With all the blather over how increased drilling in the United States -- offshore, in ANWR, in your backyard, under your bed, wherever -- supposedly will lower oil prices in the short run, despite essentially every expert saying that's not feasible, you'd think that an oil supply outage in the Gulf of Mexico - source of around 26% of U.S. crude oil production - would be RAISING prices. Instead, they're plummeting:
Oil prices tumbled more than $8 Tuesday to levels last seen five months ago as investors shifted their focus from hurricanes in the Gulf of Mexico to slowing global demand.[...]
As Hurricane Gustav petered out, traders quickly turned their attention to slowing global economic growth, speculating that demand for crude will be dampened even in rapidly expanding China and India.
"The market continues to be weighed down by worries of a global economic downturn and slowing oil demand in developing markets," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "Action by OPEC and supply side concerns should put a backstop to any sharp price drop."
So there's the story right there, as the experts have been saying for months now: it's all about world oil demand running into a near-vertical supply curve. Over the past few years, as world oil demand surged, so did oil prices. Now, with the world economy (and therefor oil demand) showing signs of stagnation, prices are falling.
No, this isn't rocket science, it's about as simple as you can get. In fact, only a pandering politician like John McCain (who admits he knows nothing about economics) could possibly fail to understand this basic law they teach in Econ 101. More importantly, this is strong evidence that the fastest way to reduce energy prices - oil in this case - is to reduce consumption.
That's right, our dear Vice President was wrong - shocker, I know! - when he disparaged conservation and energy efficiency as merely a "private virtue." In fact, energy efficiency and conservation are BY FAR the most powerful strategies for getting the United States off of its "oil addiction." In the process, of course, we could be safeguarding our national security against countries and terrorist groups that don't like us, reducing our trade deficit, cutting our greenhouse gas emissions, and boosting our economy. So why aren't we going all out to slash our oil consumption? Here is your answer.
P.S. On a related note, I love how nobody's screaming about "speculators" now that the markets in which they operate are pushing oil prices down as fast as they went up. Can we expect Congress to pass a resolution honoring oil speculators for helping reduce the price of crude by nearly $40 per barrel from its peak of around $145 per barrel just a few weeks ago? Yeah, I'm mainly kidding, but this just goes to show the idiocy of our "debate" on energy in general and oil in particular, especially in an election year (e.g., Jim Gilmore claiming that the experts are wrong and he's right...suuuuure).
CFTC and FERC cannot even agree on Ameranth. They agree that Ameranth illegally engaged in market manipulation. However, CFTC says they were unsuccessful in their attempt to manipulate NYMEX closing prices for Natural Gas. FERC says that Ameranth was successful in lowering the settlement prices to the benefit of the massive amount of over-the-counter swaps they held. So, who is right?
What we do know from CFTC is that a small number of participants hold a massive share of oil future contracts. From their analysis, their appears to be no evidence for causation in the daily movements these player make. But what I have not seen is whether increased activity in this market has caused higher futures prices. And whether longer term (not just daily traders) buy-and-hold had an impact. And CFTC was just looking at NYMEX.
What gives me pause in saying that "speculators" have no impact or an insignificant impact on crude prices is that capital must flow somewhere. The equity and debt markets were bleeding capital and that had to go some where. And we know it wasn't ending up in depository institutions. Within the same time frame as investors soured on equity and debt, commodity markets took off. Absolutely supply and demand have an impact on that appreciation, but does that account for 100% of the appreciation? It's a more difficult question to answer as to what impact investors have.
Because they believe this, they see off-shore drilling and ANWAR drilling as adding "free oil" not controlled by OPEC to the American supply. Is this true or are they being fed a line that "The Oil We Drill Here, Stays Here"?
A lot of the oil our oil companies now drill within the United States and off the shore of the United States NEVER makes it to AMERICAN gas pumps in the United States...It is exported to (complete my thought, please)
Somehow, the guy that works on my car now that it is too complicated for me to work on it, and the guy that does the home repairs I can't, and the woman who helps out when needed with caring for our house and pets when we travel,
These are the folks that need to know that oil goes not to the people who live where it is drilled and pumped, but to the highest bidder.
Now I'm not an oil guy or economist either, so what facts can the oil guys or economists put into what "real people" that the "What oil is drilled in the United States, stays in the United States" is WRONG!
You have expertise in this area, and I think it will be a factor in November or Mark Warner wouldn't be supporting "states rights" with regard to off-shore drilling.
Here's another observation. Last year iirc, when we had a hurricane threaten the gulf rigs, the price of a gallon of gas went up BEFORE it hit. The 'justification' was that the hurricane was expected to negatively impact supply. This year it barely budged with Gustav which was predicted to be a much stronger storm. Again the supply excuse, which leads me to another rant.
Hasn't the republican supply side dogma been proven wrong over and over and over again??
1. The War on Drugs - decreasing supply doesn't do smack for decreasing demand. You see more drugs in rural America than ever before.
2. "Trickle on" economics - increasing the amount of money the uber rich have, doesn't do squat for the average American. The past 7 years are evidence, taxes on the rich went down, the average family income went down by $2000/yr and the number of family sustainable jobs for average Americans went down. Yup we're getting trickled on alright.
3. Drill here, drill there, drill everywhere - Considering that there are 70 MILLIONS of acres already available that are not being used (which the oil companies get tax breaks for) what good would another 1.5 million do? Also like increasing road capacity, increasing the oil supply doesn't fix the problem it just prolongs it.
I know there are more of these supply side delusions the republicans push as being evidence of their accomplishments, but those are the top ones I could think of that are easily debunked.
I was laughed at when I said the same thing about the rolling blackouts in California, and then ENRON vindicated me with the "Aunt Millie" phone call.
Corporations learn, and there will not be ENRON phone calls, but there will be ENRON type problems.