Oil drilling on America's public lands has increased 260 percent during the Bush administration. How much have gas prices gone down in that time? Oh, wait, that's right. They've gone UP -- coincidentally enough, somewhere around 260 percent. What's that popular definition of insanity? Doing the same thing and expecting different results?

A great part of the reason why California suffered so much with electricity prices was that Enron got the deregulation of certain commodity markets to be able to trade in the dark.

And when it comes to the market, is something is possible, it happens.

At this point we don't know how much speculation there is, but my guess is that it is going on. Why? Because with a plummeting stock market and the worst bond market since the Great Depression, financial managers are trying to find a safe place to move their money. And as we all know, the more demand there is, the higher the price.

To what degree are speculators raising the prices? Hard to tell since we no longer tracking those trades in the U.S.

In the long run, the predictions about oil shortage and higher prices that many environmentalists make are probably right, and short term speculation is probably just a quick spike on the graph.

In the short run, however, speculation can inflate prices above what they would otherwise be (Remember California). And more importantly, it is bringing a level of instability into the oil market that is not good for the economy in general.  

that "excessive speculation" is behind the surge in oil prices we've been seeing.  Having said that I'm all for transparent markets, combined with enforcement of rules and serious oversight.

a modest amount of the price of oil is due to speculation and that proper rules and oversight are necessary where there is crooked activity.  

Beyond that, I have big concerns about how much we should be regulating speculation.  

If money managers are simply buying oil because it's a good investment, does that mean we shouldn't allow it because it's hurting many Americans at the pump?  Maybe, but this is tricky line between free (I use that term loosely) markets and what is good for society as a whole and what's good for individuals.

Would it be ok if individuals were doing investing/speculating?  Yeah, maybe for a little while, but longer run it's not so good.  We've had two shining examples of over buying the past decade - the "irrational exuberance" in the stock market (especially tech stocks) and the insane housing bubble.  Both spikes are primarily driven by speculation.  I don't recall hearing too many screams of shutting down speculation when housing prices were spiking dangerously... but now look what's happening.  

This is a tricky business any way you look at it and, all things considered, one we should probably not mess with too much.  Go after the clear criminals and dirty players, but leave the rest alone.  If that means higher oil prices, then that's what the market dictates and we all need to live with it.

Regardless, as has been pointed out time and again, the majority of this oil price increase is not due to speculation.  This isn't going to significantly reduce the price of gasoline.   And over reliance on a "stop speculation" strategy is highly questionable at best and is setting a precedent that we probably don't want to set.

n/t

what portion of price is attributable to market speculation?  The price refiners pay and the exchange traded price are so intertwined, how do you separate out what is true demand driven and what is market speculation?  Is there some piece of NYMEX or IPE data that makes it apparent that pure hedgers are driving the market movement and not uncovered, speculative, long positions in the market?

If you forced NYMEX and its global counterparts to raise margin requirements on their futures contracts, what would the price of oil be?  That's the problem, it's just a guess and we will never know until a bubble (if there is one) bursts.  

Look at Natural Gas, Summer (non-heating season) prices were up to $14 a dekatherm on the exchange and now they have dropped to around $9.  That's over a 30% drop, what real life event in the world of natural gas production & consumption happened in the last week that caused this precipitous drop?

Also, have you heard of Amaranth?  

As to the housing bubble, there were people asking for the Federal Reserve to do their job as regulator instead of making meaningless speeches to Congress about a bubble, no one was listening though.  You had the same thing with Enron, there were people making noise.  No one was listening.  Because when the good times are rolling, no one wants to listen to the Cassandras of the world.  The housing bubble owes a lot to historically low interest rates (read Federal Reserve created) and lax regulation of mortgage brokers and originators and credit rating agencies.  We went through a round of deregulation of the financial sector and here we are (and as an aside, Phil Gramm was the one who created some of these giant loopholes in regulation through which mortgage derivatives and Enron slipped).  There is no separation between insurance companies, commercial banking, investment banking, and consumer depository institutions anymore.  We are repeating a lesson of the post-Civil War, pre-New Deal world.  Laissez-faire creates a cycles of booms and busts that devastate the working class.  But hey, those who fail to learn the lessons of the past are condemned to repeat them.

so let us take Al Gore's 10 year challenge to change our use of energy!

I just don't understand why anyone would want to risk further damage to our beautiful coasts and ocean.

Senator Warner was on the right track with his proposal to go back to the 1970's and resurect the 55 Speed Limit, but he didn't go far enough back.  The surrest way to increase the oil supply is to...(DRUM ROLL...), USE LESS OIL!  

The American consumer has figured this out.  You need go no further than AAA's report on the number of miles driven this summer compared to last summer.  Also, over the last year the number of highway deaths has dropped significatly since last year.  This is due in large part to Americans driveing far fewer miles.  

Again, the surrest way to increase the oil supply is good old fashion conservation.  This also means cutting off lights in rooms that arn't being used, using your dishwasher (if you have one) in the evening, as well as washing your laundry at night too.  

While it's a pain, it also means unplugging anything that is not being used (that means cell phone chargers and computers) since they still draw power.  

For those "free market" and "less government regulation" cheerleaders, don't go crying to congress to do something about your sagging profits.  If you are true to your principles, you will let the market work it out.  And now, if congress will grow a pair and raise CAFE Standards that at least match China's, that will also increase the oil supply.  President Bush, here is your magic wand.  Now use it!  

...if sanctions fail and Israel strikes Iran.  

Today 60% of our oil consumption is imported and that's expected to increase to 72% by 2030.  Of the amount imported, 50% comes thru the Straits of Hormuz, Venzuela and Nigeria.  The rest comes from here at home, Canada and Mexico.  

Its folly to believe conservation and increased fuel efficiencies alone will lower the future outlook of our overall fossil-fuel crisis.  So much more is produced from petroleum other than gasoline, and some much more of our economy is dependent on fossil-fuel in some part.  Aside from that, our population is forecasted to increase 28% to 363 billion from 2000 to 2030, and our economy will continue to grow, and by 2030 OPEC may have greater influence over our GPD than the federal reserve bank.

More domestic production somewhere (anywhere but ANWR) doesn't mean we are going to drill our way out of this mess.  It doesn't mean the price of gas at the pump is going to decrease.  It doesn't mean we are abandoning our clean energy goals.  It doesn't mean this is the single solution.

What it may mean is that it could keep the economy from a depression if Israel, Iran, OPEC, Chavez or terrorists in the Arabian Pennisula or in Nigeria do something unfortunate.  The economy needs price stablity and affordable oil, if it is going to pull of revolutionizing the energy industry and our society.  

Taking increased domestic oil production off the table, heightens the risk of "demand destruction" and derailing clean energy goals.  I am not choosing this position.  Its too narrow-minded and radical, and it doesn't consider what affect terrorism or another crises in our or world oil supply will create onto the U.S. or onto the world's effort to clean-up itself.  
 

exactly how much "increased domestic oil production" you're talking about, providing specific sources of that oil for our edification. And please, PLEASE pull the veils off our faces and reveal the "folly" - as you call it - of our incorrect analysis that the United States is a mature oil province, well past peak, and that "increased domestic oil production" is absurd (let alone enough to avoid economic catastrophe if there's a major world oil supply disruption in the next few months or years).

i'll make it my next diary.

here are EIA's forecasts for domestic crude oil production through 2030 (in MMBD):

2005: 5.18

2010 (low price): 5.81
2010 (reference): 5.67
2010 (high price): 5.51

2020 (low price): 5.95
2020 (reference): 5.89
2020 (high price): 5.98

2030 (low price): 5.25
2030 (reference): 5.39
2030 (high price): 6.04

Note that in the reference case, U.S. domestic crude oil production FALLS from 5.67 MMBD in 2010 to 5.39 MMBD in 2030.  Even in the "high price" case, U.S. domestic crude oil production only increases by 530,000 barrels per day, from 5.51 MMBD to 6.04 MMBD.  That won't make an iota of difference in a world oil market of 100 MMBD.

And check out this graph:

That's right, access to the Outer Continental Shelf (OCS) adds a bit of production, a couple hundred thousand barrels per day, but not enough to make any significant difference in the overall world oil market picture.

graph.  Maybe it's due to the time compression, but it sure looks like production is in the process of falling off and then magically pushes back right onto the same track it was previous on.

Granted, it takes time for these systems to react to the market, so maybe the falling production was a result of low crude prices in 2000 and they expect production to recover strongly in the 2008-2010 time frame as companies react and change strategy based on the much higher prices.

But this thing sure looks funny - and not in a "ha ha" sort of way.

I noticed that too.  What do you think causes that?

Politics: EIA is supposed to be completely independent, but there is always some pressure to tow the government line.  And I'd have to guess that under Dubya's administration there has been even more pressure.

Fear: EIA is usually hesitant to go out on a limb.  So EIA forecasts tend to be sandwiched between those of other energy companies or government agencies.  Try to avoid being the furthest out in either direction.  And in this case, without a comparison, I'd have to guess it's a "don't change the path too much" approach.  Too many people get upset when the government rocks the boat with any prediction that doesn't show the same thing that's been happening, so they tend to play it safe.

That sounds like EIA to a "t." Also, I think that agency has gotten a lot more politicized the past few years, just as every other government agency has under Bush.  

I'm sorry, but where do I buy my discounted "domestically produced" oil? That's what you're saying, right? That "domestically produced" oil is only sold here on the Domestically Produced Oil Exchange?

No? It's sold on the international market? Where it costs us just as much as oil from any other country?

So why would we let Big Oil damage our lands and spill in our rivers for oil that costs just as much and leaves us just as addicted? Why not do plug-in hybrids that can power up on domestically produced clean energy that can't be exported to make a buck on the international market?

Oh, wait. That's not what Big Oil wants. So our president and Congressional Republicans won't let us do it.