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The Answer to Addiction.... More Abuse???

Category: Environment
Posted: 07/24/08 20:18

by Dave Mindeman

Republicans are good at examining a problem and then offering the most fundamentally basic and simplistic solution...even if it is fundamentally wrong. And as long as they refuse to explain all the complicated drawbacks to their "simple" solution, the general public will probably accept it... at least until someone has to really deliver.

It is like telling an alcoholic that all he needs to do for his problem, is to drink more. It doesn't solve anything but at least he won't feel bad.... at least for the moment.

And so it is with gas prices.

And what is the GOP answer to soaring gas prices for a nation that is "addicted to oil", as our President put it?

Drill here, drill now, drill everywhere.

In a very simple world of supply and demand, that could work.....

well...maybe...in 20 years when some of that oil, if it is really there, would get into the world supply....and if we didn't keep increasing our demand..... and if the oil companies can get the right equipment ....and if OPEC would keep producing at the same rate..... and if the oil companies would really committ to increasing refinery production (which might reduce their profit margin).... and if we can keep from having any other supply disruptions around the world....and if speculators would bid fairly on oil contracts without trying to manipulate the market....and if China and India would slow their economic growth.

Yes..yes..then drill here, drill now, drill everywhere would work!

But supply and demand isn't quite as simple as it used to be, so let's try to go over this again:

1) Oil Prices Are Currently Artificially Inflated. In the last few weeks, oil has dropped by $20 per barrel. I'm sure the GOP is convinced that the rants of Michele Bachmann and company about moving into ANWR and the OCS... along with President Bush's order that removed the executive ban on offshore drilling were the reasons for this. Except that the GOP, being in the minority, can't pass any legislation to that effect (and even when they had control of all 3 branches, they still didn't do it)...and Bush's executive order is still blocked by the Congressional ban with the same power. Sorry, but nobody in the commodity markets was fooled. They know political rhetoric when they hear it. But they were convinced by reports of real reductions in consumer demand... and that moved the market for now.

2) Reductions in Demand Affects Pricing More Quickly than Potential Increases in Supply. This is why conservation measures are so much more important to gas pricing than drill..drill..drill. A reduction in consumption is measurable.... it is something tangible that the markets can relate to. It is impossible to project these reductions very far into the future but the oil price per barrel on the commodity markets is a reflection of what the traders can see right now. Future drilling has too many variables to be a quick fix... reductions in demand are visible in the here and now.

3) Current Regulations Allow Oil Price Manipulation. We need to have more regulation in the commodity markets. A wide ranging investigation into oil pricing has begun....

In May, under the backdrop of record oil prices and calls from legislators to crack down on speculative oil trading and market manipulation, the CFTC announced a wide-ranging probe into oil price manipulation. The agency says it has dozens of investigations ongoing........

The complaint filed Thursday names Bastiaan van Kempen, chief executive; Christopher Dowson, a head trader; and Randal Meijer, head of trading at an Optiver subsidiary.

The CFTC said the firm attempted to "bang the close" by amassing large positions just before markets closed - forcing prices up - then selling them quickly to drive prices down and pocketing the difference.


Investigations aren't enough....new rules must be implemented to protect the consumer. You don't hear the GOP on that bandwagon and you probably never will.

******************

To explain the complexity of oil prices to the general public is difficult in an election year. They would rather believe that there is a quick, easy fix to these problems. And the GOP is more than willing to provide the rhetoric to match.

It works for a quick bump in the polls. But it still is not a real answer....and it never will be.
comments (3) permalink
Ron
07/25/08 16:56

Well let's just do some drilling and test the whole "peak oil" notion out - you know - trust, but verify. There are a lot of reasons being given that can be easily said in an office (e.g., peak oil, 15 years before we'd see any added oil), but I am ready to test these white collar statements out in the field.

I am not sure the situation we face here is like polishing brass as you assert, or if it is more of the blowing of smoke variety, but this displaced dairy farmer is just a tad skeptical.

So given the whole brass polishing situation you describe, doing some drilling in promising places shouldn't be a problem at all, because we really aren't going to increase supply - but let's just see if we do.

And remember (it isn't just about oil) let's follow the good example set by those Obama loving French folks and get going on building a significant number of Nuclear power facilities as well.

Yahoo!

 
07/25/08 16:31
There are no supply-side solutions to fixing prices anymore.

There are ways to increase supply. However, because we have reached "peak oil," increasing supply is like polishing brass on the Titanic. Global demand is increasing faster than global supply, and it's increasing faster than global supply will ever increase again. All we can hope to do by drilling is slow the rise in prices, not reverse it.
 
Ron
07/25/08 00:07

The supply and demand equation is not what it used to be. How so? It is simply the result of demand being higher than ever, and supply is artificially constrained by a political climate driven too far by environmental extremism. This dynamic is indulged by folks in government and the alternative energy crowd to gain money, power and control.

The argument that it will take 20, 10 or even 5 years to make a meaningful increase on the supply side is as accurate as the myths that the oil wells in Kuwait were going to burn for 3 to 5 years (turned out to be less than 6 months) after the first gulf war in 1991 ... rendering prominent geophysicists to become very wrong about their dire predictions that the world would experience significant climate effects and loss of vegetation ... but never-the-less, these ?doom and gloomers? with their overarching models, which were both exceedingly complex and interconnected were profoundly wrong. Too smart by a half again!

Technology, deployed capital and significant ROI opportunities conspire to ensure that new and necessary supplies will be available in far less time than all the pundits pretend to know. They are afforded the luxury of their pretensions to safely suggest it will take 10 years or more (as if that is any reason to not start today) from the secure knowledge that they are determined to keep any of the obvious and necessary activities required to increase supply from happening. Now that is a reality that is hard to defend and explain in an election year ? if only the curtain could be adequately pulled up to expose the sheer fakery of it all.

While we are at it, let's allow initiatives to liquefy coal and build nuclear plants to occur - briskly. Nuclear is proven and embraced by the French - as well as many others of Obama's fellow citizens of the world.

Occam's Razor supports and confirms the veracity and wisdom of simple explanations to vexing questions and simple solutions to enduring problems. And thus, to the approximate charge that conservatives are simple minded ? I guess I am eager plead guilty as charged.

I am not nearly smart enough to aspire to be the king of the citizens of the world, but I have enough common sense to see the need for America to embrace the obvious and basic solutions to the very real supply and demand issues we must confront.


 

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