Post by: Desertdog on May 17, 2008, 02:01:27 PM
Saudi oil output hike would not solve US problems: Bush
http://www.breitbart.com/article.php?id=080517140327.thd0wmmy&show_article=1
US President George W. Bush said on Saturday that a hike in oil output by Saudi Arabia would not solve American energy problems.
"It's not enough, it's something but it doesn't solve our problem," Bush told reporters in Egypt's Red Sea resort of Sharm el-Sheikh.
Bush said he was "pleased" with a Saudi decision taken on May 10 to increase its oil production by 300,000 barrels per day in response to customers, but said that he was "also realistic" about what the Americans should do.
"Our problem in America gets solved when we aggressively go for domestic exploration. Our problem in America gets solved if we expand our refining capacity, promote nuclear energy and continue our strategy for the advancing of alternative energies as well as conservation," he said.
"One interesting thing about American politics these days is those who are screaming the loudest for increased production from Saudi Arabia are the very same people who are fighting the fiercest against domestic exploration, against the development of nuclear power and against expanding refining capacity." [/b]
Bush was in Egypt for talks with Palestinian leaders and to address the Middle East World Economic Forum which brings together 1,500 people, including heads of state, business leaders and ministers from 55 countries.
Post by: Gewehr98 on May 17, 2008, 02:52:31 PM
Quote
"One interesting thing about American politics these days is those who are screaming the loudest for increased production from Saudi Arabia are the very same people who are fighting the fiercest against domestic exploration, against the development of nuclear power and against expanding refining capacity."
However, the sooner we wean ourselves off the historical anomaly called a Petroleum Economy, the better we will be in the long run.
We're so heavily committed to it nowadays, if there was another serious reduction in supply like the '73 Arab Oil Embargo, we'd all run around peeing ourselves like babies in diapers.
Post by: vernal45 on May 17, 2008, 03:53:13 PM
You are correct. I work in the oil industry, and I can tell you straight up, there is enough oil in our own back yard to keep us going until another form of energy is found or put in place. One of the BIG reason we are dependent on foreign oil are the tree hugging, blissninny, democrats who do not want us to drill in our own back yard. Dont even get me started on this. If you are pissed about gas prices, thank a democrat.
Post by: roo_ster on May 17, 2008, 04:30:18 PM
However, the sooner we wean ourselves off the historical anomaly called a Petroleum Economy, the better we will be in the long run.
Bullhockey.
Knocking over the use of petroleum before a more economically rational alternative comes to the fore is a recipe for disaster and depression. For the foreseeable future, petroleum is the best bet if one desires prosperity and relevance.
Also, the Petroleum Economy is as much an anomaly as the Coal Economy before it. IOW, not at all an anomaly, but a rational phase of technological development.
Post by: grampster on May 17, 2008, 04:51:23 PM
However, the sooner we wean ourselves off the historical anomaly called a Petroleum Economy, the better we will be in the long run.
Bullhockey.
Knocking over the use of petroleum before a more economically rational alternative comes to the fore is a recipe for disaster and depression. For the foreseeable future, petroleum is the best bet if one desires prosperity and relevance.
Also, the Petroleum Economy is as much an anomaly as the Coal Economy before it. IOW, not at all an anomaly, but a rational phase of technological development.
Well said.
Having said that, the trick is to get the oil people to get really involved in alternatives because increased extraction and refining is a self defeating prophecy for them. Alternative energy will remain only a niche, but it is a niche that will extend the oil and gas bidness for another x number of decades. But the gas and oil guys should be the ones to expand that niche. We need free them up to exploit oil, gas and increase refining capability. Don't forget those refineries will go extinct once nuclear power has been expanded by 10 or 20 fold as well as geo thermal, current, wave, wind and solar tech. I believe solar, wind and the rest will always be niche energy sources. Nuclear power and fusion power is the way to go imho.
Bush's remarks are the smartest thing he's said in awhile. Too bad McCain is opposed to it. Of course, so is Obama.
Post by: Gewehr98 on May 17, 2008, 05:23:09 PM
Quote
Bullhockey.
Knocking over the use of petroleum before a more economically rational alternative comes to the fore is a recipe for disaster and depression. For the foreseeable future, petroleum is the best bet if one desires prosperity and relevance.
Knocking over the use of petroleum before a more economically rational alternative comes to the fore is a recipe for disaster and depression. For the foreseeable future, petroleum is the best bet if one desires prosperity and relevance.
Save your expletives, Junior.
I didn't say we needed to jump into something without thinking about it first, did I?
F*&@ No! In fact, I DEFY you to state where I said that.
However, having personally been there and done that in 1974, everything old is new again, with an incredible feeling of deja' vu to boot. Fights at gas lines? Yup. People downsizing their gas guzzlers? Yup. People moving closer to their workplaces? Yup. Skipping the vacation trip to Mount Rushmore with the kids in the SUV this summer? Yup.
We are so far up to our eyebulbs on the amortized system that John D. Rockefeller and his cohorts created 100+ years ago, that we couldn't move one friggin' foot without suffering as a result. IOW, everybody wants to "explore" petroleum alternatives, but nobody wants to either foot the research/development bill, or budge on their personal comfort zones. You can see it here on APS, bitch, bitch, bitch, and yet no real suggestions as to how to fix it. Sure, we can drill for more somewhere, and somebody even came up with an explanation that oil replenishes itself (to the tune of several million barrels/day?) . That'll satiate us for what, a few more decades at best? We are a thirsty nation, dependent on a humongous amount of petroleum for darned near every aspect of our daily lives, from transportation of our fat butts to and fro, to movement of our goods and services, shipping all that precious gasoline to gas guzzlers, right down to the plastic packaging of our Twinkies. As a nation, we really don't have a pot to piss in, unless it's made from or produced by petroleum. That's a sad statement of affairs, and it's somewhat ironic that the Saudis told GWB to pound sand this week when he asked them to increase production.
I wonder if he acted like some twitching crack addict while he asked King Abdullah for another petroleum fix? "Dude, we need MORE!" The leader of the world's most powerful country, reduced to begging from his biggest dealer. Nice...
So in the meantime, we can continue to bitch and pay the oil man, or we can explore other ways to stay "prosperous and relevant". I may be a bit over the top with my off-grid solar electric system here and my biofuel vehicle, but I also expect $200/barrel crude before the end of the year, and I'm already seeing folks making serious lifestyle changes. To think I've saved some big-honkin' H3 driver several hundred gallons of gasoline already - they should be thanking me, for Gawd's sake. The dollar's weak, we're in a recession, and fuel prices are still going to go up further. Reality sucks, I know. IMHO, we deserve to get bitch-slapped, and hard, for thinking that we were going to run on cheap fuel forever.
Post by: MechAg94 on May 17, 2008, 06:34:16 PM
Anyway, not sure how true that is. Please comment if you know.
Post by: Headless Thompson Gunner on May 17, 2008, 07:54:06 PM
Anyway, not sure how true that is. Please comment if you know.
Very true. There are way too many people speculating in oil. There is far more money invested in oil futures than is reasonable. A few years ago it wasn't even feasible for the average amateur investor to buy futures. Now it's become easy, and even "trendy" (if that's the right word) to invest in futures. Lots amateur investors think that commodities in general, and oil in particular, are going to rise in price forever. "Oil? Why on earth would oil ever get cheaper?"
I have a sneaky suspicion that oil prices are going to tank. A lot of people are going to lose a lot, and I mean a lot, of money. Leverage is scary when it's working against you. It may not happen any time soon (probably not until interest rates rise again), but I'm betting that there's going to be a major oil price bust sometime.
Post by: wmenorr67 on May 17, 2008, 08:11:10 PM
As I stated in an earlier post it does no good to bring in 1000 barrels a day if you can only refine 800 barrels a day.
Post by: Parker Dean on May 17, 2008, 08:41:29 PM
To some extent I think this meeting with the Saudis was just a staged show put on by Bush and Co.
Not "to some extent" but rather guaranteed it was all show. Any professional government works out the results of heads of state meetings in advance and the actual meeting is ceremony. You might get a surprise announcement from some Third-world yahoo, but First and Second World government leaders don't like surprises, especially ones that make them look bad at home.
While I understand the political necessity of this for domestic consumption, what I hated about the whole thing was the appearance of the US President going with hat in hand to beg before the Bashaw. Basically says the US exists at the pleasure of the Saudi King. Grrrrrrrr!
Post by: MechAg94 on May 18, 2008, 04:49:42 AM
I do hear people say stuff about the arabs raising the price of oil. There are a lot of people who do not understand what is happening.
Post by: Sergeant Bob on May 18, 2008, 06:29:35 AM
Very true. There are way too many people speculating in oil. There is far more money invested in oil futures than is reasonable.
A few years ago it wasn't even feasible for the average amateur investor to buy futures. Now it's become easy, and even "trendy" (if that's the right word) to invest in futures. Lots amateur investors think that commodities in general, and oil in particular, are going to rise in price forever. "Oil? Why on earth would oil ever get cheaper?"
I have a sneaky suspicion that oil prices are going to tank. A lot of people are going to lose a lot, and I mean a lot, of money. Leverage is scary when it's working against you. It may not happen any time soon (probably not until interest rates rise again), but I'm betting that there's going to be a major oil price bust sometime.
A few years ago it wasn't even feasible for the average amateur investor to buy futures. Now it's become easy, and even "trendy" (if that's the right word) to invest in futures. Lots amateur investors think that commodities in general, and oil in particular, are going to rise in price forever. "Oil? Why on earth would oil ever get cheaper?"
I have a sneaky suspicion that oil prices are going to tank. A lot of people are going to lose a lot, and I mean a lot, of money. Leverage is scary when it's working against you. It may not happen any time soon (probably not until interest rates rise again), but I'm betting that there's going to be a major oil price bust sometime.
The "Petroleum Bubble©"!!!!!! It's mine! All mine!!
Post by: Manedwolf on May 18, 2008, 06:31:28 AM
The "Petroleum Bubble©"!!!!!! It's mine! All mine!!
Petroleum bubbles would make a terrible mess of the carpet. I think soap bubbles are safer.
Post by: mek42 on May 18, 2008, 03:53:02 PM
I saw something about a personal ethanol mfg device that looked kind of like a gas pump on TV the other night. They said it is in development and has a target price of $5 - 10K. Uses sugar, not corn. Any thoughts on this as a stop-gap alternative?
I really wish the environmentalists would come towards the middle ground and accept nuclear power as an alternative to fossil fuel electricity.
Post by: Desertdog on May 18, 2008, 06:23:08 PM
Quote
I really wish the environmentalists would come towards the middle ground and accept nuclear power as an alternative to fossil fuel electricity.
My personal belief is that the environmentalists are trying to return the common folk to the 1800s. No motor vehicles, no electricity. The motor vehicles and electricity will be for the elite environmentalist.
Post by: Sergeant Bob on May 18, 2008, 06:36:56 PM
I really wish the environmentalists would come towards the middle ground and accept nuclear power as an alternative to fossil fuel electricity.
IIRC, half of the natural gas used in the US is for the production of electricity. Switching to nuclear would certainly reduce quite a bit of our dependence on petroleum.
Shell's Gas To Liquid (clean burning diesel) program has been pretty successful in the cities where it has been tried.
Post by: roo_ster on May 19, 2008, 10:18:39 AM
Quote
Bullhockey.
Knocking over the use of petroleum before a more economically rational alternative comes to the fore is a recipe for disaster and depression. For the foreseeable future, petroleum is the best bet if one desires prosperity and relevance.
Knocking over the use of petroleum before a more economically rational alternative comes to the fore is a recipe for disaster and depression. For the foreseeable future, petroleum is the best bet if one desires prosperity and relevance.
Save your expletives, Junior.
I didn't say we needed to jump into something without thinking about it first, did I?
F*&@ No! In fact, I DEFY you to state where I said that.
Save your bluster, Codger.
And your straw-men.
Between the two and the general tone, it seems you are hoping for some sort of economic calamity to befall this nation.
Besides, the following sentence has some pretty serious problems with reality:
Quote
However, the sooner we wean ourselves off the historical anomaly called a Petroleum Economy, the better we will be in the long run.
Unless also one considers things like coal, water power, steam & internal combustion engines anomalies; petroleum is not an anomaly. Also, you wrote "...the sooner...the better..." without qualification. Usually "the sooner, the better" is not indicative of dispassionate study and meditation.
Quote
IMHO, we deserve to get bitch-slapped, and hard, for thinking that we were going to run on cheap fuel forever.
Maybe you deserve a bitch-slapping for thinking such. If so, take a number & get in line. I hear some folk pay good money for that kinda treatment. The rest of us who experienced some of the same history as you have and do not limit their data consumption to the latest American Dancing with the Star's Big Brother updates will forgo the bitch-slapping and work the problem or suck it up & drive on.Yep, drive on. Because the "Petroleum Economy" and the internal combustion engine is here to stay for at least another 50 years.
Past 50 years, I bet something else will prove itself superior to petroleum & folks will transition of their own accord. Forcing the issue with gooberment subsidies and mandates is a sure way to strangle any real progress. Just ask the Japanese how much gov't subsidy helped them whoop up on Intel & AMD in the CPU market...
For folks who are interested in data, below is a description of some fuels' densities, costs relative to costs.
Code:
solid/liquid density volumetric energy density mass energy density US retail/consumer cost
(mass/vol) (energy/volume) (energy/mass) (2007-05 prices in 2007 USD)
kg/m3 g/cm3 lb/USGal BTU/USGal MJ/m3 BTU/lb MJ/Kg USD/USGal USD/short_ton direct_subsidy/USGal USS/USGal_sub USD/BTU_usgal pct_rel_gas
petrodiesel 880 0.880 7.33 144238 40200 19689 45.68 $4.52 $1,234.21 $0.00 $4.52 $0.0000314 103%
biodiesel 920 0.920 7.66 135985 37900 17755 41.20 $4.25 $1,109.54 $1.00 $5.25 $0.0000386 127%
gasoline_reg 737 0.737 6.14 124862 34800 20345 47.20 $3.79 $1,236.07 $0.00 $3.79 $0.0000304 100%
ethanol 789 0.789 6.57 84318 23500 12837 29.78 $3.73 $1,135.46 $0.51 $4.24 $0.0000503 165%
coal_anthracite_bulk 1105 1.105 9.20 114977 32045 12499 29.00 $1.73 $37.51 $0.00 $1.73 $0.0000150 49%
coal_bituminous_bulk 833 0.833 6.94 117699 32804 16973 39.38 $1.49 $42.86 $0.00 $1.49 $0.0000126 42%
woodchips_dry_softwood_bulk 190 0.190 1.58 14998 4180 9482 22.00
water (for reference) 1000 1.000 8.33 - - - -
http://www.woodgas.com/fuel_densities.htm
http://en.wikipedia.org/wiki/Bituminous_coal
http://en.wikipedia.org/wiki/Anthracite
http://www.simetric.co.uk/si_materials.htm
http://www.unh.edu/p2/biodiesel/article_alge.html
http://en.wikipedia.org/wiki/Diesel
http://hypertextbook.com/physics/matter/density/
http://www.eia.doe.gov/
http://www.fuelgaugereport.com/
(mass/vol) (energy/volume) (energy/mass) (2007-05 prices in 2007 USD)
kg/m3 g/cm3 lb/USGal BTU/USGal MJ/m3 BTU/lb MJ/Kg USD/USGal USD/short_ton direct_subsidy/USGal USS/USGal_sub USD/BTU_usgal pct_rel_gas
petrodiesel 880 0.880 7.33 144238 40200 19689 45.68 $4.52 $1,234.21 $0.00 $4.52 $0.0000314 103%
biodiesel 920 0.920 7.66 135985 37900 17755 41.20 $4.25 $1,109.54 $1.00 $5.25 $0.0000386 127%
gasoline_reg 737 0.737 6.14 124862 34800 20345 47.20 $3.79 $1,236.07 $0.00 $3.79 $0.0000304 100%
ethanol 789 0.789 6.57 84318 23500 12837 29.78 $3.73 $1,135.46 $0.51 $4.24 $0.0000503 165%
coal_anthracite_bulk 1105 1.105 9.20 114977 32045 12499 29.00 $1.73 $37.51 $0.00 $1.73 $0.0000150 49%
coal_bituminous_bulk 833 0.833 6.94 117699 32804 16973 39.38 $1.49 $42.86 $0.00 $1.49 $0.0000126 42%
woodchips_dry_softwood_bulk 190 0.190 1.58 14998 4180 9482 22.00
water (for reference) 1000 1.000 8.33 - - - -
http://www.woodgas.com/fuel_densities.htm
http://en.wikipedia.org/wiki/Bituminous_coal
http://en.wikipedia.org/wiki/Anthracite
http://www.simetric.co.uk/si_materials.htm
http://www.unh.edu/p2/biodiesel/article_alge.html
http://en.wikipedia.org/wiki/Diesel
http://hypertextbook.com/physics/matter/density/
http://www.eia.doe.gov/
http://www.fuelgaugereport.com/
Post by: Gewehr98 on May 19, 2008, 10:30:24 AM
I've already lived through one oil-induced crisis. I'm somewhat incredulous that we as Americans have learned *nothing* from that experience.
I have a stepson who owns a 5.7L 4x4 Suburban. It sits in the driveway, and he's been borrowing mom's Hyundai because it doesn't cost him $167.00 to fill up. His comfort zone has been squeezed. I wonder how others will fare? What's your limit? $5.00/gallon? $6.00/gallon?
Yes, it's probably a safe bet that the current petroleum economy will be here another 50 years.
And those will be a damned interesting 50 years, I might add.
It's not as if we didn't see it coming, though.
Once again, I'll call it a historical footnote, just like the coal-burning years prior to John D. Rockefeller.
The "Let them eat cake" days are very much over, it's just that some didn't get the memo.
(Well, some did, I see they're laying off more folks supplying the Janeseville GM assembly plant - the one that builds Tahoes, Yukons, and Suburbans...)
Post by: Desertdog on May 19, 2008, 12:26:14 PM
Post by: Manedwolf on May 19, 2008, 12:27:14 PM
I'll bet the government is already seeing a drop in fuel taxes collectioned. Maybe that will spur them to permit more oil well drilling and refinery capacity being built, which would lower the price of motor fuel, which would increase sales and taxes collected
Nah. Dem majority, remember? RAISE TAXES!
Post by: RocketMan on May 19, 2008, 08:57:47 PM
Anyway, not sure how true that is. Please comment if you know.
Very true. There are way too many people speculating in oil. There is far more money invested in oil futures than is reasonable. <snip>
I have a sneaky suspicion that oil prices are going to tank. A lot of people are going to lose a lot, and I mean a lot, of money. Leverage is scary when it's working against you. It may not happen any time soon (probably not until interest rates rise again), but I'm betting that there's going to be a major oil price bust sometime.
Every past "oil bubble " has burst. The factors at work today aren't the same as past bubbles, but there aren't that many differences, either. We'll see about this one.
Post by: taurusowner on May 19, 2008, 09:35:25 PM
Post by: doc2rn on May 20, 2008, 06:26:42 PM
Post by: taurusowner on May 20, 2008, 08:10:53 PM
You cannot quadruple the plants that get turned into ethanol simply by "mandating" it. Not to mention it take 5 gallons of fresh water to make 1 gallon of ethanol. Where you gonna get that? Drain the Great Lakes?
Post by: seeker_two on May 21, 2008, 01:20:53 AM
http://www.star-telegram.com/ed_wallace/story/651928.html
Quote
In My Opinion: One law is causing prices to go through the roof
By Ed Wallace
Special to the Star-Telegram
"Theres a few hedge fund managers out there who are masters at knowing how to exploit the peak [oil] theories and hot buttons of supply and demand and by making bold predictions of shocking price advancements to come, they only add more fuel to the bullish fire in a sort of self fulfilling prophecy." National Gas Week, Sept. 5, 2005 as reprinted in the US Senate Permanent Subcommittee on Investigations report, "The Role of Market Speculation in Rising Oil and Gas Prices," June 27, 2006
Fiddling While We Burn
There it is in plain sight for everyone to see, exactly what Ive been reporting for the past few years: Many individuals who are investing in oil and natural gas futures are going out in the media and trying to convince the American public that either we are out of oil or there is a serious supply shortage of crude against worldwide demand. The question is: Does it surprise you to discover that the US Senate investigated the rigging of the oil market by speculators in the summer of 2006 and concluded that there was no supply and demand problem with oil? Did you know that their conclusion was that speculators were responsible for a 70 percent overcharge in the price of oil in the months leading up to the summer of 2006?
This from page 1 of the Executive Summary of that Senate investigation, there is this one troubling line: "Today, U.S. oil inventories are at an eight-year high, and OECD (Organization for Economic Co-operation and Development) oil inventories are at a 20-year high."
Thats odd because, in 2006, just like today, the media reporting covered the serious international shortage of oil and justified oils high price. Even more troubling is that the House of Representatives held a hearing this past December, ominously titled "Energy Speculation and Price Manipulation." How did it pass under the radar that both the Senate and the House studied the issue of price manipulation in our energy markets and both concluded that it was unregulated, massive trading in one futures market that was really driving up the price of oil and natural gas? And given that conclusion, why has Congress done nothing about it?
Investors Make the News, Literally
A week ago Goldman Sachs issued a new investor note, suggesting that somewhere between six months to two years, the price of oil could go into a "super spike" and prices jump as high as $200 per barrel. It became the major story of the night. Ignored in the reporting frenzy was that many legitimate and well-respected oil analysts dismissed Goldman Sachs prediction as groundless.
Get ready for the next shock to your system. In the past month we have added 11.9 million barrels of oil into our stock reserves, giving us 32.3 million more barrels of oil than we had on hand January 1. On May 5, we found out that for the second time in as many years, Iran was storing its excess crude oil on tankers in the Persian Gulf, because it had run out of storage space in the desert and was awaiting buyers for its heavy crude. That same day Saudi Arabia cut the discount price for its Arabian Heavy crude to $7.45, hoping to entice more buyers for immediate delivery. We didnt hear that news, either.
While researching my third article for BusinessWeek online about the worlds oil situation in 2008, I asked for the most current report from Oil Movements. Because the oil industry is not transparent, Oil Movements tracks every tanker at sea, from both OPEC and non-OPEC oil countries, along with their cargoes final destinations. Anne OShea responded immediately to my request with their report dated May 8, 2008. Just so you will know, oil shipments are up from a year ago in almost every class, including Middle East oil in transit and Non-OPEC in Transit. The only class of oil shipment that has declined is covered on page 3 of that report. That chart is labeled, "4-Week Changes in Westbound Oil at Sea."
Thats right, shipments of oil headed west have shown serious declines during the month of April, down 800,000 barrels per day in the week before the publication of the report. Now, let me give you the first line from under the Westbound Oil shipments chart: "In the west, a big share of any [oil] stock building done this year has happened offshore, out of sight."
Could this be true? Oil Movements, the unimpeachable source for finding the real world situation on oil transits, is saying that oil is being hidden offshore, not declared in inventories? Yes, that is exactly what they are saying.
That same week our refineries cut their production runs back to 85 percent, down from 89 percent a year ago, to trim more gasoline out of our stock reserves, to increase their profits per gallon.
National Short-Term Memory Loss
Its amazing how quickly we forget our recent history. Congressional hearings in 2001, blasting certain Wall Street executives for using the media to sell the public on stocks in order to bid up the price so their firm could divest of its shares without taking a beating. Meanwhile, other trusted advisors pushed stocks that were fundamentally worthless, because their affiliated banks had large loan agreements with those companies.
The year before Enron had been caught manipulating the California energy market, even forcing rolling blackouts across the northern part of their state apparently just for effect to support their claim that there just wasnt enough electricity to go around. Again, we now know that claim was untrue. It was Enron shutting down certain power generation plants, while placing bets on their unregulated energy futures market. The net cost to California consumers was almost $8 billion.
It didnt end there. Amaranth Advisors, a hedge fund, literally was cornering the market on natural gas futures, to make it appear that there was a shortage of natural gas, when the Commodities Futures Trading Commission told Amaranth to liquidate its position on the NYMEX because its bidding had already moved natural gas prices far beyond the reasonable limits of supply and demand. Now, remember this name: ICE, short for Intercontinental Exchange the "dark futures lookalike market."
Once the CFTC told it to back off its natural gas futures contracts, Amaranth simply shifted gears, got out of the NYMEX, placed its massive bets outside of government regulation in ICE and managed to drive natural gas futures to $8.50 per MBtu.
As the Senate investigation into the manipulation of the energy markets showed, "Amaranth the day before they failed, natural gas was about $8.50; the day after it failed, it went to $4.46 MBtu." Thats right, one major hedge fund managed to double the price of natural gas simply by loading up on futures contracts; when the government told them their bets were unwarranted, they simply moved their monies to a futures exchange that was unregulated. Only when Amaranth failed did natural gas prices fall back to what was considered normal for supply and demand.
Sadly, like oil today, when this was happening we were being told that natural gas supplies were tight worldwide. That statement simply wasnt true.
Dark Future
Likewise, British Petroleum was busted for manipulating the propane market in the winter of 2004 and fined $373 million. Of course, in Texas, under deregulation of our public utilities, our electric rates can be set using the futures market for natural gas, so the manipulation of the natural gas market spelled trouble for us. Consider this, by 2006, according to www.powertochoose.org, electricity rates for us had climbed to 15 cents a kilowatt-hour due to the high cost of natural gas. But, that was the exact same time period that Amaranth was proven to be manipulating the market and sending natural gas futures through the roof. Two months later the hedge fund collapsed and natural gas prices fell. Therefore, most Texans paid higher electric bills for Amaranths manipulation of the natural gas market.
Professor Michael Greenberger of the University of Maryland, a former board member of the Commodities Futures Trading Commission, testified in front of the House Committee on Energy and Commerce on December 14 of last year. Under discussion that day was the manipulation of the energy markets and prices, but Professor Greenberger added these comments: "Three, four months from now, youre going to have a hearing on the subprime meltdown, and youre going to find that the very same legislation [deregulating energy] deregulated something called collateralized debt obligations, CDOs." That legislation, friends, directly ties the mortgage meltdown to the high price of energy today.
It was called H.R. 5660, the Commodities Futures Modernization Act of 2000. At first this bill went nowhere in the House, not even up for debate. Then, a few months later, late one night a 242-page bill written by Wall Street lawyers, with the exact same name as the former House bill, was quietly added to an 11,000-page appropriations bill, and the Enron loophole was created. The power behind that bill was one Texas Senator, one Texas Congressman and their wives.
Next week: How the unregulated futures market pushes the price of oil, natural gas and gasoline far beyond those commodities market value, thanks to the creation of the Intercontinental Exchange. Worse, Congress knows this, but does nothing.
© 2008 Ed Wallace
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Society. He reviews new cars every Friday morning at 7:15 on Fox Fours Good Day, contributes articles to BusinessWeek Online and hosts the talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF. E-mail: wheels570@sbcglobal.net
By Ed Wallace
Special to the Star-Telegram
"Theres a few hedge fund managers out there who are masters at knowing how to exploit the peak [oil] theories and hot buttons of supply and demand and by making bold predictions of shocking price advancements to come, they only add more fuel to the bullish fire in a sort of self fulfilling prophecy." National Gas Week, Sept. 5, 2005 as reprinted in the US Senate Permanent Subcommittee on Investigations report, "The Role of Market Speculation in Rising Oil and Gas Prices," June 27, 2006
Fiddling While We Burn
There it is in plain sight for everyone to see, exactly what Ive been reporting for the past few years: Many individuals who are investing in oil and natural gas futures are going out in the media and trying to convince the American public that either we are out of oil or there is a serious supply shortage of crude against worldwide demand. The question is: Does it surprise you to discover that the US Senate investigated the rigging of the oil market by speculators in the summer of 2006 and concluded that there was no supply and demand problem with oil? Did you know that their conclusion was that speculators were responsible for a 70 percent overcharge in the price of oil in the months leading up to the summer of 2006?
This from page 1 of the Executive Summary of that Senate investigation, there is this one troubling line: "Today, U.S. oil inventories are at an eight-year high, and OECD (Organization for Economic Co-operation and Development) oil inventories are at a 20-year high."
Thats odd because, in 2006, just like today, the media reporting covered the serious international shortage of oil and justified oils high price. Even more troubling is that the House of Representatives held a hearing this past December, ominously titled "Energy Speculation and Price Manipulation." How did it pass under the radar that both the Senate and the House studied the issue of price manipulation in our energy markets and both concluded that it was unregulated, massive trading in one futures market that was really driving up the price of oil and natural gas? And given that conclusion, why has Congress done nothing about it?
Investors Make the News, Literally
A week ago Goldman Sachs issued a new investor note, suggesting that somewhere between six months to two years, the price of oil could go into a "super spike" and prices jump as high as $200 per barrel. It became the major story of the night. Ignored in the reporting frenzy was that many legitimate and well-respected oil analysts dismissed Goldman Sachs prediction as groundless.
Get ready for the next shock to your system. In the past month we have added 11.9 million barrels of oil into our stock reserves, giving us 32.3 million more barrels of oil than we had on hand January 1. On May 5, we found out that for the second time in as many years, Iran was storing its excess crude oil on tankers in the Persian Gulf, because it had run out of storage space in the desert and was awaiting buyers for its heavy crude. That same day Saudi Arabia cut the discount price for its Arabian Heavy crude to $7.45, hoping to entice more buyers for immediate delivery. We didnt hear that news, either.
While researching my third article for BusinessWeek online about the worlds oil situation in 2008, I asked for the most current report from Oil Movements. Because the oil industry is not transparent, Oil Movements tracks every tanker at sea, from both OPEC and non-OPEC oil countries, along with their cargoes final destinations. Anne OShea responded immediately to my request with their report dated May 8, 2008. Just so you will know, oil shipments are up from a year ago in almost every class, including Middle East oil in transit and Non-OPEC in Transit. The only class of oil shipment that has declined is covered on page 3 of that report. That chart is labeled, "4-Week Changes in Westbound Oil at Sea."
Thats right, shipments of oil headed west have shown serious declines during the month of April, down 800,000 barrels per day in the week before the publication of the report. Now, let me give you the first line from under the Westbound Oil shipments chart: "In the west, a big share of any [oil] stock building done this year has happened offshore, out of sight."
Could this be true? Oil Movements, the unimpeachable source for finding the real world situation on oil transits, is saying that oil is being hidden offshore, not declared in inventories? Yes, that is exactly what they are saying.
That same week our refineries cut their production runs back to 85 percent, down from 89 percent a year ago, to trim more gasoline out of our stock reserves, to increase their profits per gallon.
National Short-Term Memory Loss
Its amazing how quickly we forget our recent history. Congressional hearings in 2001, blasting certain Wall Street executives for using the media to sell the public on stocks in order to bid up the price so their firm could divest of its shares without taking a beating. Meanwhile, other trusted advisors pushed stocks that were fundamentally worthless, because their affiliated banks had large loan agreements with those companies.
The year before Enron had been caught manipulating the California energy market, even forcing rolling blackouts across the northern part of their state apparently just for effect to support their claim that there just wasnt enough electricity to go around. Again, we now know that claim was untrue. It was Enron shutting down certain power generation plants, while placing bets on their unregulated energy futures market. The net cost to California consumers was almost $8 billion.
It didnt end there. Amaranth Advisors, a hedge fund, literally was cornering the market on natural gas futures, to make it appear that there was a shortage of natural gas, when the Commodities Futures Trading Commission told Amaranth to liquidate its position on the NYMEX because its bidding had already moved natural gas prices far beyond the reasonable limits of supply and demand. Now, remember this name: ICE, short for Intercontinental Exchange the "dark futures lookalike market."
Once the CFTC told it to back off its natural gas futures contracts, Amaranth simply shifted gears, got out of the NYMEX, placed its massive bets outside of government regulation in ICE and managed to drive natural gas futures to $8.50 per MBtu.
As the Senate investigation into the manipulation of the energy markets showed, "Amaranth the day before they failed, natural gas was about $8.50; the day after it failed, it went to $4.46 MBtu." Thats right, one major hedge fund managed to double the price of natural gas simply by loading up on futures contracts; when the government told them their bets were unwarranted, they simply moved their monies to a futures exchange that was unregulated. Only when Amaranth failed did natural gas prices fall back to what was considered normal for supply and demand.
Sadly, like oil today, when this was happening we were being told that natural gas supplies were tight worldwide. That statement simply wasnt true.
Dark Future
Likewise, British Petroleum was busted for manipulating the propane market in the winter of 2004 and fined $373 million. Of course, in Texas, under deregulation of our public utilities, our electric rates can be set using the futures market for natural gas, so the manipulation of the natural gas market spelled trouble for us. Consider this, by 2006, according to www.powertochoose.org, electricity rates for us had climbed to 15 cents a kilowatt-hour due to the high cost of natural gas. But, that was the exact same time period that Amaranth was proven to be manipulating the market and sending natural gas futures through the roof. Two months later the hedge fund collapsed and natural gas prices fell. Therefore, most Texans paid higher electric bills for Amaranths manipulation of the natural gas market.
Professor Michael Greenberger of the University of Maryland, a former board member of the Commodities Futures Trading Commission, testified in front of the House Committee on Energy and Commerce on December 14 of last year. Under discussion that day was the manipulation of the energy markets and prices, but Professor Greenberger added these comments: "Three, four months from now, youre going to have a hearing on the subprime meltdown, and youre going to find that the very same legislation [deregulating energy] deregulated something called collateralized debt obligations, CDOs." That legislation, friends, directly ties the mortgage meltdown to the high price of energy today.
It was called H.R. 5660, the Commodities Futures Modernization Act of 2000. At first this bill went nowhere in the House, not even up for debate. Then, a few months later, late one night a 242-page bill written by Wall Street lawyers, with the exact same name as the former House bill, was quietly added to an 11,000-page appropriations bill, and the Enron loophole was created. The power behind that bill was one Texas Senator, one Texas Congressman and their wives.
Next week: How the unregulated futures market pushes the price of oil, natural gas and gasoline far beyond those commodities market value, thanks to the creation of the Intercontinental Exchange. Worse, Congress knows this, but does nothing.
© 2008 Ed Wallace
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Society. He reviews new cars every Friday morning at 7:15 on Fox Fours Good Day, contributes articles to BusinessWeek Online and hosts the talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF. E-mail: wheels570@sbcglobal.net
Post by: Manedwolf on May 21, 2008, 03:59:12 AM
Make them compete with E85. All congress has to do is mandate all cars be flex fueled. Problem solved, they will have to reduce cost to be competitive. Not to mention if they where not in the pocket of the Detroit automakers who have been reducing MPG since '92.
And people who can't afford to buy a new car? Or who love their already-30mpg gasoline vehicle? Screw them, right?
Sorry, not a solution.
In case you hadn't noticed, "Detroit" doesn't control anything, since "Detroit" has been losing marketshare to superior foreign-owned car makers for years.
Post by: Gewehr98 on May 21, 2008, 08:37:39 AM
The fuel economy numbers on some of the more popular rice-burners aren't exactly what they were when the early CVCCs and Celicas came out. I noticed that when reeling in shock from a recent Silverado test drive, and figured I'd take a look at comparable Jap vehicle numbers.
IOW, it appears Tokyo didn't learn anything either.
That, or it's amazingly similar to the housing bubble, people buying more house (or car) than they can afford.
Taurusowner, as an E85 user and ethanol corn grower in the Corn Belt, I'm very much interested in the source of your water figures. Please educate me, because I'm trying hard to see who mandated that all of our motor fuel in these United States must come from plants. I'll wait for your answer...
Post by: The Annoyed Man on May 21, 2008, 08:46:30 AM
Post by: Gewehr98 on May 21, 2008, 08:58:03 AM
In December of 2006, the EPA issued new test methods to determine the fuel economy rating of automobiles sold here.
The methods were revised to reflect real-world mileage, vs. the exceptionally optimistic ones seen previously on window stickers.
Across the board, the new window sticker mileage estimates dropped, sometimes considerably - but they're more in line with what the consumers will actually get when driving from day to day.
Post by: mtnbkr on May 21, 2008, 09:04:50 AM
Chris
Post by: The Annoyed Man on May 21, 2008, 09:07:14 AM
Post by: Gewehr98 on May 21, 2008, 09:10:54 AM
Quote
That's odd to me because I frequently got better than the window sticker even before the change.
Chris
Chris
A-Ha!
So you're the old fossil driving 35mph on the Interstate I almost rear-ended the other day!
Post by: charby on May 21, 2008, 09:14:17 AM
Post by: mtnbkr on May 21, 2008, 09:16:37 AM
I stick closer to the speed limit these days, but I rarely, if ever, drive below it.
Chris
Post by: K Frame on May 21, 2008, 09:32:27 AM
I never got less than 32 in the city and frequently got close to 40 on the highway.
Post by: Manedwolf on May 21, 2008, 09:35:01 AM
I regularly get 32mpg with it according to interrogation of the computer, which might be due to the larger intake, header and iridium plugs, but I am not complaining.
Post by: roo_ster on May 21, 2008, 10:45:24 AM
Paddy, where have you been over the last year or so?
In December of 2006, the EPA issued new test methods to determine the fuel economy rating of automobiles sold here.
The methods were revised to reflect real-world mileage, vs. the exceptionally optimistic ones seen previously on window stickers.
Across the board, the new window sticker mileage estimates dropped, sometimes considerably - but they're more in line with what the consumers will actually get when driving from day to day.
In December of 2006, the EPA issued new test methods to determine the fuel economy rating of automobiles sold here.
The methods were revised to reflect real-world mileage, vs. the exceptionally optimistic ones seen previously on window stickers.
Across the board, the new window sticker mileage estimates dropped, sometimes considerably - but they're more in line with what the consumers will actually get when driving from day to day.
Neither one is "realistic." If you understand that they are, at best, relative specs and do not insist that they be "realistic," a whole lot more folks would have a while lot less heartburn.
I wish they would have just stayed with the original method, so as to provide a real comparo with older autos.
Post by: Firethorn on May 21, 2008, 05:07:41 PM
Neither one is "realistic." If you understand that they are, at best, relative specs and do not insist that they be "realistic," a whole lot more folks would have a while lot less heartburn.
Exactly. You could say that the old standards were weighted towards fuel miser type drivers - You know, the guys who avoid jackrabbit starts, who time lights, keep out of traffic jams as much as possible, etc... Generally speaking they were with the radio, AC, fans and such off.
The new standards are more for 'normal' people, who get into traffic jams on occasion with their AC on max.
Quote
I wish they would have just stayed with the original method, so as to provide a real comparo with older autos.
Or went back the last three-four years and posted adjusted figures. Or even posted old&new figures for a year or three.
Personally, I'd like to get a weak hybrid truck. It's a vehicle where they replace the alternator and starter with a more powerful motor-generator. The system is set up so that when you're stopped or stopping, the engine will shut off while the motor keeps everything else powered. The motor and system is powerful enough to more or less instantly start the engine when you hit the gas. Just don't count on cruising at 25mph on battery.
Post by: Headless Thompson Gunner on May 21, 2008, 05:23:02 PM
Personally, I'd like to get a weak hybrid truck. It's a vehicle where they replace the alternator and starter with a more powerful motor-generator. The system is set up so that when you're stopped or stopping, the engine will shut off while the motor keeps everything else powered. The motor and system is powerful enough to more or less instantly start the engine when you hit the gas. Just don't count on cruising at 25mph on battery.
Post by: Firethorn on May 22, 2008, 07:43:39 AM
I've been sorely tempted by the new Jeep Grand Cherokee with the new Mercedes turbo diesel engine. My Uncle has one or two on his lot, and he says his customers are reporting mileage in the mid 20's range. That's not bad for a 4,500 pound truck that can comfortably tow a house.
Just imagine what it'd get if the engine shuts off when not needed.
Post by: The Annoyed Man on May 22, 2008, 09:40:57 AM
Post by: wmenorr67 on May 22, 2008, 08:03:34 PM
Really though are you being affected with all the weather issues? I mean a tornado in Riverside, mudslides, fire, sounds like the second coming.
Post by: De Selby on May 22, 2008, 10:57:22 PM
FWIW, I just filled up at $4.09. The owner said it would be $4.19 by the end of the day.
4.05 to 4.21 in the course of the day here.
Post by: MicroBalrog on May 22, 2008, 11:11:03 PM
Quote
Not to mention if they where not in the pocket of the Detroit automakers who have been reducing MPG since '92.
...reducing MPG?
Post by: De Selby on May 22, 2008, 11:26:14 PM
Quote
Not to mention if they where not in the pocket of the Detroit automakers who have been reducing MPG since '92.
...reducing MPG?
Bizarre but true-there are tons of cheap cars from the 80's that get as good or better mileage than the average "efficient" car today.
Post by: seeker_two on May 23, 2008, 12:56:36 AM
Quote
Posted on Thu, May. 22, 2008
ICE, ICE, Baby, conclusion
Special to the Star-Telegram
"Whats been happening since 2004 is very high prices without record-low [oil] stocks. The relationship between U.S. [oil] inventory levels and prices has been shredded and become irrelevant."
Jan Stuart, Global Oil Economist, UBS Securities
"What you have on the financial side is a bunch of money being thrown at the energy futures market. Its just pulling in more and more cash. Thats the side of the market where we have runaway demand, not on the physical side."
Tim Evans, Senior Oil Analyst, IFR Energy Services [From testimony: U.S. Senate Permanent Subcommittee on Investigations report, "The Role of Market Speculation in Rising Oil and Gas Prices," June 27, 2006]
The Love of Money
Record high prices without record low oil inventories, analysts saying that so much money flows into oil commodities that it gives the impression of shortages, when in fact no shortage exists. That mirrors the situation in the commodities market for food, as Bloomberg pointed out in its April 28 article, "Wall Street Grain Hoarding Brings Farmers, Consumers Near Ruin": "Commodity investors control more U.S. crops than ever before, competing with governments and consumers for dwindling food supplies." Thats right; food, oil and gasoline have become an "asset class." No longer are you fighting a neighbor at the supermarket over the last box of Cheerios®; now youre fighting the futures traders, who are actually determining what you will pay for that cereal.
We started as a society that worships hard labor and the basic business ethic of building value into the goods you create. Howd we get from there to worshiping Wall Streets billion-dollar boys who create nothing, build nothing, own nothing and deliver no goods, and yet can throw so much money into products made by others that they determine what we consumers will pay for those goods?
It wasnt always this way.
In the past, the Commodities Futures Trading Commission acted as the cop on the beat, ensuring that buyers in the market were not distorting or manipulating prices beyond what supply and demand normally dictate. Certainly, if a hard frost hit Florida and cost growers an orange crop, then bidding up the price of the remaining oranges was both a wise investment and allowed under the trading rules. Right now investors know that if they borrow and invest huge amounts in commodities futures, they can create a shortage on paper which drives prices up just like an actual shortage of any given product would. What kept traders from cornering the market that way in the past were the governments anti-manipulation rules.
Lay, DeLay, Gramm, Gramm & Clinton
The late, infamous Enron head, Ken Lay, realized in the eighties that he could make more money bidding up energy in the futures market than by actually creating and selling energy. But, under then-current rules, how much you could make swapping paper was limited. Fortuitously, Lay had excellent Texas political connections; and in November of 1992, the head of the Commodities Futures Trading Commission moved to exempt energy-derivative contracts and related swaps from any government oversight.
A vote was hurriedly put together before the Clinton White House would take over, and so Lay could finally start "dark" unregulated futures trading. The head of the CFTC was Wendy Gramm, wife of Texas Senator Phil Gramm; five weeks after she left, she became a board member of Enron in Houston.
Fast-forward to late 2000 and H.R. 5660, the Commodity Futures Modernization Act of 2000, sponsored by Republican Congressman Thomas Ewing of Illinois. That bill went nowhere, even though Tom Delays wife Christine was then working for a Washington lobbying firm, Alexander Strategies which Enron had paid $200,000 to push through legislation for permanent energy deregulation in these "dark" markets.
Six months later came Senate Bill 3283, also named the Commodity Futures Modernization Act of 2000. This time around the sponsor was Republican Sen. Richard Lugar of Indiana, and now Phil Gramm was listed as one of the bills co-sponsors. Like it had in the House, this bill was destined to go nowhere until, late one night, it was attached as a rider to an 11,000-page appropriations bill which was signed into law by President Clinton.
Now traders had an officially deregulated market for energy futures. Worse, that bill also deregulated many financial instruments including the collateralized debt obligations that are at the center of todays mortgage crisis, which may well cost us more than $1 trillion before its over.
Everybody Was Warned!
As USA Today wrote of this fiasco in January of 2002, "But, as a power marketer, [Enron] could buy enough energy-futures contracts in a region to create a virtual monopoly." Thats right: As early as the winter of 2002, it was widely known that the 2000 Commodities Futures Modernization Act had created a monster, capable of running up energy prices outside of the normal law of supply and demand. Worse, our government had been warned this was going to happen. Representatives of the Federal Reserve, the Securities and Exchange Commission and the CFTC had already told Congress not to deregulate energy because "the market was ripe for manipulation." Everybody was warned; thats why this deregulation bill was stealthily inserted into that appropriations bill without a floor debate.
Phil Gramms office denied that he had anything to do with writing the section of that bill that actually deregulated energy. And yet Prof. Michael Greenberger, formerly a CFTC board member himself, said that Gramms wife Wendy, along with a few lobbyists and Wall Street attorneys, had rewritten it. When Robert Manor of the Chicago Times wrote about this situation on January 18, 2002, neither Gramm could be reached for comment.
Kill It Before It Multiplies
When Enron failed and took its private, unregulated energy exchange to the grave, another rose to take its place. The Intercontinental Exchange (ICE) was the brainchild of Morgan Stanley, Goldman Sachs, British Petroleum, Deutsche Bank, Dean Witter, Royal Dutch Shell, SG Investment Bank and Totalfina. In 2001 ICE purchased the International Petroleum Exchange in London; renamed ICE Futures, it now operates as an "exempt commercial market" under section 2(H)(3) of the Commodity Exchange Act. As the Senate hearings pointed out in the summer of 2006, "Both markets operate outside of any CFTC oversight."
If you reread the quotes at the start of this story again, you find that many officials in the government warned against what would happen in a deregulated energy market, because it was so easy to manipulate. We already know this to be true thanks to Enrons California misdeeds. And, as we pointed out last week, British Petroleum was busted for manipulating the propane market and fined over $300 million; and Amaranth Partners was caught manipulating the natural gas market, unconscionably causing the futures price for natural gas to raise every Texans electric bills. (It took two years for Amaranth to be exposed.) And yes, the manipulation happened in the new "dark" and unregulated exchanges, making it almost impossible to uncover. So its not a question of "if" some "theoretically possible" manipulation and distortion of the market will result from this bill, championed by Phil Gramm, his wife Wendy and Christine Delays employer, Alexander Strategies. The reason it is not theoretical is because we keep catching well-known companies doing it on a regular basis.
No Conscience in Congress?
All you hear daily is that the world has a severe shortage of oil, or you can buy only 200 pounds of rice at one time, or we will have a gasoline crisis this summer, etc. But it takes only a minute to find hundreds of quotes from highly respected oil and economic analysts, (not to mention CEOs of the major oil companies), that completely dismiss the claim of oil, gas or food shortages that have been headlining the news.
Even more troubling is that within months of the CFMAs going into effect, we knew it had enabled easy manipulation of any energy market, but nothing was done to fix it. Nor was anything done when the Senate held its hearings on this matter in 2006, or in the House hearings last December.
Today we call this situation the "Enron Loophole," but thats untrue. Its not a loophole: it was a new law passed in 2000 and far more individuals than Ken Lay have used that law to line their pockets with hundreds of billions of American consumers hard-earned dollars. Thats not my opinion, thats direct testimony by numerous experts before both the House and Senate.
Professor Greenberger warned about our "New American Economy" far better than I could:
"Should we have an economy thats based on whether people make good or bad bets? Or should we have an economy where people build companies, create manufacturing, do inventions, advance the American society and make it more productive? We are rewarding people for sitting at their computers and punching in bets. Thats not the way our economy is going to be built, and India and China, with their focus on science and industry and building real businesses, are going to eat our lunch, unless the American public wakes up and puts an end to an economy that praises and makes heroes out of speculators."
Greenbergers statement explains why Detroit and other American manufacturers suffer while Wall Street speculators make a fortune and your rapidly shrinking checkbook pays for it, every time you buy food, fuel or feed.
All because there is no shortage of these goods, youre just being told there is because its more profitable for a few that way.
© 2008 Ed Wallace
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Society. He reviews new cars every Friday morning at 7:15 on Fox Fours Good Day, contributes articles to BusinessWeek Online and hosts the talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF. E-mail: wheels570@sbcglobal.net
Everybody was warned; thats probably why this deregulation bill was stealthily inserted into that appropriations bill without a floor debate.
ICE, ICE, Baby, conclusion
Special to the Star-Telegram
"Whats been happening since 2004 is very high prices without record-low [oil] stocks. The relationship between U.S. [oil] inventory levels and prices has been shredded and become irrelevant."
Jan Stuart, Global Oil Economist, UBS Securities
"What you have on the financial side is a bunch of money being thrown at the energy futures market. Its just pulling in more and more cash. Thats the side of the market where we have runaway demand, not on the physical side."
Tim Evans, Senior Oil Analyst, IFR Energy Services [From testimony: U.S. Senate Permanent Subcommittee on Investigations report, "The Role of Market Speculation in Rising Oil and Gas Prices," June 27, 2006]
The Love of Money
Record high prices without record low oil inventories, analysts saying that so much money flows into oil commodities that it gives the impression of shortages, when in fact no shortage exists. That mirrors the situation in the commodities market for food, as Bloomberg pointed out in its April 28 article, "Wall Street Grain Hoarding Brings Farmers, Consumers Near Ruin": "Commodity investors control more U.S. crops than ever before, competing with governments and consumers for dwindling food supplies." Thats right; food, oil and gasoline have become an "asset class." No longer are you fighting a neighbor at the supermarket over the last box of Cheerios®; now youre fighting the futures traders, who are actually determining what you will pay for that cereal.
We started as a society that worships hard labor and the basic business ethic of building value into the goods you create. Howd we get from there to worshiping Wall Streets billion-dollar boys who create nothing, build nothing, own nothing and deliver no goods, and yet can throw so much money into products made by others that they determine what we consumers will pay for those goods?
It wasnt always this way.
In the past, the Commodities Futures Trading Commission acted as the cop on the beat, ensuring that buyers in the market were not distorting or manipulating prices beyond what supply and demand normally dictate. Certainly, if a hard frost hit Florida and cost growers an orange crop, then bidding up the price of the remaining oranges was both a wise investment and allowed under the trading rules. Right now investors know that if they borrow and invest huge amounts in commodities futures, they can create a shortage on paper which drives prices up just like an actual shortage of any given product would. What kept traders from cornering the market that way in the past were the governments anti-manipulation rules.
Lay, DeLay, Gramm, Gramm & Clinton
The late, infamous Enron head, Ken Lay, realized in the eighties that he could make more money bidding up energy in the futures market than by actually creating and selling energy. But, under then-current rules, how much you could make swapping paper was limited. Fortuitously, Lay had excellent Texas political connections; and in November of 1992, the head of the Commodities Futures Trading Commission moved to exempt energy-derivative contracts and related swaps from any government oversight.
A vote was hurriedly put together before the Clinton White House would take over, and so Lay could finally start "dark" unregulated futures trading. The head of the CFTC was Wendy Gramm, wife of Texas Senator Phil Gramm; five weeks after she left, she became a board member of Enron in Houston.
Fast-forward to late 2000 and H.R. 5660, the Commodity Futures Modernization Act of 2000, sponsored by Republican Congressman Thomas Ewing of Illinois. That bill went nowhere, even though Tom Delays wife Christine was then working for a Washington lobbying firm, Alexander Strategies which Enron had paid $200,000 to push through legislation for permanent energy deregulation in these "dark" markets.
Six months later came Senate Bill 3283, also named the Commodity Futures Modernization Act of 2000. This time around the sponsor was Republican Sen. Richard Lugar of Indiana, and now Phil Gramm was listed as one of the bills co-sponsors. Like it had in the House, this bill was destined to go nowhere until, late one night, it was attached as a rider to an 11,000-page appropriations bill which was signed into law by President Clinton.
Now traders had an officially deregulated market for energy futures. Worse, that bill also deregulated many financial instruments including the collateralized debt obligations that are at the center of todays mortgage crisis, which may well cost us more than $1 trillion before its over.
Everybody Was Warned!
As USA Today wrote of this fiasco in January of 2002, "But, as a power marketer, [Enron] could buy enough energy-futures contracts in a region to create a virtual monopoly." Thats right: As early as the winter of 2002, it was widely known that the 2000 Commodities Futures Modernization Act had created a monster, capable of running up energy prices outside of the normal law of supply and demand. Worse, our government had been warned this was going to happen. Representatives of the Federal Reserve, the Securities and Exchange Commission and the CFTC had already told Congress not to deregulate energy because "the market was ripe for manipulation." Everybody was warned; thats why this deregulation bill was stealthily inserted into that appropriations bill without a floor debate.
Phil Gramms office denied that he had anything to do with writing the section of that bill that actually deregulated energy. And yet Prof. Michael Greenberger, formerly a CFTC board member himself, said that Gramms wife Wendy, along with a few lobbyists and Wall Street attorneys, had rewritten it. When Robert Manor of the Chicago Times wrote about this situation on January 18, 2002, neither Gramm could be reached for comment.
Kill It Before It Multiplies
When Enron failed and took its private, unregulated energy exchange to the grave, another rose to take its place. The Intercontinental Exchange (ICE) was the brainchild of Morgan Stanley, Goldman Sachs, British Petroleum, Deutsche Bank, Dean Witter, Royal Dutch Shell, SG Investment Bank and Totalfina. In 2001 ICE purchased the International Petroleum Exchange in London; renamed ICE Futures, it now operates as an "exempt commercial market" under section 2(H)(3) of the Commodity Exchange Act. As the Senate hearings pointed out in the summer of 2006, "Both markets operate outside of any CFTC oversight."
If you reread the quotes at the start of this story again, you find that many officials in the government warned against what would happen in a deregulated energy market, because it was so easy to manipulate. We already know this to be true thanks to Enrons California misdeeds. And, as we pointed out last week, British Petroleum was busted for manipulating the propane market and fined over $300 million; and Amaranth Partners was caught manipulating the natural gas market, unconscionably causing the futures price for natural gas to raise every Texans electric bills. (It took two years for Amaranth to be exposed.) And yes, the manipulation happened in the new "dark" and unregulated exchanges, making it almost impossible to uncover. So its not a question of "if" some "theoretically possible" manipulation and distortion of the market will result from this bill, championed by Phil Gramm, his wife Wendy and Christine Delays employer, Alexander Strategies. The reason it is not theoretical is because we keep catching well-known companies doing it on a regular basis.
No Conscience in Congress?
All you hear daily is that the world has a severe shortage of oil, or you can buy only 200 pounds of rice at one time, or we will have a gasoline crisis this summer, etc. But it takes only a minute to find hundreds of quotes from highly respected oil and economic analysts, (not to mention CEOs of the major oil companies), that completely dismiss the claim of oil, gas or food shortages that have been headlining the news.
Even more troubling is that within months of the CFMAs going into effect, we knew it had enabled easy manipulation of any energy market, but nothing was done to fix it. Nor was anything done when the Senate held its hearings on this matter in 2006, or in the House hearings last December.
Today we call this situation the "Enron Loophole," but thats untrue. Its not a loophole: it was a new law passed in 2000 and far more individuals than Ken Lay have used that law to line their pockets with hundreds of billions of American consumers hard-earned dollars. Thats not my opinion, thats direct testimony by numerous experts before both the House and Senate.
Professor Greenberger warned about our "New American Economy" far better than I could:
"Should we have an economy thats based on whether people make good or bad bets? Or should we have an economy where people build companies, create manufacturing, do inventions, advance the American society and make it more productive? We are rewarding people for sitting at their computers and punching in bets. Thats not the way our economy is going to be built, and India and China, with their focus on science and industry and building real businesses, are going to eat our lunch, unless the American public wakes up and puts an end to an economy that praises and makes heroes out of speculators."
Greenbergers statement explains why Detroit and other American manufacturers suffer while Wall Street speculators make a fortune and your rapidly shrinking checkbook pays for it, every time you buy food, fuel or feed.
All because there is no shortage of these goods, youre just being told there is because its more profitable for a few that way.
© 2008 Ed Wallace
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Society. He reviews new cars every Friday morning at 7:15 on Fox Fours Good Day, contributes articles to BusinessWeek Online and hosts the talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF. E-mail: wheels570@sbcglobal.net
Everybody was warned; thats probably why this deregulation bill was stealthily inserted into that appropriations bill without a floor debate.
So much for supply & demand....
Post by: Gewehr98 on May 23, 2008, 09:40:13 AM
When Manedwolf posted his beloved Accord's mileage ratings, the first thing that came to my mind was that my wife's old Datsun B-210 did better.
Post by: Headless Thompson Gunner on May 23, 2008, 10:33:22 AM
Yup. Reducing MPG.
When Manedwolf posted his beloved Accord's mileage ratings, the first thing that came to my mind was that my wife's old Datsun B-210 did better.
An accord is larger, heavier, safer, more powerful, and more comfortable than that old Datsun.When Manedwolf posted his beloved Accord's mileage ratings, the first thing that came to my mind was that my wife's old Datsun B-210 did better.
Mileage could be improved significantly by stripping down any of our current production vehicles. Take Maned's Accord and pull out 1,000 pounds of "unnecessary" reinforcing steel, engine size, emission's controls, safety equipment, power steering, power brakes, power windows and locks, comfy seats, and all the other stuff that modern cars have. Shrink it down until 6 foot whatever drivers can't fit in it. What you'd be left with is an underpowered, flimsy, crude vehicle (like a Datsun B-210) that still gets good gas mileage.
Even the cheapest, most stripped-down economy cars made today (Corollas, Civics, Kias, and so forth) are stronger, safer, and more powerful than that old Datsun. People have decided that having a solid vehicle with a real engine and lots of features is worth a little bit of lost efficiency.
Post by: Gewehr98 on May 23, 2008, 11:54:51 AM
Which is also why I drive a GSA schedule S-10 with a 5-speed stick, bench seat, and manual windows.
Give me another 20 years and I'll go for the cushy ride, and I'll trade in my Shovelhead for a Goldwing, too. (NOT)
You'd think with the tushy-wiperness of current vehicles, they could still approach MPG figures from imports of the late 1970s. The extra weight is a factor, as is our typical American sloth.
Post by: Headless Thompson Gunner on May 23, 2008, 12:16:52 PM
If you sold new-production Datsun B210s today, or any equivalent type of car, the government would shut you down.
There are some cars that come close, though. Corollas are reputed to deliver 40 mpg. (I wonder what it would get with a few hundred pounds of safety and exhaust components removed?) And you can even get one without power windows and locks, if you really want.
Post by: agricola on May 23, 2008, 12:49:16 PM
i) drilling for more oil, or increasing our refinery capacity, is not the answer, any more than that "last pack" of cigarettes is the answer to smoking too much;
ii) the next couple of decades will need to see political leaders make the replacement of petroleum (and its various distillations) as an energy source, and the entire society that exists around it, their #1 priority;
iii) until someone develops a cleaner, more reliable source of energy (ie: fusion) nuclear + some renewables is the only game in town that does not cause more problems (biofuels being possibly even worse than regular gasoline given the impact on world food prices);
iv) there needs to be far more investment in public transport - rail remains by some distance the most economical means of getting from A to B, yet (at least in the UK, which is madness because it is quicker to get to Liverpool, Manchester, or even Paris, by train than to fly) there seems to be a lot more focus on air travel;
vi) where is the big reward
Post by: Gewehr98 on May 23, 2008, 01:23:47 PM
I've been meaning to take weekly or monthly pictures of our local GMC dealership's lot, to see how much inventory actually gets sold. There's more activity washing and waxing the big ass-wagons on that lot than there is selling them, it seems.
Looking at a new Chevy Aveo or Toyota Yaris, I'm of the opinion that lightweight economy cars aren't too much of a stretch for 2008 technology...
Post by: taurusowner on May 23, 2008, 02:38:35 PM
Post by: HankB on May 24, 2008, 03:55:05 AM
1. Increased demand from Eastern Europe, China, and India helps to drive up prices.
2. The falling dollar increases the prices of all imports, including oil. Even though oil is pegged to the dollar in most places (I believe only Venezuela and Iran are pricing theirs in euros) the oil sheiks aren't complete idiots, they KNOW that the $ is falling due to deficit spending, falling interest rates, and mismanagement of the money supply. The GOP bears a lot of responsibility for this, but the Dems are in there, too.
3. It's no coincidence that gas prices have risen over 60% since the congress changed hands - because speculators KNOW that under the Reid/Pelosi regieme, there will be obstacles to wind farms, NO drilling in ANWR, NO new drilling offshore or in the Gulf (That's reserverd for China/Cuba), NO new coal mining or gasification, NO new nuke plants, NO new refineries built, NO new hydropower plants, NO new coal plants . . . an enduring, dependable, Democratic Party energy policy based on NO - NO - NO. And with all three major Presidential candidates - Hillary Clinton, Barack Hussein Obama, and John McCain - having partaken of the Global Warming Kool-Aid, these "NO" policies will be set in stone for the forseeable future, making for a potential bonanza in the oil futures market.
We've only seen the BEGINNING of the damage to our economy that the Global Warming charlatans are planning - get ready for even more fun.
Post by: MicroBalrog on May 24, 2008, 03:59:44 AM
Post by: Manedwolf on May 24, 2008, 05:09:19 AM
That's a darned good analogy - "That last pack of cigarettes".
I've been meaning to take weekly or monthly pictures of our local GMC dealership's lot, to see how much inventory actually gets sold. There's more activity washing and waxing the big ass-wagons on that lot than there is selling them, it seems.
Looking at a new Chevy Aveo or Toyota Yaris, I'm of the opinion that lightweight economy cars aren't too much of a stretch for 2008 technology...
I've been meaning to take weekly or monthly pictures of our local GMC dealership's lot, to see how much inventory actually gets sold. There's more activity washing and waxing the big ass-wagons on that lot than there is selling them, it seems.
Looking at a new Chevy Aveo or Toyota Yaris, I'm of the opinion that lightweight economy cars aren't too much of a stretch for 2008 technology...
A radio interview recently mentioned that large SUVs have absolutely no trade-in value no matter how much luxury fluff they have. That the most someone was offered in trade-in for a new Lincoln Aviator with every option was $14k (if they put it towards a new $39K+ vehicle), after absolutely no interest for a sale. And that people who have them are entirely upside-down on what they're still paying on them as a result. Can't get rid of them, can't afford to drive them.
Post by: roo_ster on May 24, 2008, 07:47:28 AM
i) drilling for more oil, or increasing our refinery capacity, is not the answer, any more than that "last pack" of cigarettes is the answer to smoking too much;
It surely part of the answer in the short & mid term (say up to 50+ years out).Petroleum-derived fuels are still the best & most economical way to move automobiles, especially after one factors in the costs of the subsidies ($051-$1.00/gal) congresscritters vomit forth onto the ethanol lobby constituents.
Increasing supply will have an effect on the price point.
ii) the next couple of decades will need to see political leaders make the replacement of petroleum (and its various distillations) as an energy source, and the entire society that exists around it, their #1 priority;
That is a formula for economic catastrophe not seen since Stalin's "Five Year Plans" and Mao's similar wealth-destroying collectivist fantasies.The best thing gov't can do is get the hell outta the way and let the market make the call & eventual switch. For instance, COTUS subsidizes corn ethanol, about the most sand-poundingly stupid way to produce fuel ethanol. All the while, they set up quotas on cane sugar and Brazilian-produced ethanol: sources that might make ethanol a viable alternative to gasoline.
When it comes to energy, government is the problem and more of it will only make it worse.
iii) until someone develops a cleaner, more reliable source of energy (ie: fusion) nuclear + some renewables is the only game in town that does not cause more problems (biofuels being possibly even worse than regular gasoline given the impact on world food prices);
I am all for the nukes.I also want to see a whole lot of coal-fired power plants built, since the USA has enough coal to keep the electricity flowing for a LONG time. TXU was going to build a couple nat gas plants and a dozen coal-fired plants...until the Ususal Suspects started caterwauling. Eventually, TXU said "screw it, were getting outta the energy business" and sold themselve to some other company. Good luck to 'em.
iv) there needs to be far more investment in public transport - rail remains by some distance the most economical means of getting from A to B, yet (at least in the UK, which is madness because it is quicker to get to Liverpool, Manchester, or even Paris, by train than to fly) there seems to be a lot more focus on air travel;
Outside the super-dense cities in America, the words, "Public Transport," are synonymous with "Unused Money Pit."
Post by: agricola on May 24, 2008, 08:15:15 AM
Quote from: jfruser
It surely part of the answer in the short & mid term (say up to 50+ years out).
Petroleum-derived fuels are still the best & most economical way to move automobiles, especially after one factors in the costs of the subsidies ($051-$1.00/gal) congresscritters vomit forth onto the ethanol lobby constituents.
Increasing supply will have an effect on the price point.
Petroleum-derived fuels are still the best & most economical way to move automobiles, especially after one factors in the costs of the subsidies ($051-$1.00/gal) congresscritters vomit forth onto the ethanol lobby constituents.
Increasing supply will have an effect on the price point.
Yes (though whether it will be as long as fifty years is debateable), but it doesnt solve the problem - it just delays it, or rather it allows us to continue deluding ourselves that everything is ok and we can carry on as we have been for the past forty years. Does maintaining that delusion justify the billions of dollars cost of new refineries, and the probable environmental damage?
Biofuels are not the answer either, in addition to the subsidy (which you note) they are just another cash crop for people to plant instead of food.
Quote from: jfruser
That is a formula for economic catastrophe not seen since Stalin's "Five Year Plans" and Mao's similar wealth-destroying collectivist fantasies.
The best thing gov't can do is get the hell outta the way and let the market make the call & eventual switch. For instance, COTUS subsidizes corn ethanol, about the most sand-poundingly stupid way to produce fuel ethanol. All the while, they set up quotas on cane sugar and Brazilian-produced ethanol: sources that might make ethanol a viable alternative to gasoline.
When it comes to energy, government is the problem and more of it will only make it worse.
The best thing gov't can do is get the hell outta the way and let the market make the call & eventual switch. For instance, COTUS subsidizes corn ethanol, about the most sand-poundingly stupid way to produce fuel ethanol. All the while, they set up quotas on cane sugar and Brazilian-produced ethanol: sources that might make ethanol a viable alternative to gasoline.
When it comes to energy, government is the problem and more of it will only make it worse.
We will have to make this change at some stage in the reasonably near future - we can either do it now when we can do it gently and in plenty of time, or we can do it against a backdrop of ever rising fuel prices, savage competition between nations for scarce oil, and a general rush towards a solution - any solution, which is usually when really bad things happen.
As for "the market" making the decision, that is pretty much an impossibility given the scale of the problem and the fact that such a general, unified body does not exist, and large parts of it are in direct opposition to other parts.
Take the current state of affairs for instance - "the market" hasnt seen fit increase the supply of oil in necessary amounts because it is sitting on a commodity that is only ever going to increase in value. Why would "the market" - oil companies - act to diminish the value of that commodity by promoting alternate technologies (before their value is close to the value of the original commodity, of course), or by increasing the supply in order to lower the price?
Quote from: jfruser
I am all for the nukes.
I also want to see a whole lot of coal-fired power plants built, since the USA has enough coal to keep the electricity flowing for a LONG time. TXU was going to build a couple nat gas plants and a dozen coal-fired plants...until the Ususal Suspects started caterwauling. Eventually, TXU said "screw it, were getting outta the energy business" and sold themselve to some other company. Good luck to 'em.
I also want to see a whole lot of coal-fired power plants built, since the USA has enough coal to keep the electricity flowing for a LONG time. TXU was going to build a couple nat gas plants and a dozen coal-fired plants...until the Ususal Suspects started caterwauling. Eventually, TXU said "screw it, were getting outta the energy business" and sold themselve to some other company. Good luck to 'em.
Agree with you about the nukes, coal I am less certain about. Would be better IMHO to focus the cash there on renewables.
Quote from: jfruser
Outside the super-dense cities in America, the words, "Public Transport," are synonymous with "Unused Money Pit."
Which is why I mentioned the UK perspective - prior to the infamous "Beeching Report" the UK had a massive rail network, the bulk of which was closed because the committee felt (and of course the fact that the chairman was the head of a roadbuilding firm had no bearing on matters) that the road would be a better form of transport for the future.
Needless to say, widespread local opposition was ignored, the routes were closed and torn up, and now councils in nearly every part of the country are trying to get them back again (with varying degrees of success - in Scotland and Wales (which have devolved government) stations and lines are reopening, but in England central government blocks it, favouring airport expansion). (edited to add) The main reason for the reinterest in the railways is that passenger numbers have gone through the roof, and the system is approaching capacity.This is mainly due to the Government (since 1997) continuing tp subsidize the various train operating companies (which in itself is an error, they should renationalize it) and allowed them to charge appropriate ticket prices (one of the main reasons for Beeching finding the railways unprofitable was that successive post-war Governments had not allowed BR to increase ticket prices, as an electoral wheeze - so they ran out of money. It had been reasonably profitable (for a public service) up until then).
Post by: Manedwolf on May 24, 2008, 09:43:53 AM
Post by: agricola on May 24, 2008, 10:50:34 AM
They're finally cutting public transport here after years of wasting money on "ghost buses" so-called due to the fact that they usually had one or two people on them at most.
Cutting buses is something I agree with, they are one of the great devils of the age - something clearly designed by someone who would never, ever have to use one. However one shouldnt make the mistake of assuming they are the be-all and end-all of public transport.
Post by: MechAg94 on May 24, 2008, 12:03:26 PM
I would also point out that any replacement will most likely have pollution issues of its own. IMO, they have made some strides in alternative fuels in the last 30 years. Let them keep trying for another 50 years before anyone tries to anoint the successor too early. If someone actually comes up with something that works physically and economically, it will get a market share all on its own. The only thing govt should do is provide a few grants here and there for research.
I'd like to see the investment and fuel cost numbers for that public transportation. All the real numbers I have seen show that rail is a super expensive pipe dream that politicians love to dump money into as their personal trophies. Not to mention the fact that I and a lot of other people do not live anywhere near a major city center and won't as long as this is a free country.
Post by: Firethorn on May 28, 2008, 12:02:22 PM
It's kinda like how there's more recoverable oil 'reserves' at $130 a barrel as compared to $70/barrel. It's actually economical at the higher price to go after more difficult deposits, not to mention things like oil sands and shales. Modified of course, by political concerns, conservatism in that I'm not going to sink $$$ into a new well until I'm SURE that oil isn't going to drop back down to, say, $80/barrel when I NEED $100 to make a profit. Then lead times, etc...
Personally, I'm looking into electric or diesel. Most of my travel is highway(65mph), and 30-45 miles. So, I figure an electric vehicle with a max speed of at least 75mph and a range of ~150 miles would be good. Diesel because it does well on highway mileage, despite it's currently higher price, and I see it having a brighter future than ethanol.
Post by: Gewehr98 on May 28, 2008, 08:22:01 PM
The news reported that Americans drove approximately 4.3% less this last Memorial Day Weekend than the previous year. That's 11 billion fewer miles driven, and X amount fewer gallons of gas consumed.
http://www.cnn.com/2008/US/05/26/gas.driving/index.html
At what point does the whole supply & demand thing kick in when consumers are using less of a given commodity? I would've figured there would be at least a slight dip in gas prices after seeing the figures reported above...
Post by: Firethorn on May 29, 2008, 05:35:40 AM
Quote
At what point does the whole supply & demand thing kick in when consumers are using less of a given commodity? I would've figured there would be at least a slight dip in gas prices after seeing the figures reported above...
It's complicated, of course, but one DAY of 4.3% less consumption for the USA only will have negligable effects.
In no particular order, various things keeping oil/gas prices high:
1. China and India. Their industrial revolution is advancing daily. The numbers of cars, mopeds, motorcycles, etc... Are all increasing in double digit percentages. Oil usage is skyrocketing there. US citizens driving a little less can't overwhelm this.
2. Many oil fields are loosing production. They are becoming 'tapped' out, fewer barrels can be pulled each day, and not enough new fields are replacing them. The new fields are more expensive, requiering advanced and expensive techniques to tap
3. Average fleet mileage of US vehicles is still down compared to what it was historically. It's going to take a while to get all the gas guzzeling SUVs off the street.
4. Saudi manipulation. Yes, once the Saudis decide that they like $130 oil, they'll reduce production to keep it there. Still, the uptick they don't like because it promotes finding alternatives.
Post by: charby on May 29, 2008, 05:51:01 AM
Quote
A source at Opec said its 13 members were uncomfortable with the current price of crude, which last week hit a record $135 a barrel.
Based on present supply and demand, he said it should be fetching $60-$70 a barrel.
Saudi Arabia said it would increase production.
Based on present supply and demand, he said it should be fetching $60-$70 a barrel.
Saudi Arabia said it would increase production.
I really think its the speculators jacking the price of oil up, trying to keep from loosing money on a weaker dollar. Farmer buddy told me same thing about grain prices.
I wish I knew what the next item they are going to go after so I can invest early.
Post by: roo_ster on May 29, 2008, 06:06:45 AM
In no particular order, various things keeping oil/gas prices high:
1. China and India. Their industrial revolution is advancing daily. The numbers of cars, mopeds, motorcycles, etc... Are all increasing in double digit percentages. Oil usage is skyrocketing there. US citizens driving a little less can't overwhelm this.
IIRC, thier use has been stagnant or dropping the last year.
2. Many oil fields are loosing production. They are becoming 'tapped' out, fewer barrels can be pulled each day, and not enough new fields are replacing them. The new fields are more expensive, requiering advanced and expensive techniques to tap
I don't know much about this point, but my FIL a land-man for the petroleum industry, has had a whole lot of work. New fields being explored and old fields re-opening because they are now profitable.
3. Average fleet mileage of US vehicles is still down compared to what it was historically. It's going to take a while to get all the gas guzzeling SUVs off the street.
The 4.3% drop is not just one day. It has been a trend for several months.
4. Saudi manipulation. Yes, once the Saudis decide that they like $130 oil, they'll reduce production to keep it there. Still, the uptick they don't like because it promotes finding alternatives.
The inner workings of the Saudis & OPEC are somewhat byzantine.
There are a couple other factors:
1. Gasoline reserves had SPIKED a month or two back, so the refineries reduced output to keep gasoline prices inflated
2. Refineries are in the process of switching from winter to summer formulations as well as maintenance. They are curently only working at 80% of capacity.
Post by: Manedwolf on May 29, 2008, 06:43:02 AM
The inner workings of the Saudis & OPEC are somewhat byzantine.
That's an incredibly ironic and insensitive metaphor, if you know your history.
Post by: mtnbkr on May 29, 2008, 07:30:44 AM
I wish I knew what the next item they are going to go after so I can invest early.
I was listening to NPR yesterday afternoon and they compared the Whey market to the current oil one. Whey as a protein source was "discovered" by manufacturers and went from "trash" to "treasure", attracting investors. The price got so high, manufacturers found other source of protein and started using less whey. The price has since plummeted.
Chris
Post by: Manedwolf on May 29, 2008, 07:47:41 AM
I wish I knew what the next item they are going to go after so I can invest early.
I was listening to NPR yesterday afternoon and they compared the Whey market to the current oil one. Whey as a protein source was "discovered" by manufacturers and went from "trash" to "treasure", attracting investors. The price got so high, manufacturers found other source of protein and started using less whey. The price has since plummeted.
Chris
I can see the overheard conversation to the broker on that one.
"No whey!"
Post by: Gewehr98 on May 29, 2008, 09:56:33 AM
I took a picture of the local GMC dealer's lot today. I'll do the same a few weeks from now, just for comparison's sake.
We're getting rid of our company Silverado next week, and buying a 5-cylinder Canyon. The owner feels the pinch, even though the vehicle is a tax write-off.
Post by: mtnbkr on May 29, 2008, 10:02:14 AM
Chris
Post by: roo_ster on May 29, 2008, 12:05:25 PM
A 2008 model 1/2 ton Silverado with the 5.3L V8 gets 15/20/17 (city/hwy/overall) MPG.
The 2008 Colorado with the 3.7L I5 gets 16/22/18 MPG.
Sure he just didn't want a new truck?
Post by: Gewehr98 on May 29, 2008, 01:15:11 PM
Post by: HankB on May 29, 2008, 01:21:12 PM
The inner workings of the Saudis & OPEC are somewhat byzantine.
That's an incredibly ironic and insensitive metaphor, if you know your history. 
Post by: Waitone on May 29, 2008, 03:45:03 PM
More and more information is surfacing which points to a huge financial bubble in oil prices.
Post by: Sergeant Bob on May 29, 2008, 05:00:13 PM
More and more information is surfacing which points to a huge financial bubble in oil prices.
Careful their buster! You're dangerously close to copyright infringement with that "bubble in oil" comment.
I have the copyrights to oil bubble©
Post by: Perd Hapley on May 29, 2008, 07:50:23 PM
Quote from: agricola
Why would "the market" - oil companies - act to diminish the value of that commodity by promoting alternate technologies (before their value is close to the value of the original commodity, of course), or by increasing the supply in order to lower the price?
Are you saying that oil companies are their own market? That makes no sense. But neither do many other things you're saying, except from an authoritarian, collectivist perspective in which govt drives, manages and directs our use of natural resources.
Oil companies have no obligation to look at alternate sources of energy, unless their owners/investors demand it. That's why we call them "oil companies," rather than "those companies that are in charge of making sure I have any source of energy which interests me."
Overall, of course, you are demanding that politicians solve our energy problems. This seems to imply that you want to live in subjection to govt. intervention, rather than in freedom. Of course, it also suggests that you want the problem to be solved as slowly, inefficiently and painfully as possible.
Post by: agricola on May 30, 2008, 04:56:21 AM
Quote from: agricola
Why would "the market" - oil companies - act to diminish the value of that commodity by promoting alternate technologies (before their value is close to the value of the original commodity, of course), or by increasing the supply in order to lower the price?
Are you saying that oil companies are their own market? That makes no sense. But neither do many other things you're saying, except from an authoritarian, collectivist perspective in which govt drives, manages and directs our use of natural resources.
Oil companies have no obligation to look at alternate sources of energy, unless their owners/investors demand it. That's why we call them "oil companies," rather than "those companies that are in charge of making sure I have any source of energy which interests me."
Overall, of course, you are demanding that politicians solve our energy problems. This seems to imply that you want to live in subjection to govt. intervention, rather than in freedom. Of course, it also suggests that you want the problem to be solved as slowly, inefficiently and painfully as possible.
No, I am saying (as you acknowledge in the second paragraph) that Oil companies will not be lowering the price anytime soon - why would they when they are making immense profits as a result of this hike?
As for "This seems to imply that you want to live in subjection to govt. intervention, rather than in freedom", I do not believe that freedom is defined as allowing a load of huge companies to exploit you. Your point about "you want the problem to be solved as slowly, inefficiently and painfully as possible", is of course so deeply wrong as to be laughable.
Post by: Ben on May 30, 2008, 05:13:50 AM
Quote
why would they when they are making immense profits as a result of this hike?
Just to point out, the immense profits the oil companies are making are in raw dollars, not percent net profit. Net profit is on the order of 10%, compared to companies like Apple and Google, that have been making 50-300% net profit recently. Or for a sector comparison, Gushan Environmental (biodiesel maker) made a 33% net profit last quarter -- much higher than dino-fuel providers.
One of the main reasons oil company profits are "obscene" (as quoted in the press and in Congress) is because everyone and their brother is buying gasoline and fuel.
Post by: charby on May 30, 2008, 06:13:29 AM
I wish I knew what the next item they are going to go after so I can invest early.
I was listening to NPR yesterday afternoon and they compared the Whey market to the current oil one. Whey as a protein source was "discovered" by manufacturers and went from "trash" to "treasure", attracting investors. The price got so high, manufacturers found other source of protein and started using less whey. The price has since plummeted.
Chris
I'm starting to think it is going to be coal. Research coal to anhydrous ammonia and ammonia as a fuel. Also look what the anhydrous ammonia prices from last year to this year.
Post by: Perd Hapley on May 30, 2008, 01:47:29 PM
No, I am saying (as you acknowledge in the second paragraph) that Oil companies will not be lowering the price anytime soon - why would they when they are making immense profits as a result of this hike?
I know what your point was. I simply pointed out that you made it in a way that seems to indicate a fundamental misapprehension of basic economics. Again, "the market" for energy is not "oil companies."
The market are those buying oil (in this case). When someone like jfruser talks about "the market" solving a problem, they mean that buyers will reward those who offer better value, better efficiency, etc. It is not Exxon that we look to, to provide alternative energy or lower prices. Rather, it is a market place that rewards Exxon or anyone else who gives us more go for our dough.
You also seem confused about how sellers decide to price their goods. High prices don't always indicate high profits.
Quote
As for "This seems to imply that you want to live in subjection to govt. intervention, rather than in freedom", I do not believe that freedom is defined as allowing a load of huge companies to exploit you.
Exploit me? They're not exploiting me. They're mining, refining and selling petroleum products, so that I don't have to. I don't like the prices, either, but I haven't lost my head and started whining and exaggerating about it.
Quote
Your point about "you want the problem to be solved as slowly, inefficiently and painfully as possible", is of course so deeply wrong as to be laughable.
Oh. I thought it was just the lesson painfully learned by all who have waited for govt. to improve the economic situation, by infringing the rights of those mean rich people. Post by: Gewehr98 on May 30, 2008, 03:30:41 PM
Post by: agricola on May 30, 2008, 08:59:39 PM
I know what your point was. I simply pointed out that you made it in a way that seems to indicate a fundamental misapprehension of basic economics. Again, "the market" for energy is not "oil companies."
The market are those buying oil (in this case). When someone like jfruser talks about "the market" solving a problem, they mean that buyers will reward those who offer better value, better efficiency, etc. It is not Exxon that we look to, to provide alternative energy or lower prices. Rather, it is a market place that rewards Exxon or anyone else who gives us more go for our dough.
The market are those buying oil (in this case). When someone like jfruser talks about "the market" solving a problem, they mean that buyers will reward those who offer better value, better efficiency, etc. It is not Exxon that we look to, to provide alternative energy or lower prices. Rather, it is a market place that rewards Exxon or anyone else who gives us more go for our dough.
It isnt, unless you have found a way to run your petrol-powered car on solar power.
Quote
You also seem confused about how sellers decide to price their goods. High prices don't always indicate high profits.
It doesnt always mean that, but it does seem to be true now:
http://news.bbc.co.uk/1/hi/business/7372509.stm
http://news.bbc.co.uk/1/hi/business/7377812.stm
Post by: Manedwolf on May 30, 2008, 09:41:39 PM
Did anybody notice the GM bought out/retired 19000 workers this week? I expect Ford and Chrysler to do the same in the not-too-distant future...
I would expect production of SUVs that get under 15mpg to be severely cut, if not stopped. As of now, saleswise, cranking them out makes as much sense as continuing to shovel coal into a furnace that has gone out.
Post by: Perd Hapley on May 31, 2008, 05:44:43 AM
I know what your point was. I simply pointed out that you made it in a way that seems to indicate a fundamental misapprehension of basic economics. Again, "the market" for energy is not "oil companies."
The market are those buying oil (in this case). When someone like jfruser talks about "the market" solving a problem, they mean that buyers will reward those who offer better value, better efficiency, etc. It is not Exxon that we look to, to provide alternative energy or lower prices. Rather, it is a market place that rewards Exxon or anyone else who gives us more go for our dough.
The market are those buying oil (in this case). When someone like jfruser talks about "the market" solving a problem, they mean that buyers will reward those who offer better value, better efficiency, etc. It is not Exxon that we look to, to provide alternative energy or lower prices. Rather, it is a market place that rewards Exxon or anyone else who gives us more go for our dough.
It isnt, unless you have found a way to run your petrol-powered car on solar power.
You mean the market isn't eliminating all problems immediately, so we will have a perfect world, and you will always be perfectly happy and content? Who'd a thunk it?
I'm sorry, the lack of solar-powered cars on the street isn't much of a response. I also note that the state isn't providing us all with solar cars, either.
Post by: Manedwolf on May 31, 2008, 08:34:43 AM
Yeah, the sun is up there. But current solar tech is extremely expensive, and doesn't even capture a fraction of what is hitting it as useable energy.
Post by: Firethorn on June 02, 2008, 10:17:52 AM
doesn't even capture a fraction of what is hitting it as useable energy.
Wouldn't matter; if the stuff was as cheap as tar paper per square foot even existing efficiency levels would be sufficient to make people install it left and right. Instead it's $50-60 per square foot, which renders it 'special purpose', 'people who can't do math', or 'don't care about the economicability'.
Of course, I live in ND. I think that I'll wait until 50% of homes south of the Mason-dixon line have panels, 80-90% of california, etc... At that point the math will probably make sense.
Post by: Gewehr98 on June 03, 2008, 09:53:07 AM
Is it 1974 again?
Post by: Manedwolf on June 03, 2008, 09:58:10 AM
"Seats seven!" (while being driven by ONE GUY) "Big, bold and beautiful, dripping with chrome."
It was one step from the 6000 SUX commercial.
Post by: Headless Thompson Gunner on June 03, 2008, 10:19:30 AM
Post by: fallingblock on June 04, 2008, 08:42:35 PM
For you to write this:
Quote
As for "This seems to imply that you want to live in subjection to govt. intervention, rather than in freedom", I do not believe that freedom is defined as allowing a load of huge companies to exploit you. Your point about "you want the problem to be solved as slowly, inefficiently and painfully as possible", is of course so deeply wrong as to be laughable.
suggests that you've already forgotten the example of "Government solutions" you gave:
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Which is why I mentioned the UK perspective - prior to the infamous "Beeching Report" the UK had a massive rail network, the bulk of which was closed because the committee felt (and of course the fact that the chairman was the head of a roadbuilding firm had no bearing on matters) that the road would be a better form of transport for the future.
Needless to say, widespread local opposition was ignored, the routes were closed and torn up, and now councils in nearly every part of the country are trying to get them back again (with varying degrees of success - in Scotland and Wales (which have devolved government) stations and lines are reopening, but in England central government blocks it, favouring airport expansion). (edited to add) The main reason for the reinterest in the railways is that passenger numbers have gone through the roof, and the system is approaching capacity.This is mainly due to the Government (since 1997) continuing tp subsidize the various train operating companies (which in itself is an error, they should renationalize it) and allowed them to charge appropriate ticket prices (one of the main reasons for Beeching finding the railways unprofitable was that successive post-war Governments had not allowed BR to increase ticket prices, as an electoral wheeze - so they ran out of money. It had been reasonably profitable (for a public service) up until then).
Needless to say, widespread local opposition was ignored, the routes were closed and torn up, and now councils in nearly every part of the country are trying to get them back again (with varying degrees of success - in Scotland and Wales (which have devolved government) stations and lines are reopening, but in England central government blocks it, favouring airport expansion). (edited to add) The main reason for the reinterest in the railways is that passenger numbers have gone through the roof, and the system is approaching capacity.This is mainly due to the Government (since 1997) continuing tp subsidize the various train operating companies (which in itself is an error, they should renationalize it) and allowed them to charge appropriate ticket prices (one of the main reasons for Beeching finding the railways unprofitable was that successive post-war Governments had not allowed BR to increase ticket prices, as an electoral wheeze - so they ran out of money. It had been reasonably profitable (for a public service) up until then).
Post by: LadySmith on June 04, 2008, 11:50:08 PM
I'm not surprised GM had to shut those down. Did you see the latest Escalade commercial?
"Seats seven!" (while being driven by ONE GUY) "Big, bold and beautiful, dripping with chrome."
It was one step from the 6000 SUX commercial.
"Seats seven!" (while being driven by ONE GUY) "Big, bold and beautiful, dripping with chrome."
It was one step from the 6000 SUX commercial.
Good one.
Post by: The Annoyed Man on June 05, 2008, 07:32:20 AM
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I simply pointed out that you made it in a way that seems to indicate a fundamental misapprehension of basic economics. Again, "the market" for energy is not "oil companies."
The market are those buying oil (in this case). When someone like jfruser talks about "the market" solving a problem, they mean that buyers will reward those who offer better value, better efficiency, etc. It is not Exxon that we look to, to provide alternative energy or lower prices. Rather, it is a market place that rewards Exxon or anyone else who gives us more go for our dough.
You also seem confused about how sellers decide to price their goods. High prices don't always indicate high profits.
The market are those buying oil (in this case). When someone like jfruser talks about "the market" solving a problem, they mean that buyers will reward those who offer better value, better efficiency, etc. It is not Exxon that we look to, to provide alternative energy or lower prices. Rather, it is a market place that rewards Exxon or anyone else who gives us more go for our dough.
You also seem confused about how sellers decide to price their goods. High prices don't always indicate high profits.
Any 'misapprehension of basic economics' is entirely yours. There is no so-called 'free market'. It is a myth. 'Markets' are a creation of government, as are corporations, and both are accountable to the same (IOW, 'We the People'). The reason that we have record oil & gas prices, along with record oil company profits, is because government (which is supposed to represent 'We the People') has been sold to multinational corporations-the modern versions of the robber barons of the Industrial Revolution. You've heard of the Industrial Revolution? That time between 1880 and The Great Depression? 7 day workweeks, sweatshops, child labor, dangerous work conditions, etc. No middle class, only poor and the very wealthy.
All that changed as a result of the Great Depression (the inevitable result of a corporate dominated society) and the policies of FDR, who singlehandedly recreated the most prosperous middle class in history. Until RR came along and began to dismantle it once again with his voodoo economics. 'Give bidness big tax breaks and get the gubmint off their backs' he said. 'Bidness will invest that new found money and everyone will prosper as a result of the new jobs and economic boom tax cuts will create'.
But that didn't happen, did it? Instead 'bidness' put the money in their pockets and looked for even more ways to increase profits. They took that 'prosperity' overseas where they could benefit once again from sweatshop labor conditions.
American worker's productivity increases every year while wages decline. The rich get richer as the middle class disappears. We've gone from the world's largest creditor nation in the 1970's to the world's largest debtor nation today. We borrow trillions of dollars from the Chinese, Arabs, Japanese to give to private 'corporations' for phony 'wars'. We manufacture nearly nothing in this country. We buy cheap plastic crap from China as fast as we can get it here. And it goes on and on.
Wake up. This government doesn't represent your/our interests, and hasn't since the 1980's. And if you think the election of McCain or Obama is gonna change anything you're in for a helluva long wait as our standard of living continues to deteriorate. But, as long as you've got the bread and circuses, sportsteams and Walmart, everything is A-OK, right? Sheesh.
Post by: Ex-MA Hole on June 05, 2008, 11:26:35 AM
Riley, I've missed you.
Post by: Gewehr98 on June 05, 2008, 12:54:22 PM
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Riley, I've missed you.
Oh, please. Stop lying.
Post by: Gewehr98 on June 15, 2008, 03:34:22 PM
