Of Speculators and Cartels Who Determines the Price of Oil?

This is an older article as you can tell from the oil prices noted here, but I still find it an interesting perspective from Ralph Nader.  I defend Bush & Cheney till the end, but I trust you'll find this an interesting aside as well.

By RALPH NADER

Question of the day: who and what is determining the price of oil and your gasoline and home heating bills? Don't ask Uncle Sam, because George W. Bush and Dick Cheney are running a regime marinated in oil that does not issue reports which explain the real determinants of petroleum pricing beyond the conventional supply-demand curves.

First, let us create a historical framework to provide some background. In the good 'ole oil days, before the producer-countries' cartel in the Third World gained pricing power, there were seven giant oil companies called the 'seven sisters' led by Standard Oil (now Exxon) and Shell. As chronicled in Robert Engler's classic book, The Brotherhood of Oil, they were able to affect pricing through extra-market means. Economists called them a tight oligopoly.

OPEC later took their place at the table in the mid to late Seventies and set the price of crude oil at highly publicized meetings of the various member countries representatives from the Middle East, South America and Africa. Adjusting, 'seven sisters' concentrated their pricing and supply power downstream at the refining, pipeline and marketing levels.

Pricing power was never total but it was always complex, occurring in the interstices of an industry few outsiders understood, and fewer regulators could affect. Besides, natural gas was de-regulated between 1978 and 1993, after which its prices really took off.

Today, a third party has moved to the table-the New York Mercantile Exchange, a similar operates in London and a new one in Dubai. There, boisterous traders buy and sell futures contracts on the delivery of oil. But as Ben Mezrich, the author of the new book Rigged said recently, the dollar amounts of these futures contracts are far far larger than the actual oil deliveries they represent as they turn over and over at the Mercantile Exchange.

So now the critical resource of oil is driven by speculation at ever higher abstract electronic levels of futures trading. Increasingly, the distance becomes greater and greater between this abstract trading (fueled by rumors of storms in the Gulf of Mexico, or some possible political turmoil in a region of the world, or some other frightful excuse for bidding up) and the physical supply and demand for oil and its refined products.

These oil gamblers in New York and London try to justify their frenetic daily bidding by saying that these futures markets provide liquidity, and a clear price for oil. Alright, but who benefits when, how and where?

Certainly, the strain between physical supply and demand in recent years does not explain such extreme volatility. With OPEC countries down to supplying only 40 percent of the world production, Chinese demand for oil growing fast, and the expansion of production by Saudi Arabia and others to meet this demand, crude oil supplies are not tight enough to explain such pricing behavior.

Old factors like inadequate oil company investment in refinery capacity, longer down times for repairs than some observers believe necessary, and the slumping dollar are factors that western governments, especially the Bush regime, have not wanted to investigate. After all, with consumers paying sky-high prices for these fuels, free market theorists are supposed to expect expanded supplies from recoverable reserves to grow. But, of course, the global market for oil is anything but a free market from the producers- both corporate and governmental- toward the downstream companies to the consumers.

In recent days, the price of crude oil escalated to over $90 a barrel, fluctuating up to a high of $96 a barrel. Yet the average price of gasoline in the United States-around $3.00 per gallon-is about what it was earlier this year when the price of crude oil was around $60 a barrel. Why the disconnect?

"It's a big gambling hall," The Washington Post quotes Fadel Gheit, an oil analyst at Oppenheimer. "This time it's just speculation," Peter C. Fusaro, chairman of Global Change Associates, told the Post, adding, "There's a large bet out there that prices will continue to trend higher. But it's detached from fundamentals because there's no shortage of oil."

Meanwhile, the government of Big Oil runs Washington, D.C. It thumbed its nose at pleas from then Chairman of the powerful Finance Committee, Senator Charles Grassley (R-Iowa) who asked the major companies, swimming in massive profits, to contribute some charitable dollars to help the poor pay for their winter home heating bills, and has smugly watched the major Presidential candidates avoid the subject in their debates and declarations.

Oil companies seem to spend more executive effort looking for oil by merging with other companies (note the unchallenged merger of Exxon and Mobil under the Clinton administration) than with developing efficient oil-producing and consuming technology or expanding their solar energy subsidiaries.

So long as the price of crude oil is set by speculators on trading floors, so long as the oil-indentured politicians are not challenged by new candidates standing tall for people and environments, so long as we do not protest for change and press ourselves to prevent wasteful habits and uses, get ready for higher oil prices.

HAT IN HAND, OUR PRESIDENT DISCUSSES OIL WITH THE SAUDIS

Skipping the usual litany of, "this makes me sick", "what a waste of time" and that old favorite, "fuck them arabs", let's slaughter this pig a different way.

What I am about to put forth is so logical, practical and in our best interest, that I must warn any liberals reading this, you may want to leave the room or suffer a loss of bowel control followed by a mandatory six day DailyKos enema and/or lobotomy, just to wipe the memory of what I am about to say from your diseased mind.

Ready?

BEST MOTHERS DAY 'SENDABLES' EVER!

Go on over and JibJab yourself a Mothers Day 'sendable' email.  Paste your mama's picture in bing, bang, boom and press send!  Cheaper than flowers, longer lasting than cholcolates and you can cover your Mothers Day 'bases' all from your computer sporting your mustard stained robe, clutching a Schlitz like its 1999!  Okay, that's just how I did it...

My Plea to Republicans: It's Time for Real Change to Avoid Real Disaster

by Newt Gingrich (more by this author)

Posted 05/06/2008 ET
Updated 05/06/2008 ET

The Republican loss in the special election for Louisiana's Sixth Congressional District last Saturday should be a sharp wake up call for Republicans: Either Congressional Republicans are going to chart a bold course of real change or they are going to suffer decisive losses this November.

The facts are clear and compelling.

Saturday's loss was in a district that President Bush carried by 19 percentage points in 2004 and that the Republicans have held since 1975.

This defeat follows on the loss of Speaker Hastert's seat in Illinois. That seat had been held by a Republican for 76 years with the single exception of the 1974 Watergate election when the Democrats held it for one term. That same seat had been carried by President Bush 55-44% in 2004.

Two GOP Losses That Validate a National Pattern

These two special elections validate a national polling pattern that is bad news for Republicans. According to a New York Times/CBS Poll, Americans disapprove of the President's job performance by 63 to 28 (and he has been below 40% job approval since December 2006, the longest such period for any president in the history of polling).

A separate New York Times/CBS Poll shows that a full 81 percent of Americans believe the economy is on the wrong track.

The current generic ballot for Congress according to the NY Times/CBS poll is 50 to 32 in favor of the Democrats. That is an 18-point margin, reminiscent of the depths of the Watergate disaster.

Congressional Republicans Can't Take Comfort in McCain's Poll Numbers

Senator McCain is currently running ahead of the Republican congressional ballot by about 16 percentage points. But there are two reasons that this extraordinary personal achievement should not comfort congressional Republicans.

First, McCain's lead is a sign of the gap between the McCain brand of independence and the GOP brand. No regular Republican would be tying or slightly beating the Democratic candidates in this atmosphere. It is a sign of how much McCain is a non-traditional Republican that he is sustaining his personal popularity despite his party's collapse.

Second, there is a grave danger for the McCain campaign that if the generic ballot stays at only 32 % for the GOP it will ultimately outweigh McCain's personal appeal and drag his candidacy into defeat.

The Anti-Obama, Anti-Wright, and Anti-Clinton GOP Model Has Been Tested -- And It Failed

The Republican brand has been so badly damaged that if Republicans try to run an anti-Obama, anti- Reverend Wright, or (if Senator Clinton wins), anti-Clinton campaign, they are simply going to fail.

This model has already been tested with disastrous results.

In 2006, there were six incumbent Republican Senators who had plenty of money, the advantage of incumbency, and traditionally successful consultants.

But the voters in all six states had adopted a simple position: "Not you." No matter what the GOP Senators attacked their opponents with, the voters shrugged off the attacks and returned to, "Not you."

The danger for House and Senate Republicans in 2008 is that the voters will say, "Not the Republicans."

Republicans Have Lost the Advantage on Every Single-Issue Poll

A February Washington Post poll shows that Republicans have lost the advantage to the Democrats on which party can handle an issue better -- on every single topic.

Americans now believe that Democrats can handle the deficit better (52 to 31), taxes better (48 to 40) and even terrorism better (44 to 37).

This is a catastrophic collapse of trust in Republicans built up over three generations on the deficit, two generations on taxes, and two generations on national security.

House Republicans Should Call an Emergency, Members-Only Conference

Faced with these election results, the House Republicans should hold an emergency members-only meeting. At the meeting, they should pose this stark choice: Real change or certain defeat.

If a majority of the House Republicans vote for real change, they should instruct Republican Leader John Boehner and his team to come back with a new plan by the Wednesday before the Memorial Day recess. This plan should involve real change in legislative, communications, and campaign strategy and involve immediate, real action, including a complete overhaul of the Congressional Campaign Committee. The House Republican Conference would then vote for the plan or insist on its revision.

If a majority of the House Republicans are opposed to acting then the minority who are activists should establish a parallel organization dedicated to real change. This group should focus its energies on creating the changes necessary to survive despite a conference with a minority mindset that accepts defeat rather than fights for real change (which is what we had when I entered Congress in 1978).

Nine Acts of Real Change That Could Restore the GOP Brand

Here are nine acts of real change that would begin to rebuild the American people's confidence that Republicans share their values, understand their worries, and are prepared to act instead of just talk. The Republicans in Congress could get a start on all nine this week if they had the will to do so.

1. Repeal the gas tax for the summer, and pay for the repeal by cutting domestic discretionary spending so that the transportation infrastructure trust fund would not be hurt. At a time when, according to The Hill newspaper, Senator Clinton is asking for $2.3billion in earmarks, it should be possible for Republicans to establish a "government spending versus your pocketbook" fight over cutting the gas tax that would resonate with most Americans. Lower taxes and less government spending should be a battle cry most taxpayers and all conservatives could rally behind.
2. Redirect the oil being put into the national petroleum reserve onto the open market. That oil would lower the price of gasoline an extra 5 to 6 cents per gallon, and its sale would lower the deficit.
3. Introduce a "more energy at lower cost with less environmental damage and greater national security bill" as a replacement for the Warner-Lieberman "tax and trade" bill which is coming to the floor of the Senate in the next few weeks (see my newsletter next week for an outline of a solid pro-economy, pro-national security, pro-environment energy bill). When the American people realize how much the current energy prices are actually a "politicians' energy crisis" they will demand real change in our policies.
4. Establish an earmark moratorium for one year and pledge to uphold the presidential veto of bills with earmarks through the end of 2009. The American people are fed up with politicians spending their money. They currently believe both parties are equally bad. This is a real opportunity to show the difference.
5. Overhaul the census and cut its budget radically. The recent announcement that the Census Bureau could not build an effective hand-held computer for $1.3 billion and is turning instead to 600,000 temporary workers to do a paper and pencil census in 2010 is an opportunity to slash its budget, shrink its bureaucracy, and turn to entrepreneurial internet-based companies to build an information-age census. This is an absurdity that cries out for bold, decisive reform (see my YouTube video "FedEx versus federal bureaucracy" for an example of what I mean).
6. Implement a space-based, GPS-style air traffic control system. The problems of the Federal Aviation Administration are symptoms of a union-dominated bureaucracy resisting change. If we implemented a space-based GPS-style air traffic system we would get 40% more air travel with one-half the bureaucrats. The union has stopped 200,000,000 passengers from enjoying more reliable air travel to protect 7,000 obsolete jobs. This real change would allow the millions of frustrated travelers to have champions in congress trying to help them get places better, safer, faster.
7. Declare English the official language of government. This real change is supported by 87% of the American people including a majority of Democrats, Republicans, Independents, and Latinos. It is an issue of national unity that brings Americans together in a red, white, and blue majority.
8. Protect the workers' right to a secret ballot. The vast majority (around 81%) of Americans believe that American workers have a right to have a secret ballot election before they are forced to join a union. Last year the House Democrats passed a bill that would strip American workers of the secret ballot. A new bill should be introduced reaffirming that right, and it should be brought up again and again until marginal Democrats are forced to vote with the American people against the union power structure.
9. Remind Americans that judges matter. Senate Republicans should mount an ongoing fight (including a filibuster of other activities if necessary) to get the American people to realize that liberals want to block all current judicial appointments in order to maximize the number of left wing radical judges they can appoint if they win the White House. This issue has three advantages. It reminds people that judges matter and that a leftwing radical Supreme Court would be bad for the values of most (70 to 90 percent, depending on the issue) Americans. It shows the Democrats are not engaged in fair play. It arouses the activism of those who have been disappointed by Republicans and have forgotten how bad a liberal Democratic Presidency would be.

What Is at Stake

No Republicans should kid themselves. It's time to face up to a stark choice.

Without change we could face a catastrophic election this fall.

Without change the Republican Party in the House could revert to the permanent minority status it had from 1930 to 1994.

Without change, the majorities of Americans who support the Republican principle of smaller, more efficient, smarter and fairer government will be in for a rude awakening.

It's time for real change to avoid a real disaster.

The "May Day Massacre": Can Liberals Govern in a Global Economy?

Despite the poor outlook for conservatives in our elections this November, there is encouraging news from across the Atlantic. The conservative wave sweeping Europe hit England last week when the liberal Labor Party suffered its worst local election results in 40 years.

Boris Johnson became the first Conservative Party member elected mayor of London when he defeated Labour candidate "Red" Ken Livingstone. In contests for more than 4,000 local seats across England, Conservatives captured 44 percent of the vote, compared to 25 percent for the Liberal Democrats and just 24 percent for Labour.

This Conservative victory in England comes on the heels of a history-making rout of the Communists and the Greens in parliamentary elections Italy two weeks ago. And the Italian results follow center-right victories in France (Sarkozy) and Germany (Merkel). The countries of so-called "old" Europe are turning away from the liberal high tax, big government policies that have crippled their economies and are turning toward pro-growth, pro-competitive center-right solutions.

All of which raises the question: Can the Left successfully govern in a modern, global economy? The voters of Europe seem to be saying no.

Your friend,

Newt Gingrich

THINGS YOU'LL NEVER SEE #3

If you don't already know who the Westboro Baptist Church folks are, they're the crazed idiots who think that the 9/11 attacks were G-D punishing America for homosexuals and they love nothing more than to gather at a fallen soldiers funeral with signs declaring, "Thank G-D for IED's" & that ole' whack job favorite, "G-D hates fags."

While they both may be a similar number of cards short of a full deck, I still think this is something you will never see.

 

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