 dollars. The price rose another $10 in 2004 to an average annual price of $42 (in 2007 dollars), another $12 in 2005, $7 in 2006 and $4 in 2007 to $65. But in the last few months, the price has more than doubled to about $135. It is difficult to explain a $70 jump in price in terms other than speculation.
Oil prices have been high in the past. Until 2008, the record monthly oil price was $104 in December 1979 (measured in December 2007 dollars). As recently as 1998, the real price of oil was lower than in 1946, when the nominal price of oil was $1.63 per barrel. During the Bush regime, the price of oil in 2007 dollars has risen from $27 to approximately $135.
Possibly, the rise in the oil price was held down, prior to the recent jump, by expectations that Democrats would eventually end the conflict and restrain Israel in the interest of Middle East peace and justice for the Palestinians. Now that Barack Obama has pledged allegiance to AIPAC and adopted Bush's position toward Iran, the high oil price could be a forecast that U.S.-Israeli policy is likely to result in substantial supply disruptions. Still, the recent Israeli statements that an attack on Iran is "inevitable" only jumped the oil price about $8.
Perhaps more difficult to understand than the high price of oil is the low U.S. long-term interest rates. U.S. interest rates are actually below the rate of inflation, to say nothing of the imperiled exchange value of the dollar. Economists who assume rational participants in rational markets cannot explain why lenders would indefinitely accept interest rates below the rate of inflation.
Of course, Americans don't get real inflation numbers from their government and have not since the Consumer Price Index was rigged during the Clinton administration to hold down Social Security payments by denying retirees their full cost of living adjustments. According to statistician John Williams, using the pre-Clinton era measure of the CPI produces a current CPI of about 7.5 percent.
Understating inflation makes real GDP growth appear higher. If inflation were properly measured, the United States has probably experienced no real GDP growth in the 21st century.
Williams reports that for decades political administrations have fiddled with the inflation and employment numbers to make themselves look slightly better. The cumulative effect has been to deprive these measurements of veracity. If I understand Williams, today both inflation and unemployment rates, as originally measured, are around 12 percent.
By pumping out money in an effort to forestall recession and paper over balance-sheet problems, the Federal Reserve is driving up commodity and food prices in general. Yet American real incomes are not growing. Even without jobs offshoring, U.S. economic policy has put the bulk of the population on a path to lower living standards.
The crisis that looms for the United States is the loss of its world currency role. Once the dollar loses that role, the U.S. government will not be able to finance its operations by borrowing abroad, and foreigners will cease to finance the massive U.S. trade deficit. This crisis will eliminate the United States as a world power.
COPYRIGHT 2008 CREATORS SYNDICATE INC.
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Always look forward to your work ... bravo
"This crisis will eliminate the United States as a world power."
Sooner the better - for us, in the States, and just about everyone else I suppose.
I suspect that Dr. Roberts is on solid ground. The reason the Saudis rebuffed the President is that we don't have a supply problem, but likely a speculation problem. Even the Washington Post wrote about it this week:
Investors' Growing Appetite for Oil Evades Market Limits
Hedge funds and big Wall Street banks are taking advantage of loopholes in federal trading limits to buy massive amounts of oil contracts
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/05/AR2008060504322.html
============
Also read this story on the testimony to the Senate last week:
Expensive gas
Senate told speculators causing oil madness
Committee hears about the 'runaway train' that has driven up fuel prices
http://www.sltrib.com/business/ci_9514415
I can't argue with any of this, but I'm sure that our own refusal to exploit American oil reserves off of our coasts isn't helping. This isn't just a speculation problem, it's a supply problem.
The environmentalists have shut down oil exploration, drilling and refining capacity, as well our building of nuclear power plants. None of that helps.
R. Cort Kirkwood @3:
You're right, but rolling back all the environmentalist measures and laws would be like fighting a disease's symptom rather than applying a cure.
The American people in general don't seem to know much about inflation. I was recently discussing economics with a friend of my aunt, and he seemed confused at my assertion that the economic stimulus package gimmick by Congress and the President will drive up food and gas prices. He did not believe that, and told me that it was always his understanding that "jump-starting" the economy was always in the country's best interest. My father shared his perplexity at my argument.
This just goes to show how the American people can be made to believe anything the political establishment in our government tells them. Basic knowledge of inflation and price-adjustment is just one thing that goes out the window.
I understand the causes for the rise in the price of oil to be five fold:
1. The devaluation of the dollar causing an inflation of the price of oil and other commodities.
2. The almost exponential rise is demand over against supply in China and India, among other places.
3. In conjunction with number 2, the nearing of or the reaching of peak oil. I believe that the Saudis know exactly how much oil remains under their sand and that they intend to marshal and nurse those reserves in order to extend the productive years thereof as long as possible. Therefore, they do not intend to bail out the devaluing dollar by increasing production and thereby mortgaging their future, i.e. shortening the years, dollars and political stability by overproducing in the short term.
4. Speculation.
5. Government regulation.
What's also fascinating is that only 17% of the money supply is in paper bills at any given time, the rest of it is in computers. Money is both a symbol/Fact in a complex society or social order that has gone beyond barter, but part and parcel of the symbol/& thus fact is the society's trust or confidence in it. It's obviously a balancing act between concern for liquidity and concern about inflation for the Fed, whose reason for being is to control inflation. Pumping out liquidity causes the latter, and one can wonder since inflation doesn't hurt the wealthiest people in the country only the middle class and the poor if those two groups of constituents are adequately represented in the Fed. If they are not then the allegedly *democratic 'system' is merely an oligarchy in Fact disguised symbolically as the former. That seems to be the case. That's why Obama recants or adjusts and goes hat in hand to AIPAC. This is an oligarchy. The Left and their successors the neo-cons have always been culturally hierarchical in the Jerusalem v. Athens paradigms with the latter being decidedly more democratic (they invented it.) I would argue that we were more of the Athens paradigm culturally up until the beginning of the 20th Century and since have been tilting toward the more hierarchical top-down Jerusalem model. Up until today with the advent of the W. Bush administration, wherein we are as a practical matter an oligarchy? And the rhetoric seems to be we're supposed to just now accept that due to 9/11. Why not just move the capitol then to Jerusalem and annex Israel as the 51st State? We were never shown AIPAC via the media and no one spoke of her much publically until recently. That is another shift or change. Perhaps the oligarchy now no longer needs its cover?
Mr. Peters,
Your #2 is incorrect. There has been an increase in supply and a flattening of demand in the US and Europe (which significantly exceed India and China in demand.) While demand has increased in India and China it has not outstripped supply from what I've read.
Otherwise, I think you're on the mark. (Now what can be done is another question; little in the near term except as to speculators and the value of the dollar.)
Best
All the talk about increased demand in oil from China and India is just a diversion. They don't want us to notice the obvious: a barrel of oil cost about $20 before the war. The high price of oil is attributed to one thing and one thing only: Bush's war in the Middle East. My guess is that the recent food shortages are indirectly attributable to the high cost of fuel as well.
Mr. Peters' cogent summary, particulary with respect to Chinese demand, means that we must begin oil exploration in the U.S. now, and begin building nuclear power plants immediately to meet our energy needs.
The latter would, by the way, dramatically improve our environment if we would shut down this hideously dirty coal-fired abominations that befoul our air.
The IAEA announced today that oil demand will fall again to a six-year low. In 2002, oil traded at $25/bbl. Demand dropping to a level at or below 2002, yet with prices at almost six times the level of 2002, shows that demand is not the driver of this price increase.
Rather than exploration will take years to bring on line (and money that would be better spent on expanding nuclear power), the gov't should look to the speculators.
An excellent analysis by Paul Craig Roberts.
I long for the day when we no longer have to report things in Dec 07 dollars, for example. That we have to do that, that inflation is a built in and accepted given, is a large part of the problem.
@ Mr. Wilder:
Yes, the IEA did say demand was dropping, but that is because because of high prices and people using less, not because of excess supply: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/10/bcniea110.xml.
A key line: "According to the IEA, the rise in oil prices was 'not just about geopolitical risks,' adding that the supply situation 'remains tight.'"
Mr. Peters @ #5 your point 3. re: the saudis is cogent. They also have said they don't believe oil is the future having accepted the problem of global warming. It doesn't mean every last drop will not be extruded from the earth in behalf of petroleum products but they suspect global warming will eventually assist their nursing of what remains under their sands. It's still a mystery to me why they wouldn't want to increase production right now since money today (especially dollars) is worth more now than money tomorrow. Maybe they suspect it would simply make the U.S. even more belligerent in behalf of Israel as a player in the middle east. Gosh Israel is such an asset for us, anyway you look at it. The white man's burden never seems to end or even abate.
@ Mr. Wilder (10)
Demand for oil may be falling, as you right observe, but that is only because the price is rising so quickly.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/10/bcniea110.xml
Key point; "According to the IEA, the rise in oil prices was 'not just about geopolitical risks,' adding that the supply situation 'remains tight'."
And this, from CNN: "Oil Jumps $6 On Shriking Stockpiles" (http://money.cnn.com/2008/06/11/markets/oil/index.htm?postversion=2008061114)
Not to contradict myself, but the trading today occurred on negative supply reports both domestically and from the international agency. And China demand increases were higher than I'd thought (25% increase for May year-over-year.)
http://www.nytimes.com/2008/06/12/business/worldbusiness/12oil.html?hp
Looks like I'm wrong on supply and China demand, at least as part of the problem. Still, I'm skeptical and think the other factors identified by Dr. Roberts may be more of the immediate cause. (Supply and China/India demand being more long term.)
http://www.nytimes.com/2008/06/12/business/worldbusiness/12oil.html?hp
Let us not forget that major corporations own America. The government is a part of America, Inc. It's somewhat like the old days in that corporations had departments like Payroll, Account Payable, etc but now they each have a department of Government on their staff. It will make no difference who becomes the next president as both candidates are beholden to Wall Street and that ilk.
Regarding environmentalist versus Big Oil, ask yourself this question: Why should Big Oil drill when it can easily ramp up the price and sit back using its existing wells that are now pumping out record profits for them and the Wall Street crowd? I mean, why spend money to look for and drill new wells as profits from existing wells are making Big Oil even bigger?
The idea that environmentalists are to blame does not wash. Let's get real, whom do you think has more money and clout in this has-been, corrupt country, environmentalists or multibillion dollar oil people? Have you noticed that when oil companies want to drill they almost invariably name an area that is bound to evoke protests from environmentalists? Why is it that they just can't find other places that are of little or no concern to environmentalists? Answer - because the oil cartel in this country needs to blame someone. It really doesn’t want to knock the good thing it has going!
Welcome aboard the USS Titanic, a ship with a broken rudder, no captain at the helm and an iceberg dead ahead!
@ Mr. Wilder (18)
How about this: Perhaps the speculators and speculating because they know the supply is shrinking, as CNN reports, and such speculation may well be driving some of the price increase. But if that is true, that is why drilling here and now might lower oil prices because supplies might not longer be perceived as shrinking and reduce the profit of speculating.
oh, Kmarx ... your namesake's alienated take on history cut deep since it was in Fact honest. So? It just lent credence later to your/his half-baked materialism and its ensuing, alternative 'metaphysics' - not facts or wholeness or truth.
You took not truth but a derivative of it (just like the metaphysics your critiqued) and called us, me, you, mankind 'only' the material of labor. That 'Believed' as if truth - it led in other forms - to the sign over Auschwitz "Work Makes Free" and to us all today not only not being persons (like the holy ghost or christ or god) or even customers, but "consumers." My dog isn't even only a consumer. He's Max.
You sought to replace what you considered a one-sided metaphysics with your materialism which only 'proved' - [ask in the worst case scenario the cambodians or the millions dead russians or chinese] - to be a metaphysics, as well as one-sided and worse than the old in that it also jettisoned the more reliable traditional, (for all of its imperfections as well...)... it still sees and embraces persons.
The problem is not that this world isn't 'material' it is - the PROBLEM is that your half-baked notion of materialism has not yet been fully explored - since you were half-baked too in the imperfect world, as well as your onclusions - after you got off to a good start in your look upon history.
Questions?
Shame on you. Yes, remember - "shame." but you jettisoned that as well. Shame on you.
Here is a presentation that Lindsey Williams held at The Granada Forum in October, 2007. Lindsey Williams was prophetic about the price of gas.
http://video.google.com/videoplay?docid=3340274697167011147
Sorry for rambling in my #21 ... in a nutshell marx-good in analysis of history - yes, very fresh and poignant. BAD afterward in what he subsequently took himself serious about... I only wonder why we bought into that later detritus? ... I think I know the answer. We couldn't yet hold two apparently contradictory thoughts in our head simultaneously. Sadly if his history was right (it was and improved our perception) then what he said afterward (his B.Sh-t) must be right too. WRONG. but I know very smart folks yet today who still buy into the later B.S. ... If you don't know why you do that mistakenly (and you're one of those very smart folks nonetheless) then I would say go up and read my #21.
People have said on this site I'm self-referring and faulted me for it... I'll accept that if my motives are impure. So far they're not. I have no other agendas to my knowledge. If someone discerns other agendas in me that I do not see yet myself - point them out in the specific. tks. p.s. the sick and silly will to power is sly... i'm on d'hat bithch... she ain't on me to my knowledge. put down that apple Eve. put it down. NO i don't want a bite - bithtch. (humor.) you'll only blame me later, as usual.
Can't we also have fun herein? Why take ourselves too seriously?!
Considering that oil is a globally traded commodity, it is doubtful that increased North American production, no matter how loosely regulated and far flung, would have much impact on pricing in the short term, if ever. Unless a discovery not now even imagined is brought on line, OPEC in general and the Saudis in particular will enjoy the sole power to swing overall production quantities.
A congressional declaration of open drilling season, however, might break the back of the speculative element in the current price.
Mr. Kirkwood,
You may be correct. However, the price has more than doubled in one year from $60 to $138. I cannot see how either supply or demand could alter so quickly in that period of time to cause such a meteoric increase in price. My point, as with many other instances of economic distortion in our history, look to the speculators. Men of paper who are the enemies of Middle America and should not be given quarter.
Webmaster-
The Amazon.com Associates Context Links Widget often seems to slow down the loading of pages for me, sometimes very much when comments are many.
I thought gas is purchased and sold in dollars?
I pray every day that the U.S. or Israel does attack Iran. Especially now that Iran has said they will retaliate by launching missile attacks on all oil carrying ships and oil producing facilities in the Middle East. That will be the end of the United States - $12 / gallon gas, here we come!
Robert Borne, you're genius.
I agree. But what can we do about it?
McCain will be another Bush and continue down the exact same path.
Obama will spend the money in different ways, but the system will be the exact same.
The only solution is a man like Ron Paul.
He wants to overhaul the monetary system. He wants to cut government spending (not 5% or 10%, but more like 50%). He wants to have a non-interventionist foreign policy. He wants the free market to regulate commerce.
All of his ideas, which are all supported by the SUPREME LAW OF THE LAND, the Constitution, will support the American people to a better life in a better country in a better world.
He may be out of the race now, but the revolution must continue!
The production of oil fell for the first time in almost a decade in 2007. here's the url: http://ukpress.google.com/article/ALeqM5g2kVVPJeledbFjgGV41KHTnAag6Q
From the report: Global oil production fell last year for the first time since 2002 while consumption carried on rising, oil giant BP has said.
World production fell by 130,000 barrels per day last year to 81.53 million, the company said in its 2008 statistical review. But usage rose by 1.1% to 85.22 million barrels per day, outweighing production by nearly 5%. The rise was thanks to soaring demand for the fuel in emerging economies such as China, Latin America and Africa.
Oil production fell in 2007, and it has fallen a little bit more here in the first half of 2008. At the same time, as predicted by Hubbert's peak oil model, demand is continuing to rise in both countries that produce oil and countries where oil is heavily subsidized.
In every nation oil production has risen to a peak and declined thereafter. The same thing will happen to the Earth, it's only a question of when, and the answer is probably 2006 was the peak.
So when you say that there is no "fundamental reason for oil prices to be so high" there actually is: demand is now higher than supply. In the 1970s supply shortages of 5% led to price increases of 50%.
http://www.petroleumequities.com/Figure2A.jpg
Speculation (or not):
I've been reading around, and an expert on the matter has quite an interesting opinion and analysis. His name is Philip K. Verleger, Jr.
He basically asserts that the principal driver to the price of oil is not speculators, but rather the dramatic increase in demand related NOT to China or India, but to the US strategic reserve's demand for sweet crude.
To boil it down: Oil is extremely price sensitive to minor changes in demand. The US strategic reserve has dramatically increased the demand for a particular type of crude, called sweet crude. This is what is used to make a large portion of Gasoline and Diesel fuel, due to ecological regulations on sulfur content.
Since the US strategic reserve is increasing its reserve of a significant amount of sweet crude, this is having a significant impact on Oil prices.
It's a VERY interesting read. His website is here:
http://www.pkverlegerllc.com/publications.html
Specifically, the article that goes into detail is here:
http://www.pkverlegerllc.com/PKV%20December%20Senate%20Testimony.pdf
This is the senate testimony he gave in December 2007.
In quoting #1 Greg DeValt
“This crisis will eliminate the United States as a world power.”
Sooner the better - for us, in the States, and just about everyone else I suppose.
Do you want China to be the world power? No wait, why not Russia ? Or maybe the socialist, elitist leadership of the EU where 10 percent plus unemployment is norm? So our grand parents died so you could make a statement like that? Get the hell out of the country.
Yes we are getting taken by the speculators and it is exasperated by the increase of demand by growth countries such as China and India coupled with the FOOLISH monetary policy of the Fed who are just bailing out the banks in the short term.
But saying it would be a good thing if we crashed and burned and let someone else call the shots for the next century equates Greg DeValt's I.Q. to that of plastic I'm typing on.
We have plenty of oil in Alaska, Texas, and one other region recently found...however the government (ie Bush 'n' company) ordered these oil drilling locations in the U.S. to be closed, just in time to enter the Iraq war 5 years ago. Convenient, no? According to many sources, we have enough oil to supply our country till at least 2050, if not longer. But the greed of our nation's leaders and the oil companies is so strong that they neglect "we the people," and thus import oil at outrageous prices. We get stuck with the bill...and it's a BIG one.
thats funny, the US dollar index is breaking out to new highs in recent days ..yet oil has not dropped one bit. Its actually going up as the dollar is strengthening.
What media inspired info will you offer next, that nuclear energy is baaad? or drilling in ANWR is going to kill off the elk and caribou there?'
---------
also, why did oil go up $6 the DAY BEFORE Israel made that announcement of possibly hitting Irans nuclear facilities?
I wonder who "speculated" + bet that much money to drive the price up $6 in one day, as big a move as when Katrina hit. Who had this insider information?? *cough* err.... Goldman Sachs *cough*....
It then went up another $11 the day Israel did make that announcement. Why insider trading/manipulating commodities is legal is the real question here.
We are in a time of evil leadership. It's about money, power and no responsilbilty for waste. Cheney should be tried for treason.
Look at Halliburton value before 2000 and now. It's a national disgrace. Is there any hope for sanity?
Between Canada and the USA, there is about 6 times more oil than all the middle east combined
Tar sands Alberts....About 1 trillion barrels total
Tar sands Saskatchewan...More than Alberta
Bakken oil field......500 Billion barrels yes that's a B
Prudhoe Bay Alaska.....producing 2 million barrels/day
Gull Isalnd ......4 times the size of Prudhoe
Kuparuk.............Twice the size of Prudhoe
There is enough light sweet crude in Gull Island alone to supply the USA at current consumption for 200 years
Oil supply is not the problem.......The government is.
We've gone from a stock market bubble to a housing bubble to a commodities bubble.
What's next? Tulips again?
You want to know what's crazy? That we are still dependent on oil at all. Forty years ago people began calling for alternative and renewable forms of energy, yet every step of the way the Republicans in Congress, on the take from Big Oil, have done their level best to to make sure that the United States would never become energy independent. They ESPECIALLY don't want "de-centralized" alternative energy, wherein each and every household or commercial/public building owns its own power source (as in solar panels or wind turbines etc.) and is no longer "on the grid" regularly paying some big energy company to provide them their power. It's really a scandal of the first order. They continue to give huge subsidies and tax breaks to the already richest industries on the planet, Big Oil and Coal, yet peanuts for R&D on renewables. This has, until recently, kept the price of gas just low enough to make the purchasing of an alternative system too expensive by comparison for the great majority of Americans. By design they created an unequal playing field.
You'd think that with the sudden spiking of gas prices recently, though, they would remember their supposed role of looking out for the American people and would realize that we should be investing in renewables - but you'd be wrong.
“Separately, Democrats also failed to get Republican support for a proposal to extend tax breaks for wind, solar and other alternative energy development, and for the promotion of energy efficiency and conservation. The tax breaks have either expired or are scheduled to end this year…. The oil companies could have avoided the tax if they invested the money in alternative energy projects or refinery expansion. It also would have rescinded oil company tax breaks — worth $17 billion over the next 10 years — with the revenue to be used for tax incentives to producers of wind, solar and other alternative energy sources as well as for energy conservation.”
http://www.huffingtonpost.com/2008/06/10/republicans-block-extra-t_n_106282.html
http://www.ens-newswire.com/ens/jul2002/2002-07-19-09.asp#anchor2
http://findarticles.com/p/articles/mi_m1525/is_4_85/ai_63127627
When Bill Clinton tried to make it fairer again the Republicans put the breaks on anything that could lead to a switch away from dirty energy (oil, coal, nuclear).
http://clinton4.nara.gov/WH/new/html/Tue_Oct_3_130025_2000.html
If the price was oil is high, then so should the price of gold be too. But the price of gold is slumping. I think Robert M. Peters is right in his 5 reasons above, with one critical reason missing: US and Israeli threats of attack and war against Iran. This brings in speculators to oil, as an attack would have an immediate effect on oil prices, but would not effect the price of gold. And like someone pointed out, before the USA started going rampage in the Middle-East, the price of oil was mere $20. This changed when Bush came to power, since he has only ever listened to 2 people in his government: Those of the oil companies and those of the military. Both of whom he has made immense wind-fall profits during his terms.
The most important article you'll read this year on oil prices (in 2 parts):
http://www.star-telegram.com/ed_wallace/story/651928.html
http://www.star-telegram.com/ed_wallace/story/659081.html
And here's the government's investigative conclusions to prove it:
http://hsgac.senate.gov/public/_files/REPORTExcessiveSpeculationintheNaturalGasMarket0.pdf
I encourage you to read this article, verify its facts in the government report (if you don't believe it), and forward this information to everyone you know who's fed up with the criminal run-up in oil prices.
THIS, my fellow American, is what we can do to bring oil prices back to normalcy: educate ourselves with FACTS and pressuring our government to do their job to protect us from criminal activity in the commodities markets.
From the government report:
"The inability of the CFTC to accomplish its statutory mission with respect to the trading of energy commodities presents a threat to the energy and economic security of the United States."
Remember when oil first spiked and started it's fast upward trend? It was after Katrina, when there was a supposed disruption in supply because of damage to piplelines/refineries. I've always been curious why prices didn't return to normal levels after these facilities were brought back online.
I'm not educated in economic theory or foreign policy, but I have played a lot of board games.
If one accepts that a critical resource (oil, in this game) is going to run out in the next couple of turns, one sort of has to accept that the price of it is going to go up sometime or another, and that is going to cause pain sooner or later. Once I've accepted that I'm going to feel pain, I often look to the endgame. Can I invest some pain now in burning out my opponents early, and then rise like a Phoenix?
Do you think we'll look back on this time as a happy (albeit bittersweet) accident when the middle east runs dry and we still have reserves in Alaska and off our coast? Maybe increasing US oil output is actually shortsighted, and we should instead start speculatively investing in small oil rig defending gunships and white tank paint.
The trick is to not invest so heavily in pain now that your fast-burning opponents can walk over you. I've occasionally accomplished that by carefully managing resources, and also by presenting an appearance of irrelevance. The latter is easier.
When we lie to ourselves about what the real rate of inflation is, then we can't understand what the real problems are with our economy. You got it when you remind us of the manipulation of the CPI during the Clinton Administration. I don't believe we will ever get to any published numbers like they had during the Depression because the rate of measurement would be "adjusted" again before that would happen. We need someone to publish using the old rates for comparison so we can truthfully measure our economy. Then we could see the truth about our economy. Honestly, what did we expect when we cut taxes, charged everything to the national debt and became financially dependent on China? This irrational debt through borrowing can't continue without severe pain, either through the hard steps needed to fix it, or in the continued pain of ignoring it.
hmmmm. first we ship american jobs to china because somehow this will allow for more free trade, and we will be able to sell american products to all those chinese making 20 cents an hour. and then, the 10% annual growth in china now means increased oil consumption which pushes up our price of oil, combined with liberal pressure not to allow any more drilling in the u.s. It would seem that liberals and the wall street gang. rockefellors, etc. work well together for their mutual benefit. at some point they will finally break the back of the american worker and middle class, and I guess that the problem will be liquidity, a weak dollar and a failure of americans to save more, while at the same time they failed to hold up the world economy as expected. so much for wallstreet and free trade logic.
Hmmm, maybe we could just use LESS of this NON - Renewable resource. Maybe instead of spending more money drilling in fragile ecosystems so that we can drive SUVs with only one person in the vehicle, and so we can have entertainment such as NASCAR we can invest in alternatives as we should have done back in 1979 (or earlier).
"Big Oil" and George Bush, and McCain will say we MUST drill offshore and we MUST drill in the Arctic Wildlife Refuge. But guess what happens when we do- we will still run out of oil someday, but we will also have destroyed our environment.
Using price increases and scare tactics is the way some industries/people operate to get more of what they want (money).
"We must have more (oil, trees, fish, etc) to process or we will shut down this (mill, rig, port, etc) and (hundreds, thousands) of people will lose their jobs". Sad part is, they eventually shut down operations anyway (with their pockets full) to rape and pillage another area. Man has been doing this for over 2000 years, wonder if we will ever get a clue.
You know - I must admit that until abut a couple of years ago I was totally ignorant (like the rest of the unwashed masses), and the more I learned about it and how it works - the madder I became.
But now the more I think about it - I must admit that my anger has been redirected towards congress - which created it and allows it to continue - and then - when you really think it through to it's logical conclusion - that saying of "when you point a finger at someone there are 3 others pointing back at you" applies.
"we the people" are the ones who elect (and reelect) these buffoons. Like the infamous Pogo cartoon said - "I have met the enemy and he is me".
1.Weak Dollar is one of the main reasons why Oil is getting expensive. All major US exporter countries sell OIL for dollar! As Dollar getting weak, they have to sell it at higher price! as the result, weak dollar pushes oil prices even higher!
2. US weak foreign policy
3. Bush and his administration wants OIL at high prices!
That simple...
The only thing that will help the American people get back on track is to throw out this greedy, corrupt administration and their appointees who are running our financial circumstances. Changes have been made in the last eight years that are crippling America. No, not the super rich America - just the tax paying regular America which the super rich are feeding off of now. Our blood has about run out.