Wednesday - June 11, 2008

A little common sense?

I still think my plan is better. Not only does it cut the price of oil 80% over night, it scares the crap out of the entire planet. Hey, if they don’t respect you make them fear you. But in the meantime, please click over to NRO and read the rest of this piece. It’s about the uncontrolled speculation on the oil commodities market, which is responsible for a huge amount of the price of oil, and suggests several ways to limit that impact.

In my opinion the world needs to be on an oil standard. The same way that the world used to be on a gold standard when gold was fixed at $32 per ounce. What we are going through now is very similar to the Tulip Craze. PLEASE take 60 seconds to click the link and read up on that one if you aren’t familiar with it. The bottom line is that unchecked speculation leads to disaster. And we are currently on the very edge of the abyss, and a very large part of the reason why is another out of control speculation situation. We need some common sense ASAP. But lacking that, and the whole damn world seems to be lacking that, we need to put some brakes onto this runaway train as fast as we can.

An astonishing thing happened last Thursday and Friday: oil on the New York Mercantile Exchange rose by almost $17 per barrel, or roughly 14 percent. At the same time, the wholesale price for unleaded gasoline added another $0.36 per gallon, or 11 percent.

Media and analysts were quick to blame this unprecedented spike on the declining value of the dollar, on brewing tension between Israel and Iran, and on increasing demand for oil in China, India, and other expanding economies. But this was a market event, not an economic or geopolitical one: Futures trading and speculation is unquestionably putting upside pressure on oil prices.

Those skeptical about investors’ role in rising energy costs should be persuaded by last week’s events. The time has come to consider new commodities-futures regulations in order to prevent an unnecessary speculative oil spike, with all the collateral economic damage that will attend it.

Nothing makes conservatives queasier than regulation, especially of financial markets. But oil’s meteoric rise from $50 in January 2007 to almost $139 on Friday calls for drastic measures that might solve this crisis without a measure as drastic as the gas tax Charles Krauthammer proposed on Friday.

In the past, energy price appreciations of last week’s magnitude have typically been caused by supply disruptions — like the 1973 OPEC embargo, or the 4 million barrels per day in lost production that followed the Islamic Revolution in Iran in 1979, which restricted international oil supplies for several years and caused a spike in prices.

In this decade, though, world oil production has continued to rise, making it difficult for simple supply and demand to explain the explosion in oil’s price from $20 in 2002. The Energy Information Association reports that since 2002, world petroleum production has risen from 76.995 million barrels per day to 84.594 million barrels per day in 2007, a 9.87 percent increase. Over the same period, demand has gone from 78.036 million barrels per day to 85.354 million barrels, a 9.38 percent increase. So total world oil production actually rose faster than demand, but prices increased by almost 400 percent nonetheless. Kind of throws a monkey-wrench into blaming this crisis on China and India’s lust for crude, doesn’t it?

The fact is, the explosion in oil futures trading on the various exchanges around the world has unquestionably been a huge factor in the nearly 200-percent increase in oil prices since January 2007.
...
As a pure capitalist, I’m all for defending the free market. However, with food and energy prices going through the roof largely due to commodities speculation, calling these markets “free” seems a tad oxymoronic.

This article makes sense. If the children won’t behave, and they aren’t, then Mommy has to call a time-out, and change the rules of the games they’re playing. Because you don’t want to wait until Daddy gets home, especially if you put me in the Daddy roll. Please go read the rest and make up your own mind. Will this work, or not? Why or why not? Comments are open ...

Posted by Drew458     on 06/11/2008 at 07:21 PM   
Filed Under: • No Shit, Sherlock • Oil, Alternative Energy, and Gas Prices •  
• Comments (3) • Trackbacks(0)  Permalink •  

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