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Behind Skyrocketing Oil Prices
Yesterday comes the news that the Commodity Futures Trading Commission (CFTC) is investigating potential manipulation of the oil trading market.
That's a good thing, though the CFTC is not exactly the most aggressive regulator around. (Says Judy Dugan of Consumer Watchdog: "On its face, the investigation smacks of the fox investigating a hen shortage in the chicken coop.")
Market manipulation may be contributing to the recent oil price spike -- though even in the worst case, it is only part of the story. The most important factor is supply and demand: supply is having trouble keeping up with unabated demand growth.
Are Wall Street firms and hedge funds in fact manipulating the oil market? Perhaps. There are certainly enough conflicts of interest, and unregulation, to make such activity plausible. These aren't exactly guys with an honorable track record.
Whether speculation is driving price up is a separate issue from manipulation. Investment dollars are pouring into oil futures, pretty clearly driving up price. This reflects supply and demand for oil futures as an investment tool, more than available supply and demand for actual crude oil. Some nontrivial portion of the recent run-up in price is almost certainly due to this speculative activity, which is fueled by leveraged buying (use of borrowed money).
At the end of 2007, with oil prices around $100 a barrel (a shocking height, just half a year ago), Jennifer Wedekind, my colleague at Multinational Monitor, interviewed roughly a dozen oil analysts about the price of oil. They were divided on the reasons for high oil prices of $100, with some agreeing that speculation -- but not manipulation -- played a role and others fiercely denying it.
Among those attributing some role to speculation was Linda Rafield, a senior oil analyst, with Platts: "We have seen money market funds and asset managers and portfolio managers definitely putting money to work in the commodities sector, and that certainly has bolstered prices, since most of those people notoriously will trade from the long side." Against speculation as a factor was Jeff Rubin, chief economist and chief strategist, CIBC World Markets. Asked what factors were driving the price spike, he said, "Certainly not Middle Eastern instability or speculation or so-called geopolitical factors."
Six months later, it seems like speculation has become increasingly important. It's just very hard to identify what has happened in the last half year to jump prices by a third.
A second key factor in rising prices is the decline in the value of the dollar. A barrel of oil today is worth a barrel of oil tomorrow. If the dollar is worth less tomorrow than today, then the dollar value of a barrel of oil will be higher tomorrow. Against a basket of currencies, the dollar has fallen by 25 percent since 2003, and considerably more since its peak in 2001.
But, whatever the allocation of blame for today's price, the most important factor in the big picture is supply and demand.
Global demand is growing at a steady clip, thanks to very rapidly rising oil use in China, India and the Middle East.
Global supply is stretched thin. Some argue this is because the world is at or near "peak oil production," a tipping point when half the world's oil has been extracted, and yields begin to decline, with very major price effects.
A different view is uncomfortable with the apocalyptic element of peak oil theory. From this vantage point, more oil -- or close substitutes, like tar sands or shale -- is available, but it is harder and more expensive to get. This is the preferred view of the oil industry analysts (many of whom note that much oil that is easily attained from a technological standpoint -- for example, in Iraq -- is hard to reach for political reasons).
Either way, the supply challenges combined with rapidly growing demand means the world is going to see steadily higher prices. Additionally, very tight supplies will inevitably lead to price spikes that appear irrational from a close-up view.
Says Charles Maxwell, senior energy analyst at Weeden & Co: "So long as capacity utilization in the world crude oil producing system is running at 98 percent, which it is today, and so long as perhaps one-and-a-half, 2 percent, that's excess, is in the form of Saudi heavy, sour crudes, which the typical American refinery can't use any more of -- they use some, but they can't use any more of because it has very serious effects in pitting the insides of these pipes and then requiring the refinery to shut down for a long time and the redoing of all the pipes -- we're going to have these periodic price rises of this sort."
Explains Maxwell: "Any system needs to have a little cushion between adversity that strikes -- weather factors or cut-offs for political purposes or political struggles from civil wars. We don't have in this system enough of a cushion. Normally, capacity utilization is considered ideal around 94 to 95 percent. So our 98 percent capacity utilization is well above that and we can't get it down, because it takes 5 to 7 years to create it and we aren't spending the money today that would create it 5 to 7 years out."
So, by all means, forward with a robust investigation of market manipulation, and yes to re-regulating oil markets that are now too financialized and removed from the buying and selling of real oil.
But the supply-demand challenges facing the world are much more serious than the speculative and other factors contributing to the present run-up in price.
It's hard to imagine why the United States -- or the world -- would need more incentive than responding to climate change to invest in renewables, mandate much tougher efficiency standards for cars and a switch away from the internal combustion engine, and massively scale up public transportation. But climate change doomsday scenarios have, so far, not proven enough. Perhaps the prospect of $200/barrel oil will.
Robert Weissman is co-director of Essential Action, a corporate accountability group based in Washington, D.C. that focuses especially on international issues and has been very involved in the access to medicines campaign. He is also editor of Multinational Monitor magazine. With Russell Mokhiber, he is editor of a weekly column, Focus on the Corporation, archived at http://lists.essential.org/pipermail/corp-focus.
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74 Comments so far
Show All"How strange. U.S. oil consumption is down yet prices continue to increase at the pump ?"
It is "demand", not "consumption", that applies. Consumption is easily neasured, demand is not, as it involves things that cannot be measured such as psychology and ability to forecast future market conditions.
"Anyone writing about energy inflation in the good old U.S.A. who does not take into account the devaluation of the dollar or the invasion and occupation of Iraq is either incompetent or has a hidden agenda."
I cna't think of anyone who dismisses those points. Can you?
The amount of money flowing into the commodities market is about 5 five fold from as little as a few years ago, it is $billions upon billions. It is pension funds, hedge funds, institutional funds....the type of funds that wouldn't normally go to commodity futures trading but have recently in search of better returns. In the old days previous regulatory constraints would have prevented this however these regulations were done away with some 9-10 years ago or so.
Consequently, my guess is rampant speculation is good for about $20.00-$25.00 /barrel. The decline of the U.S. buck since 2002 is good for another $30.00 or so.
The underlying production/consumption problems will be with us forever going forward, we have entered a new era with respect to oil and people are going to have to understand this. The ballgame has changed, cheap gasoline for the monster SUV's is a thing of the past.
TECH 2: I have noticed the same thing--the same contradictions and it makes me wonder what IS true in this oily situation.
Article states:
Market manipulation may be contributing to the recent oil price spike — though even in the worst case, it is only part of the story. The most important factor is supply and demand: supply is having trouble keeping up with unabated demand growth.
If the price was $25 in 2000 $130 today, it is a real stretch to blame that on supply and demand or production costs. It's a bubble where you hope a lot of people lose their asses when it bursts. Of course, the system is so screwy now that the folks who speculate make it on the rise or fall.
The uncertain world created by Bush brings these folks out of their holes. Another example of the thesis last stated by Naomi Klein, that disaster may be a tragedy for most, but an opportunity for the bloodsuckers of the world.
Herman, Kingsville, Md
Ya, well, when it's legal for 1% of 1% of 1% of the population to counterfeit enough money to increase the total supply by, say, 20% a year, what exactly do you expect??
This is just step #72 of the 219 steps that will need to be taken for that 1% of 1% of 1% of the population to own 99.9999% of everything on the planet that can possibly be owned, including you.
This media genius forgot to mention that the American war crimes in Iraq have resulted in a reduction of Iraq's already reduced production and devalued the dollar at the same time. The Iraqi resistance has tied up the cheapest source of sweet crude on earth.
And against the Euro, which is now becoming an oil trading currency, the dollar has gone from about .90 cents for one Euro in 2002 to the present $1.56 which is about a 60% decline and not 25%. And of course the Euro is doing much better as a currency for purchasing oil.
http://www.alternet.org/waroniraq/86515/
Iraq War May Have Increased Energy Costs Worldwide by a Staggering $6 Trillion
By Geoffrey Lean, The Independent. Posted May 27, 2008.
"The Iraq War means oil costs three times more than it should.
The invasion of Iraq by Britain and the US has trebled the price of oil, according to a leading expert, costing the world a staggering $6 trillion in higher energy prices alone.
The oil economist Dr Mamdouh Salameh, who advises both the World Bank and the UN Industrial Development Organisation (Unido), told The Independent on Sunday that the price of oil would now be no more than $40 a barrel, less than a third of the record $135 a barrel reached last week, if it had not been for the Iraq war."
And:
The weak dollar is discouraging new production which reduces supply.
http://www.mees.com/postedarticles/oped/a47n33d01.htm
"As mentioned above, drilling activities would be higher if current oil prices were associated with a stronger dollar. Therefore, dollar depreciation reduces supply."
" Dollar depreciation reduces activities in upstream through different channels including increased cost, higher inflation rates, lower purchasing power, and lower return on investment. Dollar devaluation increases oil demand in countries with appreciated currencies because of an increase in purchasing power. Large dollar devaluation reduces the supply of oil and increases the demand for oil."
And Duh ! The dollar may soon "not be worth a continental".
http://www.alternet.org/waroniraq/38550/
Iraq Is Killing the Dollar
By Nicholas von Hoffman, TheNation.com. Posted July 10, 2006.
"History shows that inflation and the cost of war go hand in hand -- and Iraq is no different."
Menwhile the Federal Reserve keeps increasing the money supply (funny money) to keep the war machine running. Got a problem, just print more money !
I can't wait for my stimulus check to lift me out of poverty so I can once again be a consumer !
Could this be the decline of the American house-of-cards empire via imperial over-extension and inflation ?
We will either have a "revolution"--a complete transformation or our economic/cultural/environmental paradigm--or we will continue down our current path to "failed statehood".
www.StudentsForTheEarth.org
Don't the refinery owners have some influence on supply?
Oh please! What nonesense. This article and the last are nothing but a shallow attempt at defending neo-con foreign policy and wall street speculators.
World-wide oil demand has not gone up five fold in the last 6 years. It's the war stupid! And the threat of more war against Iran.
The instability in Iraq. And the possibility of war against Iran, and the closing of the Hormuz straits, has sent oil futures prices higher and higher.
It's The War Stupid
When Bush went to Saudia Arabia and begged the Saudis to increase oil. They told him that they increased supply by 300 million barrels the previous week, their has been no increase in demand or supply problems, drink your tea and get the hell out of our kingdom.
The oil execs testified a few weeks ago that the price of oil should be at $55 per barrell.
Increasing world-wide oil demand, and shrinking supplies, is indeed a long-term problem. However, it does not explain the dramatic rise in prices, over the last 6 years. It's the war stupid.
On the positive side. High oil prices are causing people to change their behaviour. S.U.V sales are down, people are driving less, which is all beneficial to the environment. On the other hand, high oil prices have a down side, inflation is taking off, and food riots are spreading around the world.
This is dumb economics. Exxon and the Saudis are profiting at the expense, of the poor and the hungry, and our oil dependent economy. Our economy is so oil dependent, that you can easily correlate our economic growth, with the price of oil. Look back the last 50 years. If oil prices do not dramatically decline our economy could collapse.
I am Green, I do not own a car, so my oil exposure is limited. However, I am affected by the economy, and I am effected by mass unemployment and social unrest. If you want to change peoples behaviour, tax oil and spend it on green initiatives, don't give the money to Exxon and the Saudis.
If you want to get the price of oil down, Vote Obama for President, and the speculators will instantly cover their futures positions. This is the best option to get the price of oil down. And then let's tax the hell out of S.U.V.s, gasoline, invest in mass transit, solar, wind and renewables.
These two articles, written by Robert Weissman should be seen for what they are, a shameful attempt to deflect attention away from neo-con foreign policy and wall street speculators. I'm surprised that Russell Mokhiber is associated with this clown.
Opps...the Euro was about .98 cents in 2002 but that still remains about a 60% decline.
A current view:
http://www.themoscowtimes.com/article/1016/42/367724.htm
" The sole reason for this enormous difference is the incredible depreciation of the dollar against the euro. From one for one at the end of 2002, it now costs nearly $1.60 to buy a euro.
The chorus of complaints about the price of gasoline gets louder every day and is even becoming a campaign controversy both across and within parties. The same old solutions we have heard for years are being proposed -- conservation, increased domestic exploration and manipulations of the tax on gasoline. But no one is pointing to what is by far the biggest reason for the exorbitant cost to fill up a tank of gasoline these days.
The collapse of the dollar exchange rate, alone, explains at least half of the increase in the pump price of gas over the past five years. If it were not for the falling value of the dollar, the price of gasoline wouldn't be an issue."
And while we are paying more at the pump the average American is also inheriting about $5 Trillion (Stiglitz) in war debt to subsidize record MIC and Bil Oil profit. And it remains to be seen how all of these factors will play out as the overall American economy (and related economies) continue to decline as a result of the most expensive war crimes in world history!
And well worth the read, as the plot thickens !
CóilÃn Nunan: Oil, Currency and the War on Iraq
http://www.feasta.org/documents/papers/oil1.htm
"World-wide oil demand has not gone up five fold in the last 6 years."
You can measure "consumption" but not demand.
"It's the war stupid! And the threat of more war against Iran."
Yes war in the Middle East is a factor but what has happened in the Middle East over the last year to have cause a doubling of oil prices in the same period. You can't blame the conflict there exclusively for the increase without a very good answer to that question.
"The amount of money flowing into the commodities market is about 5 five fold from as little as a few years ago, it is $billions upon billions."
Do you think it's a bubble then?
I think oil in euros is up about 80% in the last year, anyone know for sure?
Words do little but to shore up the ego unless they are followed by widespread, INDIVIDUAL ACTION. What is EACH ONE of us doing to lighten the potentially fatal planetary burden of climate change?
Dead Eye Dick and The Shrub!
WAR, War, WAR.
STOP the WAR and
GAS will drop by half.
EXXXon Moron.
The so-called rise in oil prices is nonsense. The dollar is in free fall and the oil producers and other oil consumers have quietly switched to the Euro as the oil exchange currency. The sole reason to invade Iran was to stop them from dumping the dollar as the currency of exchange but it's too late now. It's already happened worldwide. Welcome to pushing a wheelbarrow full of dollars down to the corner to buy a beer.
The Great Oil Swindle
How much did the Fed really know?
By Mike Whitney
Click on the link for the article
http://www.informationclearinghouse.info/article20011.htm
"The sole reason to invade Iran was to stop them from dumping the dollar as the currency of exchange but it's too late now. "
Without actual evidence for this you are just guessing. You are entiltled to do that but that's all you are doing.
if speculation is not the main culprit, then why was the price of oil stable until after the meltdown of mortgage-backed securities? the rulers fear greatly that the american people will understand the role of speculation in our economic system.
The most important factor is supply and demand: supply is having trouble keeping up with unabated demand growth.
We didn't ask which factor is most important. We want to know all the significant factors, which are 1.) failure to stop the bidding wars among consumers, 2.) failure to reign in private speculation, 3.) failure to reign in refiner/distributor profiteering, and 4.) failure to reign in the US government's imperial misadventures that inflame the first three.
All four are failures of the US government to serve the public interests which include stable and sustainable energy sources and supplies. The problem is the US government failing its responsibility.
"3.) failure to reign in refiner/distributor profiteering,"
When you try to limit their profit, they will simply stop producing when they near that limit. You can't force a business to operate if they don't think they should. And if your suggestion is "fair", wouldn't it also be "fair" to give money to companies when they post losses? You may not be old enough to remember but htere was a period when oil companies lost money.
jakenewton
It wasn't until the Iranian government announced they wanted to form their own bourse and trade oil in Euros that the Bush crime family went apeshit. Now there's nothing they can do about it. Furthermore, the systematic looting of the Treasury by the Bush crime family has made anyone holding T bills very nervous and the big players (China, Western Europe) have started to dump them at fire sale prices.
purvis, nothing in your last post supports your claim ast to what the sole purpose of the invasion was. Further, you offer no specifics as to what you mean by "went apeshit" ot "looted the Treasury", so it's hard to see what idea if any this post could possibly support.
Please Ignore jakenewton!
He adds nothing to the debate, offers no suggestions, and takes glee in getting commenters into arguments.
This is a serious issue that is causing, people in Haiti to eat dirt, bread riots in Egypt, and rice shortages in Asia. It is destroying the U.S. economy, creating un-employment, and hardship for millions.
Some have suggested that jakenewton is a paid troll, others have used foul language against him/her, I don't know what motivates him/her. Yesterday, I un-wittingly responded to his /her inane critique of my comment, and wasted a couple of hours of my life.
If you have the dis-pleasure of having jakenewton, respond to your comment, do yourself and everyone else a favor - ignore jakenewton.
"Please Ignore jakenewton!"
Oh yes, that way you don't have to respond to reasonable arguments based on facts.
"He adds nothing to the debate,"
I am still trying to get you or someone else to answer the question " If oil prices are all about the war, than what has happened in the war in the last year that's any different that would cause oiul prices to have doubled in the same period?"
This is in fact something I have added to the debate. That there is still no apparent good answer to the question strongly suggests that the price of oil is *not* entirely due to the war. That means that those who think so should maybe rethink their position.
It is *bad* to have bad ideas, OK? So if my contribution here causes just one reader to to get rid og just one bad idea, the world will be a better place for it.
"This is a serious issue that is causing, people in Haiti to eat dirt, bread riots in Egypt, and rice shortages in Asia. It is destroying the U.S. economy, creating un-employment, and hardship for millions."
*I* did all that? *blush*
" I don't know what motivates him/her."
I'll tell you why, even though it shouldn't matter: It's much more challenging to me to discuss and debate matters in a group where most people disagree with me than to go to some place where there would be no such disagreement. I would strongly suggest that some of you try it some time, and see if you can hang in there or not.
"Some have suggested that jakenewton is a paid troll,"
It's only a coping mechanism for them to deal with what they sense as dishormony, or even a nagging questioning of their sacred beleifs.
"Yesterday, I un-wittingly responded to his /her inane critique of my comment, and wasted a couple of hours of my life. "
*You* should ignore me then, for the sake of your own well being, please. You need to take care of yourself and not let things like this get to you.
I really get tired of hearing about supply and demand. We all know this is a bunch of hooey. I remember that the price of gas began going up right after Katrina. I also recall that EXXON began making record profits at that time as well. They probably figured they could get away with price gouging, and spew a bunch of garbage about supply and demand and everyone would calm down while they make themselves filthy rich. When we wake up and take our pitchforks to these billionaires and nationalize these evil oil demons, then we can switch over from a gas guzzling tank driven economy to something more sensible. Mass transit/green driven transportation. Who is making a money off of driving truckers out of business? Who is making money while the rest of us suffer under this oppression? These are the guilty. I don't believe for one minute the whole supply/demand blah, blah, blah. Someone is making loads of money right now.
Big Oil and Big Finance are partners in crime. According to William Engdahl, about 60% of the price of oil is due to speculation. Goldman Sachs prediced oil would drop to 55 barrels of oil last December, and now thye are up to 200 dollars a barrel. It's a bubble helped by a lack of a cushion.
"Explains Maxwell: "Any system needs to have a little cushion between adversity that strikes — weather factors or cut-offs for political purposes or political struggles from civil wars. We don't have in this system enough of a cushion. Normally, capacity utilization is considered ideal around 94 to 95 percent. So our 98 percent capacity utilization is well above that and we can't get it down, because it takes 5 to 7 years to create it and we aren't spending the money today that would create it 5 to 7 years out.""
Yes, and the cushion costs money to build. Having a cushion lowers prices, why spend money to devalue your product. It is obvious, that the oil cartel, which is Big Oil, has an incentive to have less of a cushion. Thats manipulation. We need to break up these cartels and get competition into the markets.
Many believe those countries holding the oil have the power. Thats nonsense. Oil in the ground without the means to extract it, refine it, ship it to the end buyer is worthless. Big Oil controls this. Iran has to import gasoline, because Big Oil won't sell them the equipment they need to do their own refining.
Indirectly, the war in Iraq has something to do with oil prices. Imagine if sanctions on Saddam were lifted, and he allowed the Chinese and French and other non-US/UK oil companies in to extract his oil, which by all accounts is more plentiful and is cheap to extract (1-2 dollars a barrel). Oil prices today might be 20 dollars a barrel. But we invaded Iraq, saying the oil would pay for the costs of the war, then we intentionally botched the occupation that fueled sectarian violence, so the oil could not be extracted to it's maximum potential, and oil is at 130 dollars.barrel.
As for the global warming component coming from CO2 produced from burning oil, 31,000 scientists say its not true.
http://www.telegraph.co.uk/news/worldnews/2053842/Scientists-sign-petition-denying-man-made-global-warming.html
CO2 is food for plants and our crops that we eat, and it's increase has improved crop yields allowing us to feed the world. We need to burn more oil, we have plenty according to Thomas Gold. Feed our plants, grow more food, populate the planet to create more Einsteins that will solve all the worlds problems.
"They probably figured they could get away with price gouging,"
No one can gouge you without your permission.
"Yes, and the cushion costs money to build. Having a cushion lowers prices, why spend money to devalue your product. It is obvious, that the oil cartel, which is Big Oil, has an incentive to have less of a cushion. Thats manipulation. We need to break up these cartels and get competition into the markets."
What "cartel"? They compete with each other, they are not like OPEC, unless that was who you are talking about. What keeps one of them from lowering their price to get more volume?
"A barrel of oil today is worth a barrel of oil tomorrow."
WRONG!
The deeper into an oil field you extract, the less ENERGY the extracted oil is worth, due the energy required to bring the oil to the surface. At PEAK OIL we enter a period in which oil is worth LESS ENERGY than it required to draw from it's source. Did you ever suppose you'd see a day when a barrel of oil cost you energy?
jakenewton
I'm getting the distinct impression that you're a woman employee of the RNC. You have absolutely nothing to add to the conversation but schoolmarmish nonsense. And I'm sorry if "going apeshit" offended you. As for looting the treasury, just exactly how stupid can you get with the national debt now larger than the entire aggregate of all previous national debts combined.
American's are pathetic. We have the power to drive down the price of oil by serious short term conservation. Just stop buying it. Put yourselves out a little and develop creative ways to stop using so much of it. Most people will not even do something so simple as to carpool until the price drops. I won't carry the burdens of selfish people. A gallon of gas now lasts me two weeks so I could care less if it goes up to ten dollars a gallon.
What a joke. The MSM has segments titled something like: $5 a gallon gas coming soon?
This is just to get us softened up to the idea that, yes, it will be $5, then $6, then $10...
I still think back to bush saying to a reporter recently, "$4 a gallon gas; I hadn't heard that." Impeach the idiot even if it's the day before the election. Now that would be theater.
@JK
"No one can gouge you without your permission."
What a load of unmitigated crap, everyone has to eat. What am I going to do, go on a hunger strike because commodities and oil speculation has caused food prices to soar above their production costs, i.e. gouging.
Further due to poor infrastructure planning it's damn difficult to live without a car in the U.S. so many ARE forced to pay for gas just to keep their jobs to survive. SUDDEN price jumps that people can't plan for do in fact exactly gouge people without their permission.
Perhaps you sir have joined the New Age 'breatharians" and have figured out how to live on pure air to avoid commodities gouging, those of us in the real world have not.
" And I'm sorry if "going apeshit" offended you. As for looting the treasury, just exactly how stupid can you get with the national debt now larger than the entire aggregate of all previous national debts combined."
Not as a percentage of GDP. That was back in the mid forties.
" What am I going to do, go on a hunger strike because commodities and oil speculation "
The fact is you *choose* to buy gasoline. It may be difficult for you to set things so that you may lower or eliminate that purchase, but it is well within what is possible for you to make the choices neccessary to do that. The choice is yours.
"As for looting the treasury, "
Another thing, it's Congress that spends money, not the President.
What am I going to do, go on a hunger strike because commodities and oil speculation has caused food prices to soar above their production costs, i.e. gouging.
Eat mud pies like the poor people of Haiti!
High oil prices wreak havoc around the world:-
http://www.independent.co.uk/environment/green-living/shocked-how-the-oil-crisis-has-hit-the-world-837477.html
joneden, thanks for the link;
lets all max out our credit cards buying essentials like bikes and hand tools and such, and then not pay the bill. Or better yet, fill up your tanks, then not pay the bill. Or even better, how about both? Then see just how long you can make that tank last. if you can go two months on a tank of gas, you are doing something right. Two days, not so good. Two weeks on a gallon is downright awesome!!!
This will also really stick it to those monied interests that depend on the minimum payments on those cards to lube the system. Its all funny money anyways. You seen those new 5 $ bills? Crazy thing is the date on them is 2006, not 2008, so they had stacks of cash just waiting to be released into circulation for two years? More and more often, when i withdrawn money from an atm, i get fresh crisp uncirculated bills, not old worn out ones...The money supply has grown, but the commodities they buy has not, therefore hyperinflation like we are seeing today is the result. A friend today had me pump her tank in a little chevy car, and 10 or 11 gallons was $52.25, its insane. HINT, when you pump, dont go full pressure on the pump, you get more fumes and less gas, and when you are done pumping also shut off the machine, then grip and ungrip the handle to get all that gas still in the line that you paid for. Kudos to those that don't have to worry about these things though, riding bikes and walking is so much better for you.
@jonoden
I followed your link. Those graphs are great. I should make a poster out of them and put them on my wall.
This is news? Really? It should be obvious to the casual observer that oil futures is the only place left for the gouging to be going on. The only question is who is doing it, or is it really just a bubble that can't collapse because of demand. Someone is making $150.00 per barrel between the oil field and the distillery. My guess is that it's the executives acting as private investors, selling to their own corporations. The money is somewhere, and we all remember DeepThroat don't we?
Only SOME of the current price it is a speculative price bubble. The production of light sweet crude oil has peaked, if I am right, and will never return to its former level. Our refineries are mostly capable of processing this sort of easy to process oil. So there is a genuine shortage. It may not cost the oil producers anywhere near that cost to extract the oil, but there is no point in selling it for less, that would lead to real shortages and rationing. Demand is greater than supply, and so the price must be high.
There is plenty of heavy sour crude available, so when our refineries are rebuilt to cope with heavy crude (viscous), or sour crude (high sulphur), then the price at the pump will either drop or or rise at slower rate, until of course, that peaks also, but that COULD possibly be a decade away.
Why high prices right now? The collapse of the sub-prime market which led to the increase in the money supply/lowering of the prime rate, which led to lowering the value of the dollar, which raises the price of speculative oil, which encourages more futures trading etc. I would agree that this is a bubble, and that the bubble will indeed burst. It just may not burst until after the collapse of our economy.
There is a war connection, though some here seek to dismiss that angle. First, how much oil is Iraq currently producing, and who is taking it out, and where is it going, and who is profiting? Nobody I have read/talked to knows the answer to these questions, and this is, in my opinion, the great crime being perpetrated under cover of the war crimes.
Or perhaps everyone here knows that Iraq is the only major oil producer without meters on the wells. That's right...the oil gushes out un-metered and unaccounted for. How much? Nobody knows. Is there a direct pipeline to Kuwait, installed after the invasion? Nobody will say. But I have seen satellite pictures which, if true, indicate such a pipeline was built and guarded by U.S. forces. Anyone doubting this should look at a map overlay of pipelines/pumping stations and U.S. bases. they match up pretty well. That map can be seen here: http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=132&topic_id=3190892
The other war effect comes from our strong military presence in the Persian gulf and saber rattling against Iran (another oil producer). The crucial straits of Hormuz are susceptible to blockade by Iran, and any conflict with them raises global fears of supply problems. Even if we have no intention of invading Iran, we are acting as if we were; and that is enough to raise fear among the speculators, who have no problem with their increased profits.
Looting the treasury; Bush has bankrupted this nation by taking us from a surplus economy to a deficit economy, and yes deficits do matter, regardless of economic statistical sleight of hand (oh it's low as compared with percent of GDP or some such chicanery).
The beneficiaries of this looting are the contractors in Defense/security, construction, and yes, oil, which enjoys billions in taxpayer supported subsidies. As Reagan did, Bush policy took money away from social programs and increased spending in the Defense budget...ours is greater than all the world's defense budgets combined, and that includes, of course, Russia and China. This shuffling of money from social programs to defense is part of the economy-crippling strategy of the Republican party.
Now go ahead...address these issues with your 'facts' and stick to the issues trolls/
there is something strange going on.
I have read dozens of articles by "experts" over the past months, each contradicting each other.
Experts with data that suggests oil demand is not rising as fast as other experts claim.
Experts saying speculators are the problem, others saying they are not.
Money supply is the issue according to others, massive US dollars printed to finance the Iraq war.
I have read articles stating oil supplies are dwindling, and other articles showing massive new reserves disovered in Brazil, Oregon/Canada, Saudi Arabia, and of course Iraq.
Very strange.
"Looting the treasury; Bush has bankrupted this nation by taking us from a surplus economy to a deficit economy,"
The debt is at 65% of GDP, not a historic high. Can you think of families with mortgages that are much higher than that percentage of their annual income? Of course, it's *common*. Do we call them "bankrupt"? Of course not.
Only congress spends money. Bush does not control all of the congressmen who voted for appropriations bills.
While I would certainly agree that the Congress is equally at fault with regards to war funding, this does not change the situation or offer us any possibility of solving this problem any time soon.
And yes, I can also agree that many families are indeed going bankrupt (that whole sub-prime thing)...your point just helps make my point. And here is the difference. I have a mortgage, but I also have a job and can keep generating the income to keep paying down the mortgage. In our economy, our solution is to have more money printed up, thus again lowering the value of the dollars we currently hold, and lowering the prime rate, which also devalues the dollar. We work for our money; the Government just prints more (or, to be more accurate, buys more from the Fed, which is not a Government entity but a private banking consortium which sells us the money with added interest)
The debt may be below a certain percentage of GDP but that's irrelevant. What is relevant is the total amount of debt, who owes it, and how do they hope to pay it off. It seems as if you (jakenewton) think a surplus is not a good thing.
And no one likes to have a mortgage hanging over them; it's just more money in the hands of the banks, and any mortgage holder longs to be free of debt...republicans seem to revel in debt. Why is that?
And, the bank can, if it wishes, ask you to pay off the balance of your loan or risk foreclosure. What does the U.S. do when China/Arabia/Japan calls in their note?
Why do you favor economic policies that put us at a severe economic disadvantage to our 'enemies'? Why do you want the terrorists to win?
jakenewton, are the commodities markets a bubble - you bet they are. Consider this, in the U.S. in 2003, pension funds and index funds (large, institutional investors) had about $13 billion invested in commodities. The amount as of March 2008 is $260 billion. The worry is it could go higher, much higher. The easing of regulatory restrictions has made this possible. This of course drives up all commodity prices including food. It is ironic that groups having absolutely no interest in taking possesion of any of the commodities contracts they bought are dictating food, fuel, metals etc. pricing around the globe. It's just business.....and some people around the world will pay a very heavy price for this "business".
"lets all max out our credit cards buying essentials like bikes and hand tools and such, and then not pay the bill. Or better yet, fill up your tanks, then not pay the bill."
Sure, just load the burden on to evryone else. How selfish.
"Someone is making $150.00 per barrel between the oil field and the distillery."
Whoa! Another big increase! I hadn't heard of it.
"jakenewton, are the commodities markets a bubble - you bet they are. "
Thanks for your response.
"The worry is it could go higher, much higher. "
If it's a bubble, than I was specifically wondering about a burst, in the short term at least, such as with Tech and Housing.
And yes Bush does control congress in regards to funding; it's called the veto.
"And yes, I can also agree that many families are indeed going bankrupt (that whole sub-prime thing)…your point just helps make my point. "
With todays mortgage "crisis", there is only a very small percentage of families who are in arrears.
"your point just helps make my point."
Nonsense. You point to a tiny minority of families with mortgages to try to make your point.
"And here is the difference. I have a mortgage, but I also have a job and can keep generating the income to keep paying down the mortgage. "
And following the analogy, the equivalent to your job is the GDP of the nation, which of course is at a record high.
"In our economy, our solution is to have more money printed up, "
This is true of *all nations*. There is no gold standard or similar anywhere in the world anymore. Given that fact, why does this matter?
"What is relevant is the total amount of debt, who owes it, and how do they hope to pay it off. "
You have yet to make the case that percentage of GDP is irrelevant, and you neglect to inclede in your list perhaps the most important thing of all, *what* is bought with the debt. Any of those billion items is debatable.
"And, the bank can, if it wishes, ask you to pay off the balance of your loan or risk foreclosure. "
That was true in the depression era but not now.
"Why do you favor economic policies that put us at a severe economic disadvantage to our 'enemies'?"
What economic policy have I stated that I "favor"?
"And yes Bush does control congress in regards to funding; it's called the veto."
Nonsense. That's a "check and balance" device, hardly "control". The President can only veto a bill *after* Congress has passed it. What nonsense.
I'll start with the last first. Are you suggesting that the White House has no influence with regards to the types of spending bills brought before Congress, and how vigorously these bills are fought over. Do the leaders of the Senate and House on the Republican side meet with Bush and other Cabinet and administration officials? Of course they do, especially in this administration which has politicized every aspect of government. So, yes, the Bush administration has powerful influence over the kinds of bills submitted by the Republican party. On the rare occasions where congress and especially the Democrats have not bowed to republican pressures Bush can use the veto. Like when they attach ending the war amendments to Defense authorization bills. But, to admit to this, you would have to admit the abject failure of this administration in safeguarding the public monies. No doubt you would prefer the current situation over the balanced budget and economic prosperity we had under Clinton. Trickle down economic theory is bullcrap, and the track record of the Reagan Bush economies speak for themselves to all those with ears. You can quote all the GDP statistics you like, but the fact is, a balanced budget with a net surplus is far better for our whole economy than the deficit laden gift to the rich we currently operate under. If the economy is so great, why is the income gap increasing at such an alarming rate?
the answer you run from is that the economy as a whole benefits the rich at the expense of everyone else. If you cannot understand that, that you are part of the 1% who are economically benefiting, or the 22% who still support the Bush administration. Either way, you are in the minority, and the recession/depression we face probably won't bother you, but some of us are hurting as a direct result of the failed economic policies of the Republican party.