What We Can Do To Reverse the Oil Crisis 31 comments
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Despite the market being up 100 points at 9:49 yesterday, I was already worried saying to members: "Very unimpressive move so far. Oil still at $145, moving up is still bad there let’s not forget." I didn’t mention oil yesterday morning as I’m sick of talking about it, but I have not changed my opinion that $145 oil is destroying the world. So how are we going to have a recovery with oil at this price? You would think that is not the case listening to the MSM, who blame everything else in the world but the runaway price of oil, which is interesting as the same Conservative pundits who take every opportunity to say that taxes are destroying the American way of life seem not to be bothered that rising energy prices represent a $5,365 tax on every single U.S. household ($70 extra per barrel x 21Mbd x 355 / 100M households, rich or poor) and rising food prices nearly double that total to create a flat Bush Commodity Tax of nearly $10,000 per American household.
There are your credit card defaults, there are your mortgage defaults, there is your consumer slowdown. The economic policy of this administration is choking the life out of the American consumer, as well as the global consumer, and we cannot survive continued inaction!!!
I don’t want to make this a political rant. Bush is out the door and we can pretend he’s blameless and we can let Bernanke and Paulson BS CongressTuesday and pretend that these factors were unforeseeable when they let the dollar’s value fall 40% (yet another phantom tax on the American people) or when they started a government subsidized program of using food for fuel or when they lowered rates (which were never passed down to the consumer) or when they threw $168Bn of free money onto the fire rather than trying to put the inflationary flames out… We can pretend all those things are fine BUT THAT IS THE PROBLEM - by consistently holding the administration blameless for this mess, conservatives in the media have allowed things to spiral completely out of control.
Confidence is shot--in the administration, in the dollar, in banks, in the US in general. The dollar is hitting new all-time lows this week and oil, despite very obvious signs of a global slowdown, oil is hitting new all-time highs. It is oil, oil and oil that needs to be addressed first and drilling 10 years from now is not the solution. George Bush is sitting on 700M barrels of oil and every single day 300M barrels of oil are traded on the futures market. Since every oil bull on TV claims that oil is heading up on "supply concerns" I would very simply put it to the administration that they release 1Mb a day from the SPR and buy 30Mb a month on the NYMEX to replace it.
If the NYMEX is truly not a speculative joke, then the actual purchase of 30M barrels out of the 6Bn barrels traded back and forth each month should have no effect whatsoever on the price but the steady release of 30Mb a week from the SPR will quickly fill commercial inventories to the brim (we currently have 60M less barrels, out of 1,040,000,000, less petroleum than usual in commercial inventory).
Every single day on the NYMEX, 300 Million barrels of oil are ordered and canceled and all I am proposing is that each day the US government stand on that trading floor and buy 1/300th of those contracts and NOT cancel them. Those barrels can be used to fill the SPR next month while oil is released this month. We can even let the President go wild and stuff those last 6M barrels into the reserve.
It’s a revenue neutral strategy that doesn’t cost the taxpayers anything and has a good chance of making a dramatic impact on oil prices - TODAY - not in 2020. This is why I get upset with Bush: He IS the President, he is supposed to do SOMETHING to help. If I can think of 10 things to do to bring down the price of oil, I’m sure he can think of one. I’m tired of waiting and I’m going over his head to Congress and I’m laying out this very simple plan to refill the commercial stocks of this country without jeopardizing our national security or spending any money.
Once we have that going, it would be nice to investigate why a country that is supposedly so short on refining capacity and petroleum inventory IS EXPORTING 10M BARRELS A WEEK OF PRODUCT OUT OF THE COUNTRY??? Does that seem strange to you? Does it seem odd that the US refining cartel is ordering 10M barrels a week of crude oil, which increases the apparent demand of our nation by 5% per day and then, rather than putting those refined barrels into inventory, they sell them outside of the US, drawing 1,444,000 barrels a day out of our product stocks?
It’s even worse than that because the US "only" imports 11Mb a day and that means that means that 13% of our crude imports are NOT for American use, they are barrels that are imported to the US, refined by the US refining cartel and then shipped away from the US while CNBC pretends there is a shortage of oil. Come on, Congress--it’s right there in front of you, do your job and start asking some real questions! It’s time to take the gloves off and start interrogating the people who are really terrorizing America, causing economic damage on a scale the 9/11 crew could only dream of.
Speaking of the refiners, idle refining capacity has ticked up from 232,000 barrels a day last November to 501,000 barrels a day in April, that’s 8M barrels a month less product being refined with a refinery utilization rate of just 86% (was 83% in March). That’s 2% lower than last April and 1.8% lower than April ‘06 and 6.6% lower than April ‘05 and 6.3% lower than April ‘04 and 7.9% lower than April ‘03, when oil was $30 a barrel. Refiner profits meanwhile (taking VLO for example) are up from $622M in 2003 to $5.2Bn last year. This is not an aberation, TSO went from $76M to $566M, SUN from $312M to $891M, XOM from $20Bn to $40Bn. THERE IS YOUR $10,000 PER PERSON PER YEAR COMMODITY TAX, AMERICA, don’t just nod your head and agree when the morons on Fox (now owners of the WSJ) tell you those are not excessive profits taken at your expense.
This is not incompetence, it’s criminal. There is a shell game being played with oil and refining capacity on a national and global scale, and nothing is being done to address the real issues. Instead we get distractions, this is what criminals do--they create a distraction so they can get away with their crimes while no one is looking. Step one of being a good citizen is to let them know we ARE looking, and we will be watching from now on. When you vote, ask your representatives if they have your interests or oil interests in mind. Despite the current spin in the media, those interests are not the same at all!
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This article has 31 comments:
Huh? Prices, my friend, have gone up and down before the birth of George W. Bush, and will continue to do so after his death. If you think otherwise, I have in my desk drawer some very fine tulip bulbs to sell to you. They are sure to appreciate in value over time.
He is President, not chief controller of all matters financial and economic.
i've been reading phil for almost two years now: he hasn't gotten political except recently, when people have been losing their frickin minds.
there may be more vituperative, pissant commenters here on SA than on the political blogs i read. I bet they all just lost money...
Did Bush or Congress do this?
"immediately ban pension funds from investing in commodities"
"abolish commodity etfs"
Oh brother.
he good good bucks today and was not the only one :) , it was a risky play, and it deserves my CONGRATS MAN!
The science is this: hydrocarbons are infinite. Let's drill for them.
oilismastery.blogspot..../
where are the fundamental demand growth? ja!
On the topic of the refiners & idle capacity: let's say you're a small/medium refiner & don't have your own wells. Oil spikes to $145/bbl but retail gas is only about $4.50 so you're losing money on every gallon.
Doesn't it seem like that's a good time to shut down & start making repairs?
Take a look at the chart of something like WNR it's gone from $65 to $8 and it isn't even sitting on a pile of toxic subprime mortgages.
If you didn't believe me with my first teaser....trying reading these articles...
About ICE,IntercontinentalEx... Inc.
Ice, Ice Baby Part 1
www.star-telegram.com/...
Ice, Ice Baby Part 2
www.star-telegram.com/...
Here are some teaser quotes:
When Enron failed and took its private, unregulated energy exchange to the grave, another rose to take its place. The Intercontinental Exchange (ICE) was the brainchild of
Morgan Stanley,
Goldman Sachs,
British Petroleum,
Deutsche Bank,
Dean Witter,
Royal Dutch Shell,
SG Investment Bank and
Totalfina.
In 2001 ICE purchased the International Petroleum Exchange in London; renamed ICE Futures, it now operates as an "exempt commercial market" under section 2(H)(3) of the Commodity Exchange Act. As the Senate hearings pointed out in the summer of 2006, "Both markets operate outside of any CFTC oversight."
www.star-telegram.com/...
We started as a society that worships hard labor and the basic business ethic of building value into the goods you create. How’d we get from there to worshiping Wall Street’s billion-dollar boys — who create nothing, build nothing, own nothing and deliver no goods, and yet can throw so much money into products made by others that they determine what we consumers will pay for those goods?
Oil Movements tracks every tanker at sea, from both OPEC and non-OPEC oil countries, along with their cargoes’ final destinations. Anne O’Shea responded immediately to my request with their report dated May 8, 2008. Just so you will know, oil shipments are up from a year ago in almost every class, including Middle East oil in transit and Non-OPEC in Transit. The only class of oil shipment that has declined is covered on page 3 of that report. That chart is labeled, "4-Week Changes in Westbound Oil at Sea."
That’s right, shipments of oil headed west have shown serious declines during the month of April, down 800,000 barrels per day in the week before the publication of the report
This is EXACTLY what Enron did when it's Electricity Manipulation, Turning off power grids to falsely inflate demand on other grids....
Timeline Lies
Many shortsighted politicians dismiss the opening up of US moratorium areas with statements such as, “it would take decades to bring the oil and gas to market, so let’s not bother”. This a not correct.
Its simple to get new American energy supplies quickly, Appeal to Corporate Greed: If oil companies are given enough financial incentives, they will move much faster than anyone believes and could find and start producing new oil and gas within 2-3 years, then ramp quickly up to produce enough energy to completely replace oil imports within 10-12 years.
With gas prices reaching deeper into motorists' pockets, attitudes about offshore oil drilling are shifting even in normally greener-than-thou California, with a majority of individuals and elected officials advocating its expansion. July 1st, 2008; The number of Democrats who said they saw increased production as the top priority jumped by 16 percentage points since February to 46 percent. There has been a dramatic increase in a span of just five months in the support for energy exploration and production among groups that have traditionally championed conservation as being the answer to the country's energy problems.
Oil and gas prices that have doubled in the past year have squeezed aside the war in Iraq as the No. 1 issue this election year and both parties are blaming each other for the price spike -- and for apparent congressional paralysis. Both the candidates' own advisers -- admit none of their energy proposals will have any impact on $4 gasoline or $130 a barrel oil in the near term, or even the intermediate term.
Come November any candidate for any seat who does not wholeheartedly support developing America's own energy resources immediately, is likely to get hit by a virtual "voter rejection train", poetically loaded with imported $5 a gallon gasoline from Chavez, Iran and Russia.
Continued US drilling restrictions will further exacerbate the global demand-supply imbalance, and send “futures” prices even higher. If we tell the world today that we are launching an Energy-Manhattan-Proje... if that call is clear and unequivocal, then it will have an impact on the futures market and lower prices.
By imposing bans on leasing, and encouraging environmentalists to challenge seismic and drilling permits on existing leases, politicians ensure that we will never increase our proven reserves. In fact, reserves will decrease, as we deplete existing deposits and don’t replace them. The rhetoric is clever – but disingenuous, fraudulent and harmful.
The IEA warned governments not to blame speculators. It said: "Like alchemists looking for a way to turn basic elements into gold, everyone wants a simplistic explanation for high prices," bluntly adding: "Often it is a case of political expediency to find a scapegoat for higher prices rather than undertake serious analysis or perhaps confront difficult decisions."
See; www.strategicnine.com/...
That is, since oil effects the cost and inflation of almost all products and services, the real cash value decreases on returns since the dollar value declines. I mean, I can not pay my house payment or go out and pay for my hdtv with oil(at least not yet). So, money has to have some real value against oil and other commodities and can not sustain a continued loss against them.
So basically, piling investment money into commodities that are the bases for an economy creates no real capital and can only be a temporary profit.
These investment firms either know this and will pull out at some point, or they are stupid as hell.
Also, if you think that changing currencies to the Euro would make a difference, It might for a while. But, any economy that uses oil and other commodities will eventually lose true value up against continued price increases on the commodities.
To be fair (which clearly wasn't your intention), most conservative pundits have been pounding the table for a long time about the need to expand domestic energy exploration and production. Most of the opponents of opening more federal lands and waters to drilling have been on the Left.
Bush has been blamed for a lot of things, but it's tough to blame him for high commodity prices when he was advocating policies to increase our energy supply years ago, and was blocked by Congressional Democrats (with the help of some liberal Republicans as well, including McCain).
> jack
What little oil reserves we have left should be reserved for military use (that why they called them reserves)! This use would be the hardest to convert, and besides, a good portion of our military is stationed overseas where more oil is available (by force, if necessary.
This wealth transfer (2.5 trillion/year) from western democracies to
Communist and Islamic heathens must stop. It makes no sense to be claiming we are winning the war on terror at the same time we are lining the terrorists pockets.
We should be actively converting our personal transportation to other than oil use, and be working on cargo and mass transit now.
Depending on oil, foreign or domestic, is a losing proposition.
This isn't 1870. Adapt or perish. God discontinued making dinosaurs 70 million years ago.
Bush forced me to take a mortgage I could not afford?
Was it Bush or congress that voted for the war?
Bush gave me back some of my tax money TWICE!
You could double the amount of oil produced tomorrow and the OPEC cartel would slice production that amount and we would be paying the same amount for gas.
You could open Alaska, off shore and anywhere else and the companies that produced the oil would not sell it for less. What kind of fools are we?
I give 5 stars to the Poster for the links to the articles by Ed Wallace. I have sent these articles to members of Congress.
4 stars to FXtrader07 and John S. Gordon who have taken the time to learn about the truth.
NO stars to the trash-talkers. You know who you are.
And 10 stars to you, Phil Davis.
Just so everyone knows, My Congressman, Paul Kanjorski, D, PA., is aware of the "ENRON Loophole" and he is going to do something about it. I emailed this article to Kanjorski and to Senator Bob Casey.
Everyone should do the same.
Congress will get the speculators out of the oil futures market because A LOT OF THEM ARE UP FOR REELECTION AND THE ECONOMY SUCKS.
Not that I am political but I AM NOT PAYING FOUR THOUSAND DOLLARS TO BUY 1,000 GALLONS OF HOME HEATING OIL THIS WINTER.
Here is an idea to conserve energy...Turn off your oil furnace and heat each room of your house only when you use the room WITH A SMALL PORTABLE ELECTRIC HEATER.. Close all doors all the time.
Use less hot water. I now use the MICROWAVE in the winter to heat small amounts of water for washing in the morning. In the summer, I use cold water only.
If we all did this, TSO,VLO, heating oil distributers, etc, would get very upset and complain to Congress. ( I also email Phils stuff to two local heating oil distributers).
Sorry Charlie
But don't get me wrong, Democrats and Republicans are both responsible for where we are. This article is pure crap to just blame Bush.