Whenever I've been watching one of the billions of presidential debates over the last few months, my roommate has occasionally asked me "what are they going to do to bring these gas prices down?" And my answer has been pretty pathetic: "uhm, there's not enough refineries, and China's increasing the demand, so it's out of their control until we switch to renewable fuels.... I think".
But the more I really thought about it, the more that simply didn't make sense. If Exxon is making a BILLION dollars in profit for the first three months of this year, that means that their revenues have vastly outpaced their expenditures. So, even if the processing of crude oil had become so much more expensive because of bottlenecks in the pipeline, which would, presumably, drive up the price of a barrel of oil, it still doesn't account for the huge profit disparity.
And then I saw this segment on "Countdown with Keith Olberman" last night.
In short, it's all Enron's fault. Enron and Phil Graham.
So, the question is, if the so-called "Enron Loophole", that allows energy speculators to simultaneously drive up the price of oil while hording it as an investment and then reaping insane profits, has single-handedly caused the price of oil to double since it's inception, why haven't ANY of the Presidential candidates talked about it this year? After all, you would think that Enron is a pretty easy boogeyman to present for further public flogging.
And, yes, I'm talking to YOU, Senator Obama.
Some legislation has been passed to address this, but there's much more work to be done. If you want to help do something about it, check out StopOilSpeculators.com.
The other thing that concerns me is that, near the end of Keith's report, he mentioned the term "oil bubble".
Having lived through both the 1st internet bubble and now a real estate bubble, the thought of an oil bubble makes me extremely nervous. I mean, sure, if the bubble burst, the oil prices should collapse, which would be easier on my petrol budget. But, if all of these financial institutions are acting as major oil speculators, would the crash of the oil market make some collapse like Bear Sterns, pouring even more salt in the wounds of the credit crisis?
3 comments:
I'm torn on my opinion on this, for a few reasons:
1) There's a lot of evidence that oil supply is decreasing, and any of the new domestic drilling we've been talking about doing here is a gnat on the ass of Saudi Arabia's production capabilities. I think Saudi Aramco is several times larger than Exxon Mobil. China and India use proportionately less oil per person, but their demands are steadily increasing. If the supply in the ground is decreasing, and demand is increasing, prices have to go up.
2) The California electricity crisis happened because Enron controlled both the trading market and the power plants. They would actually turn off power plants at will to boost the price. While the report mentions some shadiness with oil firms, it's a bit disingenuous to say Morgan Stanley owns a bunch of oil. . . they're never taking delivery and that contract has to be sold to someone eventually. Please correct me on that if I'm wrong and they've got a bunch of warehouses containing oil. (and I don't mean that sarcastically.)
The speculators may be pulling tomorrow's problems into today, but I don't think they're throttling supply to the point where if they just went away everything would be better. If you want to accuse anyone of throttling supply, you have to look at the state-owned companies that sold the speculators the oil.
I'm preparing for a permanent increase in the price of oil, myself. I'm a bit optimistic, but I believe someone who figures out how to meet our energy needs in an alternative, efficient way will be the next Rockefeller or Carnegie.
C.G.,
Check out http://uk.reuters.com/article/marketsNewsUS/idUKN0837878520070808
Apparently, Morgan Stanley DOES have warehouses containing oil, although, presumably, they're doing so at the behest of the U.S. government. But, given this, I suspect it's not an enormous leap to think they have the capacity to horde it, especially if it's considered a valuable commodity in declining supply.
In short, I don't think the speculators are solely responsible, but I do think they clearly have an extremely significant impact.
Ok, I love Olberman, but there's more to the story than that piece suggests. Futures trading or not gas is a limited quantity and our society is hugely dependent on it. The price is going to keep going up until we find some effective alternatives. I highly recommend this discussion with two experts on the industry:
http://www.washingtonpost.com/wp-dyn/content/discussion/2008/06/20/DI2008062002001.html?hpid=discussions
Post a Comment