Americans Forget High Oil Prices Too Quickly

For some years now I've been having an ongoing email debate with CNBC anchor Joe Kernen with respect to oil prices and oil supply and demand. Being a believer that worldwide supply will simply not keep up with worldwide demand, I have been a strong proponent of US energy diversification away from oil. Joe has strongly disagreed and said that the high price of oil was mere speculation. Back when oil topped $90/barrel and I told him it would go much much higher; he said poppycock and suggested that we should get two barrels of oil for $90.

Friday I got an email from Kernen declaring victory. Oil hit $45/barrel and that was his "two-for". He implied that "Einstein" (me) was wrong and that peak oil believers were badly mistaken. I wrote back and told him that after four years it was about time he was right on something, as even a clock is correct twice a day. Didn't get a reply to that one.

Kernen conveniently forgets some facts. First of all, I've always said we'd never see low prices on oil again unless we suffered a severe worldwide recession or depression. Hello. That said, even I am surprised by the precipitous drop in oil demand and prices. I never in my wildest dreams expected the extent of the current "financial crisis". More importantly though - the peak oil crowd was absolutely right. Oil was up 500% in a very few short years due to strong worldwide demand from emerging economies in China, India, Russia, and the Middle East. Even with oil prices at $145/barrel, worldwide oil supply never got much over 86 million barrels a day, and it took digging in the dirt (oil sands) to keep us at those numbers.

So, yes Joe, you were right on your two-for $90 call, but on the bigger picture you were wrong for so many years. In other words, oil prices have declined not because of new supply (or adoption of a sane energy policy), but due to huge demand destruction caused by the economic policies that Kernen and his fellow CNBC "goldilocks economists" have been supporting these many years.

Unfortunately, politicians, the media, and investors are making the same mistake as Joe. You would think the oil crisis that hit us this year (after all, it was only 6 months ago that oil was over $100 and gasoline over $4/gallon) would have taught even the Washington crowd something. However, in all the talk of auto bailouts there are some glaring omissions:

1. The CEOs of GM and Ford (F) should resign in return for bailout money. They have proven their incompetence over-and-over again with respect to fuel-efficient vehicles. Not to mention they came to Congress asking for $25 billion without so much as a plan or presentation? (I remember once giving a 2 hour PowerPoint slide presentation just to beg my bosses for $45,000 in engineering software!). If this isn't incompetence, what is?
2. Chrysler should be allowed to fail. Cerberus, the privately held investment group which owns Chrysler, has lots of money - why doesn't it pony-up?? Private investors are now going to be bailed out with my tax-payer money? This is an abomination. Of course, the $700/billion going to Citi (C), AIG, Bear...etc. etc. amounts to the same thing I suppose.
3. Why aren't natural gas powered cars and trucks being discussed?
4. Why doesn't Obama's "infrastructure stimulus plan" provide funds for building natural gas refueling stations along the interstate highway system?

The good news on this front is that the American driver has definitely gotten the message and won't be fooled again by lower short-term oil prices. Any car or truck that is not fuel efficient will have a shrinking pool of folks willing (able?) to shell out cash for them.

Despite an S&P 500 that is negative over the past 10 years (taking into account inflation and US dollar decline), Joe Kernen, the rest of the goldilocks economists on CNBC, and American policy makers still don't seem to "get it". Any country that imports 70% of its oil (can you spell U-S-A?) must adopt a strategic long-term comprehensive energy policy.

Low short-term oil and gasoline prices are obviously a direct threat to implementation of such a plan. However, now is exactly the time to begin filling the strategic petroleum reserve (SPR) to the brim and to enact a graduated gasoline tax ($0.02/gallon in 2009 increasing to $0.20/ gallon over 10 years) with this revenue going directly to fund alternatives to gasoline powered transportation (only).

The US economy has two broad problems: oil and the destruction of the middle class. I have already addressed oil with the energy policy. Equally disturbing for investors (not to mention he middle class itself) is that war has been declared on the middle class.

During the eight Clinton years (while, I might add, the fiscal budget was balanced), 23.7 million new jobs were created and median family income increased by $7,500. During the eight Bush years (while the fiscal deficit doubled from $5 trillion to over $10 trillion, and that was *before* the bailouts...), there were only 2.3 million new jobs created and median family income actually declined. During the Bush years, this income decline was felt even more severely as the value of the US dollar dropped while gasoline and inflation rose. Is it any wonder the S&P500 is down for the last 10 years? Given recent economic policies, are mutual fund management companies like Fidelity and Vanguard really so sure of their advertisements about investing for "the long term"? They certainly have a much harder case to make...

No country can be economically sound if the middle class is weak. History is a great predictor of what happens to countries when wealth is concentrated in the hands of a very few people. Yet, that's exactly what is happening in the US today with our unregulated financial markets and a tax-and-spend policy that favors multi-millionaires, billionaires, and the well-connected over the hard working middle class.

Some people have called me a socialist, or worse yet, a communist. I am certainly not a communist. However given a choice between say Canadian or Scandinavian style socialism or the "socialism for the wealthy" (fascism?) as implemented by the Bush crowd in the US, I would certainly favor the prior over the latter. That said, what we really need is fair government that implements capitalistic policies for the benefit of the many, not of the few. Only with a strong middle class will equity markets in the US be a place to invest for the long term. Otherwise, the destruction of wealth, investment, and the middle class will continue in the US, accompanied with a corresponding decline in everyone's standard of living.

If the US does not adopt a strategic long-term comprehensive energy policy, all of this will happen (and is happening now) regardless of any other economic policy whether it's socialist, capitalist, or fascist. Ironically, it is the most wealthy that have the most to lose. Americans, especially wealthy Americans, appear to be in as much denial about Bush political realities as they are about their addiction to foreign oil.

More accurately I suppose is their denial about the consequences of these realities. One only has to look at history to see how the wealthy fared in countries that dove into huge debt to back unwise militaristic policies. History shows economic decline is inevitably followed by a reduction in civil liberties as the government begins to exert more control in an effort to position itself for civil unrest. These reductions in civil liberties have already taken a huge leap forward under the current Bush administration.

The headline in the Economist last week asked "Where have all your savings gone?" The answer is "bye-bye," the same place where all our money goes for foreign oil. And if they don't get the auto bailout terms correct, we'll be sending all our money to Japan and Korea for purchasing fuel-efficient cars and trucks too. Of course that assumes we have a surviving middle class to purchase such vehicles. That appears to be a big "if". Now at least we have Obama up to bat as opposed to a continuation of the policies that got us here to begin with. We may have a fighting chance assuming he stays healthy. That said, he is the biggest threat to the fascist military industrial complex since Kennedy, and we know how that ended.

So what is an investor to do in these times? The lack of a US energy policy, combined with the withdrawal of investment dollars in the oil patch and alternative energy market due to the current economic crisis, means the next oil spike will be an even greater super-spike than this year's. Governments the world over are reducing interest rates and flooding the market with liquidity in hopes to jump start economies. Although banks are currently hoarding this cash, one of two things are going to happen:

1. monetary and stimulus policy will succeed in bringing back the economy
2. monetary and stimulus policy will fail and the recession is long and deep.

In case 1), you want to be invested in oil when the demand comes back. COP, XOM, BP, and CVX are all large, well capitalized oil companies that pay good dividends and are in great financial shape. In case 2) you want to be in cash with some gold in case things really get bad. Stick with gold coins and take personal delivery of them. That is, if you can even find them! Kitco and AMPEX still seem to be having problems finding US gold eagle coins to sell. See my earlier SA article on this issue.

Comments

[longoil:]

Fitzman,
Excellent article as always.

Like you, I am shocked that billions of dollars are being given away like Halloween candy with no accountability. Having dealt with bankers myself, they normally want a detailed market analysis, business plan and financial protections before they give you a cent for even the smallest of business ventures. Why can we have the same requirements for banks and automakers requesting billions?

2008 Dec 08 10:27 AM

[nerfer:]

Totally agree with a columnist, which is kind of unusual, but I have a couple comments:
1) the good years under Clinton were probably due in large part to the exceptionally cheap oil of that time. I expected a recession to come from high oil prices, but was surprised by the extent of the housing/finance collapse. (This might buy us time with oil supply). Even with today's cheap-ish oil I doubt we'll ever get back to times like the Clinton years in the next couple decades as oil prices cannot sustainably drop any lower than what they are. There was speculation on the top side in summer, now there's speculation on the low side.

2) I am continually surprised by conservatives who think the status quo is patriotic and we need to buy big American vehicles. Putting our economy totally under the will and abilities of unstable and unfriendly countries is so dangerous it should be considered un-American, even treasonous, to use an SUV for commuting to an office job.

2008 Dec 08 11:04 AM

[Space Cadet...:]

This was a great article showing how the political decisions have affected the finances of citizens and their lives. More interesting, though, was how the citizens could change the political landscape as a result of these policies. People like to point to a simplistic cause/effect analysis for how countries have fallen in the past. But no country ever fell over night. There were always a series of circumstances - some that they were able to control, some they couldn't - and some that they caused.

2008 Dec 08 11:40 AM

[Kirk French:]

Come on now, we all know that the Saudi's need oil priced at least $50 to support their lifestyle in their country. Let's do our part to push the price to that level or higher. I can't imagine a U.S. bailout of their government when we go green.

2008 Dec 08 11:47 AM

[Socialism c...:]

You're dead wrong on # 1 -- GM and Ford have some *great* fuel-efficient vehicles on the market, with more coming. The Focus has been quite popular, as one example.

Re. # 4 -- why should Obama spend our tax $$ on nat gas stations??? The outcry has always been against Big Oil for its record profits. If Nat Gas companies are going to be the next highly profitable energy resource, let those companies pay for the infrastructure they need to make their sales with!! It's called "free enterprise", Michael...and I find it ironic that libs like you complain about corporate profits on the back end, but then want US to pay for infrastructure on the front-end of a new energy source!! Just get the government outta the way!!!

2008 Dec 08 01:52 PM

[anarchist:]

Socialism cannot compete thinks we need to "Just get the government outta the way!!!" If you look at the financial industry today you have a good example of "the government getting out of the way". If there is going to be an infrastructure hand-out why not do something that will move us away from oil and all geopolitical chaos, not to mention blood and dollars it causes.
Oil was subsidized in the early days when the government built roads. Many states and cities subsidized oil to get their business. Building infrastructure or making it inviting for the gas industry to build the infrastructure for gas autos is a great idea.

2008 Dec 08 02:19 PM

[longoil:]

Socialism cannot compete,

Spending tax dollars (or giving tax breaks) on NG filling stations or on T. Boone Pickens for transmission lines for his wind farms or for producers of (non-corn) ethanol is a much better investment with long term benefits than giving over a trillion dollars to financial institutions and auto companies with no conditions or guarantees what-so-ever.

These investments reduce the dependancy on oil from US hating despots in Saudi Arabia, Venezuela, Iran and Russia and gives them less money to fund terrorist campaigns against the US and other nations with democratically elected governments.

2008 Dec 08 02:20 PM

[Wadhamite:]

I am awaiting the day when China produces and sells in the USA a $10,000 fuel-efficient small car. Does anyone really doubt that it will happen? When it does, the implications for "big oil" and "Detroit 3" should be obvious. And, in today's cheap-oil and auto-bailout scenario, there might be just enough time for America to beat the Chinese. If we lose this opportunity, it's gone for a long time.

2008 Dec 08 06:41 PM

[Michael Fit...:]

thanks for all the comments. as usual the author likes to jump into the fray....

longoil: thanks for the compliment. wrt to all the bailouts...i find it real interesting that all my friends, congress, and the jerks on CNBC didn't say squat about the $700 billion that went to bailout bear stearns, AIG, CITI, lehman, etc. etc (it was *necessary* to prevent systemic financial risk), but then we have a critical industry to help us solve our foreign oil problems, keep middle class people employed, and could be a big creator of jobs and wealth, and everyone goes haywire.

nerfer: good point wrt to low energy prices under clinton. that said, he also didn't start an unnecessary war and had a common sense tax policy. that said, clinton too backed down to the auto unions wrt higher fuel-efficiency legislation. i agree totally to point 2)....i would go further in that when i lived in austin, you never found a more "freedom" loving "patriotic" group of folks in your life...but boy, don't touch their SUV's...it's lunacy.

space cedet: it appears we agree - politics and economics are inseparable, especially in the US. wrt change, all i can say is pester your political representatives (locally, statewide, and nationally) to get on the stick wrt energy independence - especially nat gas fuel cars and trucks which would be the quickest way to reduce foreign oil importation.

kirk french: i suppose that was tongue in cheek...are you referring to the chummy relationship between the house of bush and the house of saud? if so, no doubt about that. all you have to do is point to the plane that bush authorized to take flight after 9/11 (during the airspace "lockdown") carrying the saudis out of the country. not only did he authorize it, but he lied about it in a press conference, then finally admitted it did take place after reporters presented evidence of it. can you say treason? if we had impeached him then and there, we wouldn't be in half the trouble we are today.

socialism: dead wrong that the CEO's of GM and Ford should step down? pah-leeeeze. they show up to congress wanting $35 billion of my (and your) tax-payer money with no presentation, no plan, and no answers to the questions? did you WATCH that performance? if there was ever incompetence on display, that was it! yeah, GM and Ford have some fuel-efficient cars, we agree there. the problem is, they sell most of them over seas! you can't even buy a ford nat gas vehicle in the US, but you can in europe and asia. why? because GM and Ford (and their well-payed lobbyists...) have bent over backwards to promote Hummers, SUVs, and other idiotic vehicles in the US to protect their short-term profit margins. meanwhile, toyota and honda have taken market share away almost every year for decades. you want to reward these guys with your tax dollars? jeez man, wake the heck up. why should obama pay for nat gas stations? because:

1) it would be the quickest way to reduce our foreign oil bill
2) nat gas supplies in the US and alaska could power our entire transportation needs for 60 years
3) nat gas burns cleaner than gasoline
4) it would allow the auto makers to make and sell nat gas vehicles
5) it would create jobs that are REAL
6) it would create an entire new industry in the US
7) it is STRATEGIC

get the government out of the way? isn't that what we did with the de-regulation of the financial markets? oh yeah, that worked out great. you forget, it was the government that BUILT the interstate highway system. seems like now the government, by placing a tax on gasoline and building the nat gas refueling stations, could ensure that Americans could travel on this interstate highway system on AMERICAN energy!
btw, i hate labels...liberal, greens, etc. etc. you listen to too much rush L.

Wadhamite: you're right to worry about china. they are not only sitting on mountains of foreign reserves, but they could put the US out of business anytime they want by just dumping our treasuries on the market all at once. did you happen to notice the news blurb today about china investing $10 billion in brazil with petrobras to get at some of those 80-100 billion barrels of oil they recently discovered? this is where the bush bankruptcy of the US really hurts the US...we can't compete with china's ability to invest around the world in the strategic minerals, energy, and other strategic elements that keep an economy strong.

2008 Dec 08 08:38 PM

[fireofenergy:]

I'm kinda new (and late to this post), but really want to push the "renewables is the answer" button. Not just any intermittant renewable, but solar thermal. Sure, I don't know how people could invest (in this time) trillions of dollars into the secure and clean desert mirrors option, but I believe it's jobs creation is the only way Americans can survive. If a large enough mirror field were to be built for each nuclear class steam generator, and aluminum industry standard graphite heat storage resevoir, Americans (and others around the world) could manufacture real capital, not just more debt as they want to do today from China's resources...

Gloom and doom: If we don't do this (or something better that requires lots of jobs and secondary jobs) then we spiral down to economic, social, and eventually, environmental hell! Oil will rebound and when it does in this kind of market... It will be too late. At least now, there is still a hope. Energy is cheap enough to build that secure American made form of unlimited baseload power.

I just don't know if it would be worth indebting the future with another trillion $$$. Too bad the "smart people up there" didn't already do this instead of bailing out old dino's!

2008 Dec 08 10:34 PM

[AndyMan:]

I bought my Chevrolet Aveo brand new in 2005 for $7,700 at a huge discount sale.


You can buy cars under $10,000.


Oil will go higher at some point....this is all demand destruction from the financial fall out....oil is just trading alongside the stock market it seems. Just be patient...wait for the investment to dry up in new projects...which it is....and wait for the declines from conventional oil to set in.....pick up the cheap shares today...collect the dividends...and wait.


On Dec 08 06:41 PM Wadhamite wrote:

> I am awaiting the day when China produces and sells in the USA a
> $10,000 fuel-efficient small car. Does anyone really doubt that it
> will happen? When it does, the implications for "big oil" and "Detroit
> 3" should be obvious. And, in today's cheap-oil and auto-bailout
> scenario, there might be just enough time for America to beat the
> Chinese. If we lose this opportunity, it's gone for a long time.

2008 Dec 08 11:08 PM

[Mmarrkk:]

a) While I hate the idea of "government" funding the building of private eneterprise and bailouts, I feel that our incoming administration (and outgoing administration for that matter) are going to throw money at this economic downturn. So, I guess I support them creating places to spend it that will do some long term good versus just throwing it away in those little stimulus checks that no one I know actually qualified for. If the choice is give everyone a $1000 check (except people who have good income and pay all the taxes) or take those billions and build something that will last, then I go with the latter. Lets invest in our infrastructure and create jobs versus giving people checks so they can go out and buy a big screen TV. And a nat gas distribution center isn't a bad start, although I'd argue an upgrade to our electricity grid/distribution system and our roads/bridges wouldn't be a bad start either.

b) I keep hearing everyone gnashing their teeth over the "American" auto industry. But all I ever hear them talking about are GM, Ford and Chrysler. Guess what? There are several car manufacturers that build cars in the US that aren't part of the Big 3. Why is a Hyundai built in Alabama not an "American" car? Or a Toyota built in Tennessee? Last time I checked, Tennessee and Alabama are still part of the United States. Toyota, Honda and Hyundai all make cars in the U.S., employing US workers and in US states/towns/cities. I guess they have two big differences from the supposed "American Car Companies": they make a profit, and they are non-union. Hmmm, wonder if those two are related?

Auto Bailout: hold nose, avoid puking and give them some of the already approved money from the re-tooling funds but make it contingent on: 1) UAW contract torn up, thrown out, and Car Czar arbitrates new salaries, 2) CEO/Management pay and bonuses voted on by the new Board of Directors...the taxpayers via proxy given to our elected officials, 3) prestructured bankruptcy mandatory.

2008 Dec 09 09:36 AM

[longoil:]

Unfortunately, the current climate (both the financial crisis and cheap oil <$50) makes investment in alternative energy, conservation and development of new energy reserves seem highly unattractive. What most people fail to realize is that these investments solve at least five serious problems the US and other nations are facing simultaneously.

1) Economic Stimulus: Retooling failing industries into making solar panels, wind turbines, NG filling stations, etc. would generate millions of well paying middle class jobs (as Fitz has mentioned several times in the article and discussion).

2) National Security: Reducing oil imports from belligerent nations (KSA, Russia, Iran, Venezuela, etc) would deprive the despots of money that would be used to fund terrorists.

3) Climate Change: Moving away from oil and coal would help solve the global warming dilemma.

4) Global Famine: Moving away from corn (wheat, sugar, and other food based) ethanol towards cellulosic (non-edible sources) ethanol solves both global famine and would help stem illegal immigration from Mexico. When corn prices went up, so did the price of the key component of the Mexican diet (tortilla bread) and consequently many hungry Mexicans flocked North to the land of opportunity.

5) Resources Wars: China and India are making all sorts of deals with despots (i.e. Sudan) who kill their own people to facilitate the sale of oil. The US has suffered the immeasurable loss of over +4000 young soldiers in Iraq in the quest for cheap oil to supply SUV, Jeep and Hummer drivers back home.

2008 Dec 09 10:09 AM

[Ferdinand E...:]

Can the leading academic energy economist in the world join this discussion? He can you say, good, because his precious articles and comments always run the risk of being barred - as if he cared.

This is a great article, and it needs widespread circulation. I wouldn't worry about peak oil though. Once the oil price reached $100/b, the output peak became irrelevant. And that's where the price will go again when the macroeconomic and financial scenes are put in order. What was lacking in this article however was a discussion - using the same approach and language - of the 'wars' in Iraq and Afghanistan. Would you or somebody please inform the new president that these wars have been won, and he can bring the troops home.

And thanks for comparing the Clinton and Bush governments - although personally I couldn't/can't stand Clinton.

Professor Ferdinand E. Banks

2008 Dec 09 10:10 AM

[Old Wizard:]

Fitz, As I've said in the past, much of your political arguments are highly debatable. Your condemnation of the B

2008 Dec 09 10:35 AM

[Old Wizard:]

fitz, As I've said before your political arguments are highly debatable. Your condemnation of the bush administration may or may not be justified, but your lack of condemnation of Clinton is not balanced. Rubin was the advocate of deregulating mortgage-based derivatives,it was Clinton appointees who presided over Fannie Mae and Freddie Mac as they bought more and more risk while making tens of millions in personal wealth and it is the democrats who are still in power who backed the kind of untenable benefits agreements that the US car companies are now saddled with. Also the budget under Clinton was not balanced until 2000. The two years previous it was only balanced, if you take the surplus collections of social security over outflow in those years. The social security tax increase under Clinton is perhaps the most regressive tax increase on the middle class in our history. Further, wasn't it under Clinton that we reached the so called peaceful nuclear agreement with N. Korea and were treating Packistan as a potential enemy[ I know this through my own work experience]. Isn't it Bill Clinton who has amassed tens of millions lecturing and lobbying for the arabs and for companies who do business there. Rationalizing that George Bush is the only villan in the case doesn't do the country any good, because it deflects us from identifying the real issues to be solved and holding our elected officials responsible for presenting and implementing solutions. Longoil your points for the 5 aspects of solution,are all those which, I think, Fitz and I agree. I would add that what is missed in the discussion of the middle class is that we, as a country, have not been able to ratioalize a free traade policy[ which truly lifts all boats] with the creation of products and services that we produce here that we can sell to everyone else so that the country's current account is zero or positive. Fitz that is why I would like the Obama administration to take 250b of the stimulous packaage and create pilot projects for electrical generation from wind and solar in several metro areas and build monorail spiders in several metro complexes instead of more roads and bridges. Those who don't believe that gov. should intervene in times of crises apparently don't understand the long term benefits of the Appollo program on the long term economy of the country. It is the role of the people's government to provide these solutions if it has the vision and courage to do so. The situation is now time-critical, but I remain apprehensive that the new players may be missing at least one of these characteristics..

2008 Dec 09 11:15 AM

[Mmarrkk:]

Old Wizard: All great points. Clinton v Bush...is there really a winner here? Current economic woes have fingerprints from both admin's. Just don't think the Bush folks have made as much money off of the crisis as ex-Clintonista's. their money made elsewhere. Had Rubin not got us off on this wild ride, and continued it after he left office, and had someone in congress other than McCain would have stepped up, maybe the Freddie's wouldn't have bombed out on us. But the Freddies were run by people with money in the pockets of a lot of people (including the upcoming POTUS) so they paid to make it kind of go away, for a while. But when it erupted, it erupted big. Just one of the primer cords for today's mess. Anyone look at the bonuses paid to those folks in 2006 and 2007 for doing a "great job"? I guess they are no different than any other industry!

Again, enough blame to go around at least 2 administrations. Just wish Obama wouldn't be bringing in so many re-treads. I really thought he'd bring in new blood. I probably wouldn't like them anymore than the re-tread Clintonista's, but at least they would have new blood/ideas. The old ideas got us here; not just Bushies ideas but Clinton's too. Thought folks voted for a fresh start...only time will tell. I really hope it works! For all of us, R or D or I.

2008 Dec 09 12:06 PM

[longoil:]

Old Wizard,

I agree fully with you on the free trade issue. John McCain really saw the free trade big picture and its benefits. I don't know if Obama was only pandering to unions and therefore downplayed free trade or is truly ignorant on the consequences of restrictive trade practices.

In 1930, when the US entered a steep economic downturn after the recent stock market crash of 1929, the situation metamorphized into a fully blown depression with the introduction of the Smoot-Hawley tariff act. Despite the fact that over 1000 economist signed a petition warning of the dire consequences, Herbert Hoover signed it into and triggered the great depression. When you taxed imports, guess what, all your trading partners do the same and your exports get hit even worse.

If the US invests properly in alternative energy not only will the domestic issues be taken care, but a huge export market opens up to countless countries suffering power shortages (e.g. India, South Africa, etc)

2008 Dec 09 01:35 PM

[optionsgirl:]

Sorry, Michael. Americans haven't forgotten a thing. It is not in their power to change much. Bloomberg's noted today that oil consumption has not been this low since 1983--people are doing what they can to conserve, they are terrified that they will lose their jobs and their investments. If you live in suburbia, you just have to drive. Not a good chance one can sell one's house and move out of suburbia, is there, in the midst of a real estate crisis?

As for the "promise" of the democrats-today Nancy Pelosi suggested that Paul Volcker be tapped to be the new "Car Czar". She wants to hire an economist to restructure the car industry. Why? Because he is well known and respected, not because he is a businessman qualified to lead a technological metamorphosis.

Good lord, crude will be back up before we know it. But in the meantime, please stop whining about fascist republicans. If we really lived in a fascist society, you wouldn't have the liberty to pontificate on this forum, would you?
What we have is a bi-partisan congress filled with dangerous, inept, thieves. With Nancy Pelosi, Harry Reid, Barney Frank and Chris Dodd
(The Gang of Four) as our leaders, you can expect nothing but bail -outs, give-aways, and theft of our autonomy, control, and money. You want conservation and build out? You'll get onerous carbon credits- another form of taxation that will ham string our production. Meanwhile, none of them approve of using the resources we have- coal, nuclear, nat gas. They endorse biofuels. Know what drove up the price of corn? Corn is supposed to feed people and animals. Well, ethanol drove up the price of commodities. There are our politicians in action, gumming up the works again.
Obama has taken Clinton's old appointees out of moth balls. His Vice President is an old, political hack. He intends to do an even bigger stimulus package and devalue the dollar even further.
This is the sweeping "change" Obama promised. Expect to be bitterly disappointed in the next four years!

p.s.- when you mix revisionist history with your energy investment strategy, you only serve to water down your message. Want to make some money in the meantime? Short the indexes. Plain and simple.

2008 Dec 09 02:32 PM

[Ferdinand E...:]

Maybe if I had voted for McCain he would have won. Of course, someone who is willing to sponsor a hundred years of war in stone-age countries, and decides that Ms Palin should be put a heartbeat from the presidency might be better qualified to supervise a cook-out in his garden than plot strategy in the Oval Office.

Without going into details, I blame Clinton for the war in Iraq, because he was sufficiently intelligent to have seen the things that could have been done to win the gratitude and respect of the Iraqui people, but the Bush presidency was an out and out disaster that we will have to live with long after he returns to his non-presidential activities.

2008 Dec 09 02:59 PM

[fireball:]

hi fitzman
been awhile. you need to take a look at et3 (google it). i think you would find it interesting as a better j-pod.
longoil
hope you are well. i finally picked up io (3rd time) just yesterday. it was good to me the 1st 2 times. i also decided to revisit ngs when it was at 7.70. it was good to me too.
guys i can't really blame anything on the "free" market. i don't believe i've ever traded or invested in one except as a young guy that got very lucky on some stocks that were never listed on an exchange. that was 30 yrs. back.
jefferson warned us about national banks. guess we shoulda' listened.
i go a little further back in blaming politicians. we have plenty of reps. and senators to blame too.
if we see morgan or boa going the route of citi lets snap it up at $2 or $3 and wait on the bailout to snag a few thousand on the bounce. the one i'm sure of is jpmorgan since a few months back it appears the federalis were in collusion on an outragious metals short scam.
i think we will get another shot at citi down there too. check out the political donations of these banksters to see my reasoning.
fitzman i'm as lost as everybody else but i'm thinking it is a good time to be buying oil, ng, and mining while they are down.
oops i almost left out b.o.. anybody catch the young illinois attorney that led the case to force fannie and freddie to make bad loans? he sux just like the rest of them. clinton "balanced" the budget by destroying our military at least partially.
i don't really dislike bad boy bill but i will always wonder why he picked such dogs for women when he could have enjoyed some real beauties. at least he was entertaining.
everybody seems to hate george jr. now. to blame him all by himself is moronic. i am glad he rebuilt our military. i would have handled 911 differently (i think) but i am not privy to intelligence reports. he was just another screw-up in a long line of screw-ups.
would anyone else like to see a true conservative party that would abide by the constitution, stay out of business and our private affairs.

2008 Dec 09 06:05 PM

[fireball:]

fitz
almost forgot. when oil starts climbing (no idea when) i will be looking for one of those slam u back in the seat muscle cars. haven't had one since i was a young idiot. now that i'm an old idiot i kinda' want one. should be cheap if the price of gas gets up. just making lemonade.

2008 Dec 09 06:12 PM

[Kezorm:]

"That said, what we really need is fair government that implements capitalistic policies for the benefit of the many, not of the few."

When I voted in November, the type of wish you expressed above is what I was voting for. I picked the candidate who I thought most likely to deliver it. Here are some excellent, early signs:


www.reuters.com/articl......

Obama vows strong new financial regulations

Sun Dec 7, 2008 11:06am EST

WASHINGTON, Dec 7 (Reuters) - U.S. President-elect Barack Obama said on Sunday he would put strong new financial regulation at the center of his economic recovery program to force more accountability on the banking industry.

Obama again warned that the U.S. economic crisis, which saw the country lose more than half a million jobs in November alone, would worsen before it gets better.

"As part of our economic recovery package what you will see coming out of my administration, right at the center, is a strong set of financial regulations," Obama said in a taped appearance on NBC's "Meet the Press" television show.

"Banks, ratings agencies, mortgage brokers, a whole bunch of folks (will) start having to be much more accountable and behave much more responsibly.

"We've got to have transparency, openness, fair dealing in our financial markets and that's an area where I think over the last eight years we've fallen short."

end excerpt

How about that last line for a polite understatement? :)

2008 Dec 09 08:05 PM

[a. palmer jr.:]

I'm still not sure why US automakers are reluctant to really make a fuel efficient or a no gasoline vehicle. The new cars (Aveo included) don't get nearly the gas mileage they should and the automakers know it!! Like I said in a previous post, a well-tuned 1993 Geo Metro has all the cars beat on gas mileage, including the Prius. If they could make fuel efficient vehicles in 1993 it looks like they still could!!
I thought Chevrolet was thinking the right way with their new Volt, but then they had to stick a turbocharged engine on it so it would still be addicted to gas. Why not remove the engine and install more batteries where the engine was. If Tesla can do it you'd think GM could. Sorry I ran on so long.

2008 Dec 10 01:35 AM

[longoil:]

The more I think about it, the more I am starting to think the big "3" CEOs are as not as incompetent as they appear but are brilliant opportunists.

They see the financial institutions get trillions of dollars with no questions asked. The US is in a full blown recession and many people are losing their jobs. The government wants to preserve jobs and prevent the economy getting worse.

The CEOs probably talked amongst themselves and figured this is a perfect opportunity to extort a few billion dollars (peanuts compared to what the bank and insurance co got) from the government and also force the UAW into many concessions. Given that Obama has gotten much support from the blue collar segment, if he does nothing about the auto industry problem, he loses a key support base for his second reelection bid.

2008 Dec 10 08:37 AM

[Mmarrkk:]

palmer: the reason they don't make the Geo anymore is nobody would buy the piece of crap! But I guess making what the buyer wants to buy is not allowed around here. Better for GM, Ford, etc. to build "what we need", not what we want...and "what we need" is determined by Al Bore, Nancy Pelosi and B.O.? Some here make it sound like all that GM has built over the last 10 years were SUV's and trucks, thus "forcing" us to buy them. Hell, they've also been buying a bunch of fuel efficient cars but guess what?? No one is buying them! If hundreds of thousands of people are buying SUV's, is it the government's job to tell us "no you can't have them??". Please. Next, they'll be telling us we can't go to the doctor when we want, or we can't eat certain foods, or......OH HELL! THEY ARE ALREADY TRYING TO DO THAT AND IT LOOKS LIKE THEY WANT TO EXPAND IT! And lots of folks here are clamoring for more of it and they just elected a president who has vowed to push that agenda!

Jefferson is turning in his grave!

2008 Dec 10 09:03 AM

[fireball:]

kezorm
hope you are right. we're talking about a politician. there's a chance he is another lying lawyer.
palmer
maybe our buying preferences steer them?
lomgoil
obama and the uaw. you smacked that nail on the head.

2008 Dec 10 09:06 AM

[longoil:]

Fireball,

Nice to hear from you again.
IO is dead in the water until exploration (i.e. higher oil prices) picks up again, but so is every other company involved in the oil & gas industry. I think it is good investment long term (beyond the next 2 yrs). I wish had some spare cash to snatch up some of the many bargains out there like XOM, CVX, etc. I think buying oil and gas opportunities will last well into most of 2009.

2008 Dec 10 09:44 AM

[Michael Fit...:]

the author is back for more...

fireofenergy: all for solar therma - the cost and transmission issues just need to be solved as part of a broader, long-term strategic energy policy. a much quicker and beneficial short-term fix would be natural gas vehicles.

Mmmark: i would add to your list of contingencies making the bailout dollars contingent on the big 3 producing nat gas vehicles for sale in the US along with manufacture of a nat gas home refueling appliance.

longoil: as you point out, the current financial downturn is exactly why now is the time to build out these alternative energy infrastructures. oil and steel prices are down, so build now while it's the costs are cheap!
agree on your points and wold add to 3) that it is the corn ethanol *mandates* that caused all the disruption in the food market. let's use corn ethanol, but eject the bush administrations mandates on the number of gallons per year. just use it when it's economical. bush's only alternative energy policy was, like everything else he touched, a disaster and only caused massive food inflation. with respect to 4), china was recently in brazil to invest $10 billion to get at the 80-100 bilion barrels of oil petrobras recently discovered. btw, PBR is a screaming BUY.

professor banks: wouldn't worry about peak oil? hmmm...perhaps you havent been paying attention? iraq and afghan wars won? did we get the oil? did we slow down terrorism? the iraq war has done nothing but bankrupt the US and destroy our credibility throughout the world. we didn't get the cheap oil from iraq that bush said would finance the war, and in fact the taking off of the market of iraqi oil at the precise time chinese and indian oil demand went up was one reason for the huge spike in oil prices over the past 4 years. as far as clinton goes, i don't care if you like him or not. please look at the article for the economic statistics of clinton admin vs bush. those are not opinions, they are facts.

wiz: the economic statistics presented in the article are not opinions, they are facts. if you are happy with the job growth during bush's years as he spent us into bankruptcy, well, i am happy for you. personally, i see absolutely nothing to show in return for the quadrupling of debt. if you are happy with the tax policies that gave hedge fund managers the ability to make hundreds of millions of dollars without being taxed, well, i hope your hedge fund is doing well. if you are happy with the performance of the S&P500 and your investments under "business savy" bush, well, great. if you like the transfer of wealth from american tax payers to the uber-wealthy who sit on their ass and get the money, great. the verdict is in: bush's economic policies have been an unmitigated disaster. in my opinion, anyone who thinks otherwise is just blinded by ideological hypocrtical arguments.

Mmark: bush folks haven't made as much money?? have you not been paying attention? pah-leeze....you guys simply aren't being objective about the facts. next to the transfer of american dollars to foreign oil producers, the next biggest transfer of wealth in history has taken place during the last 8 bush years (from the american tax-payer to the uber-wealthy). wake up folks.

optionsgirl: long time no see. actually, it was american policy makers i was mostly referring to (my title was "How Soon They Forget", but i guess SA editors chose to change it). as far as fascist republicans go, at the rate we are going, how long will it be before i cannot pontificate on here? they can already tap our phones, letters, and email. they can already intern us without legal representation. perhaps you are happy with the erosion of personal liberties and the bill of rights by the patriot act, but me personally, i despise that document and the fascist republicans who wrote it. what drove up the price of corn was bush's idiotic corn ethanol mandates. there is nothing bad about corn ethanol...what is bad is dumb-ass mandates that caused huge disruptions in the entire food chain. another wrong-headed bush policy that still has not be rescinded. i love what obama is doing to change how the government works. i like almost every move he has made so far (except his neglect of natural gas powered vehicles and infrastructure). you can long for the days of bush and mccain all you want, i can't wait to see the jack-asses leave washington dc. hopefully, for good. wrt revisionist history, the jobs data, debt data, and performance of the S&P quoted in the article are facts. if your ideology has blinded you to the point where you cannot believe facts, well then, tune in rush limbaugh, you'll love him. to separate political action from economics is foolish. glad to see you are shorting the indexes after 8 years of your brilliant president. that speaks volumes doesn't it? you are welcome to give me a SA thumbs down, but you know i'll never stop criticizing ridiculous political economic policy. perhaps you should write a SA article defending bush and the republicans...then i can comment on yours :)

fredbanks; old mccain was a good man. the mccain after the "bush power" made him change every single policy was simply mini-bush and that is why he lost. you blame clinton for the iraqi war? now that is rich.

fireball: YES, i would love to see a true conservative party that would abide by the constitution!! and yes, it is time to buy oil stocks and energy in general. it's the only long term play left in america unless we adopt a strategic comprehensive long-term energy policy. as far as the muscle car goes, well, they'd be cheap to run in the short term...

kezorm: thanks for the quote! note none of my republican detractors mentioned it. but, right on with your comment! note also obama's efforts on publicizing the minutes of govenment meetings (obviously non-security related) on the web at change.gov/ what a breath of fresh air after the secrecy of bush/cheney! and yes, please underline the last statement. nice to see someone agrees with me on the evils of bush economics.

a.pamerjr: oh, american car companies can build electric and hybrid vehicles. the problem is that fought hire fuel standards with all the money they could shove at their lobbyists in washington dc and then made and strongly promoted hummers and SUV's. it was not only an unpatriotic strategy that benefited the saudis, iraqis, iranians, and russians it was also terrible economics and environmental policy. that is why all of the "big 3" CEO's should step down (fired!) as part of any bailout agreement.

longoil: see my previous comment to palmer. if the big 3 CEO's were politicians, i'd have them up for treason (right next to bush). i think it would be a big mistake not to have american car companies able to build the electric, nat gas, and hybrid vehicles we so badly need. that said, it's a management issue and new blood is obviously required. that said, if the politicians dont get on the natural gas vehicle issue (including obama), new leadership wil also be required there as well.

2008 Dec 10 01:08 PM

[Mmarrkk:]

Fitz: bushies not making money...I believe what I said was "Just don't think the Bush folks have made as much money off of the crisis as ex-Clintonista's. their money made elsewhere." See, I said the Bushies made their money elsewhere, just not in the financial crisis. Can I get a little credit for giving both sides the backhand?? :o)

2008 Dec 10 02:24 PM

[Mmarrkk:]

And Fitz...when you speak of American car makers, do the factories in Kentucky (USA) and Tennessee (USA) not count as American? I personally don't give a rat's arse what brand name is on the car if its built in the U.S.A....even in parts of the U.S.A. that didn't vote for Obama. Why not have toyota, honda, et al come in and take over some of the GM, Ford factories. No matter what the name is, if its built in the USA why not call it an American car?? This also gets rid of the problem of the UAW which I believe is a huge part of the problem.

Since making and marketing SUV's is a "treasonous" offense, would we say the same thing for tobacco growers and cigarrette makers? How about alcohol distillers? All of these things are bad, very bad. Are how about electric motor manufacturers. Those things burn up electricity which cause us to burn coal which pollutes our environment. Again, supplying a vehicle that Americans have shown they WANT to BUY is not something I can fault FM, Ford for. I'd fault them for building that damn GEO though!! A death trap that was ugly and overpriced!

If we want to move away from SUV's and trucks, why not instead of restricting CHOICE, how about we incentivize better choices?? Give folks a tax credit for buying a more fuel efficient vehicle. We already pay a tax for driving a SUV (via the fuel taxes) but make it an incentive to buy the fuel efficient vehicle. I would still drive my truck and my wife would still drive her SUV, but other "MORE PATRIOTIC" folks could buy their GEO and their Prius and their golf carts. Restricting choice is probably not a great way to go. Isn't what Obama said about abortion? Why doesn't it apply to SUV's?? Man, I've gone off the deep end now!! Next, I'll want to give people Choice in schools or some other wild eyed idea like that! Karl, pull me back in!

2008 Dec 10 02:35 PM

[Old Wizard:]

Fitz, All one has to do is not agree fully with your critique of Bush and point out some glarelingly obvious shortfalls of the previous administration for you to go on the attack mode. I don't have a hedge fund and believe that they on balance don't add much to the country's well being. I think you may have it wrong on who really was in favor of the hedge fund tax loophole. I recall that just recently George Soros was one of the main beneficiary's and cautioned the congress when he testified, recently, to not over regulate hedge funds. I don't think that anyone feels that Iraq was a Bush shining moment. You ignored in your diatribe what I said about some of the Clinton missteps. I'm willing to critisize anyone whom I feel is not doing what I think is good for the country or can't seem to define the underlying problem and drive to a solution. The social security tax increase passed in the early years of the Clinton administration is very repressive to the middle class. What are your views about it? Was the current account zero or positive during the Clinton years? C'mon now, I bet I've lost more than you on paper since mid Sept, but I think it is irrelevent to the solution of our more pressing problems which we have not really addressed in at least 4 administrations.

2008 Dec 10 06:53 PM

[Michael Fit...:]

MMmmmark: the bush folks have taken theivery to new levels and orders of magnitude above any previous adiministration, republican or democrat. they doubled the deficit (quadrupled after the bailouts...) and we have NOTHING to show for it. where did all the money go? fraud in katrina, iraq, the bailout by "i report to no one but bush" paulsen. isn't it interesting that they put paulsen, the main proponent of the financial deregulation that caused this crisis, in charge of its management? and who did they put in to administrate the dishing out of our tax payer money to the bankers and wall streetes? naomi klein reported that it is the same guy who was in charge of dolling out money in iraq!! we are still trying to find those billions. any objective, impartial, non-ideological look at the facts can conclude only one thing: bush and his administrations have been an unmitigated disaster to the middle class, the US long-term financial health, and the democratic capitalistic society we are supposed to be. look what is happening now: all financial and banking power is being concentrated in a very few large institutions (which are stealing tax-payer money as we speak). how do you think this bodes for the future of "freedom" in america? not good my friend.

yes, of course totota and honda have factories in the US. but the technology and the engineering come from japan. only through innovation and technological leadership will the US compete against the millions (billions?) of engineers and scientist being turned out in china, taiwan, japan, korea and india. see, that is the problem: china is being managed by engineers in government, the US by corrupt politicians. the US used to be an engineering based country...now we are financial services, marketing, and hollywood. unsustainable...

the "treason" remark was tongue in cheek about the auto makers, not so with bush. i think he should have been tried for treason: outing of a CIA agent, the flight out of the country for the saudis without CIA/FBI vetting, and for the patriot act which was treasonous with respect to his not keeping his oath to uphold the constitution.

wiz: i have criticized the democrats before (for instance, clinton not raising fuel standards for cars and trucks) and i have already criticized obama for his mention of windfall profits taxes on oil companies and his lack of a natural gas transportation program. that said, the economic statistics i point out in this article on the bush jobs records, deficit, and market returns are facts. instead of reading the article for its substance, bush fans tell me these *facts* are incorrect and call me "revisionists". so, yeah, i get upset. when ideology blinds people (as in pre-WW2 germany), and rush limbaugh controls peoples' minds, that is a very serious thing. so, yeah, i go on the offensive. you bet. there is NOTHING "conservative republican" about bush. nothing. and his 8 years have been the worst presidential performance in the history of our country. i can't even believe with all the facts that are now in people even want to debate this. it is a debate i am glad to have because the facts are so over-whelmingly in my favor. in fact, it borders on the ridiculous for anyone to defend bush's economic, tax, and foreign policies.

2008 Dec 11 12:42 PM

[Michael Fit...:]

conservative republican (historical definition): a person who supports small government, fiscal discipline, individual rights and freedoms, separation of church and state, just and respectful foreign and domestic policy.

if george bush fits this description, i will eat my hat.

everyone here seems to forget, i am a *true* conservative republican of the form of the above definition. the reason i have been supporting democrats for the last 20 years is because modern day "republicans" have abandoned the definition above and democrats have moved closer to it. people get so attached to labels and ideology they get stubborn and forget to *think* and observe what is really happening. historically, that is how countries fade into the history books as failed experiments. we are currently losing what america is supposed to be due to the extreme hypocrisy of the last 8 years, and americans not recognizing it for what it truly is: a disgrace and an abomination.

2008 Dec 11 12:56 PM

[Old Wizard:]

Fitz, Your disgust with Bush is now bordering on legendary. All I ask is that you pursue the facts about the previous group that Obama is essentially putting back in power. I still didn't see a response to the questions I asked about the current account and Soros' defense of hedge funds which I am leaning toward advocating they be abolished.. I want Obama to employ a significant part of all this paper money that we are printing to implementing concrete pilot energy prjects and a transportation pilot prgram that is not the conventional make work projects advocated by politicians[ of both parties] and unions all over this country. I don't hear anything that is going to fix our long term energy problem while creating a host of new products we can sell. I agree our country has not been run by the people who have the competance,vision and political courage to solve the basic problem of our tremendous negative cash flow. Unfortunately, lawyers, financial paper manipulators[gamblers]... political hacks have mostly run the country. If you listen to the rhetoric of the new crowd where, do you see, an innovative solution being hatched?

2008 Dec 11 04:44 PM

[pockyclips ...:]

Then why am I working 7 days a week to keep my head above water?
I had more money, less stress, and the same 401K account balance 10 years ago. Bush isn't the only crook (ALL politicians are crooks), just the biggest one who sold the American middle class down the river (literally).


On Dec 09 11:15 AM Old Wizard wrote:

> fitz, As I've said before your political arguments are highly debatable.
> Your condemnation of the bush administration may or may not be justified,
> but your lack of condemnation of Clinton is not balanced. Rubin was
> the advocate of deregulating mortgage-based derivatives,it was Clinton
> appointees who presided over Fannie Mae and Freddie Mac as they bought
> more and more risk while making tens of millions in personal wealth
> and it is the democrats who are still in power who backed the kind
> of untenable benefits agreements that the US car companies are now
> saddled with. Also the budget under Clinton was not balanced until
> 2000. The two years previous it was only balanced, if you take the
> surplus collections of social security over outflow in those years.
> The social security tax increase under Clinton is perhaps the most
> regressive tax increase on the middle class in our history. Further,
> wasn't it under Clinton that we reached the so called peaceful nuclear
> agreement with N. Korea and were treating Packistan as a potential
> enemy[ I know this through my own work experience]. Isn't it Bill
> Clinton who has amassed tens of millions lecturing and lobbying for
> the arabs and for companies who do business there. Rationalizing
> that George Bush is the only villan in the case doesn't do the country
> any good, because it deflects us from identifying the real issues
> to be solved and holding our elected officials responsible for presenting
> and implementing solutions. Longoil your points for the 5 aspects
> of solution,are all those which, I think, Fitz and I agree. I would
> add that what is missed in the discussion of the middle class is
> that we, as a country, have not been able to ratioalize a free traade
> policy[ which truly lifts all boats] with the creation of products
> and services that we produce here that we can sell to everyone else
> so that the country's current account is zero or positive. Fitz that
> is why I would like the Obama administration to take 250b of the
> stimulous packaage and create pilot projects for electrical generation
> from wind and solar in several metro areas and build monorail spiders
> in several metro complexes instead of more roads and bridges. Those
> who don't believe that gov. should intervene in times of crises apparently
> don't understand the long term benefits of the Appollo program on
> the long term economy of the country. It is the role of the people's
> government to provide these solutions if it has the vision and courage
> to do so. The situation is now time-critical, but I remain apprehensive
> that the new players may be missing at least one of these characteristics..

2008 Dec 13 03:15 PM