Larry

It is not just Reed and Pelosi. It is the whole democratic party, that keeps blocking drilling bills.

There’s one itsy-bitsy, teenie-weenie, little-tiny detail left out of this letter. Demand for oil from India and China is booming. China has consumed as much energy in the last 2 years as it has in the previous eight. Demand from emerging markets, especially Brazil, Russia, india, and China has fueled price increases in many commodities, including copper, iron ore, coal, and grains. the demand for grains has been great news for Monsanto, and the price increases have been great news for local Peabody Energy and Arch Coal, the #1 and 2 coal producers. It’s not the speculators, its the demand from overseas. And certainly the absolute intransigence of the Democrats has hurt our ability to supply our own energy needs: no drilling, no coal-fired plants, no nuclear plants. No, no, no.

Tim, you made one mistake. You are assuming that facts matter to liberals! It has to feel good since guilt is the initial feeling of all liberals. By the way, those were excellent facts. It’s just too bad it doesnt matter to those who chose to ignore facts.

Larry, you are economically ignorant as many Americans are. If you look into history, politicians are normally the problem. You failed to mention that back in the 70’s they tried the Windfall Profits tax. The results of that stupidity was high gas prices, long lines, and and economic nightmare. Unfortunately, the electorate has a short memory or doesn’t read their history. We are now repeating the mistakes of the 70’s. Now, go thank a liberal when you fill up your gas tank!

The problem with Tim’s little rant is that Tim is a conservative using economic liberalism (demand side economice)to pin blame on a problem caused by economic conservativism (supply side econimics).

As I stated in a previous blog, the deregulation of the energy market by the US government has effectively raised the price floor for oil. A price floor set above the market equilibrium price has several side-effects. Consumers find they must now pay a higher price for the same product. As a result, they reduce their purchases or drop out of the market entirely. (i.e. ride the bus, ride scooters, trade in their SUVs for 4 cylinder hybirds)Meanwhile, suppliers find they are guaranteed a new, higher price than they were charging before. As a result, they increase production. This is why oil companies have been experiencing record profits. Taken together, these effects mean there is now an excess supply of the product in the market. In order to maintain the price floor over the long term, the government must take action to remove that supply which is why Bush was cramming the strategic oil reserve to full capacity and the future traders are buying up all the oil they can. This keeps the price of oil high.

To the supply-side economist, reallocation away from consumption to private investment, and most especially from public investment to private investment, will always yield superior economic results. However, there will be a point where increases in asset prices will produce no new supply, that is where investment demand will outrun potential investment supply, and produce instead, asset inflation, or in common terms a bubble. The existence of this point, and where it is should it exist, is the essential question of the efficacy of supply-side economics. With all the increased demand from China, India, Brazil, and Russia (which is rich in their own oil and other natural resources)where are the shortages caused by the high demand Tim refers to that is driving prices high? But hey, if you were Peabody or Arch Coal and prices are high beacuse of demand from China, why go back to selling your stuff for less even if the lesser prices would help out us little people in the homeland?

Superdave is right about one thing: If you look into history, politicians are normally the problem.”In 1971, Richard Nixon ended the convertibility of the US dollar into gold, which meant the end of the Bretton Woods system. Commodity prices, including oil and gold particularly, which had been rising steadily in response to the dollar glut, spiked upwards.” So the net effect of that smooth conservative economic move was rising prices and a devalued dollar. Sound familiar?

My advice to the neo-cons on this issue is to go back to what you do best, name calling because the facts are not with you on this issue.

Buddy, you live in your own fantasy land. Tim Jones was absolutely correct in his statements. The problem is that pro-government socialists like you want regulation for everything. We would still be using black rotary phones in your world. Just ask the Russians when they were communists.

I find it interesting that you selected Nixon as the politician that hurt our economy. I would agree that getting off the gold standard was not a good idea. However, your hero Carter showed exactly what government intervention does to an economy. By the time the greatest President of my lifetime got into office, Reagan had inherited one of the worst economies ever in the United States with interest rates in the high double digits. Yes, your socialist President Carter was a nightmare to our economy. The worst part is that Obama makes Carter look conservative. I am quite sure that a socialist as yourself loves Obama.

By the way, how much is your monthly check from the goverment? Funny how that works!

Buddy- You’re wrong

The US market no longer sets the price of oil. Demand in developing countries sets the price for oil. In the US, we have reduced our demand by about 4% over the last year, and it has done NOTHING to oil prices. Every drop of oil we conserve will be gladly purchased by China and other developing countries at market prices. I never said there were shortages driving up prices, demand is driving up prices, and supply is meeting demand.

It’s the same story with copper. Once upon a time, US demand for copper would set the world copper price. If the US housing market slumped, copper demand would have been driven down and prices would have followed down. But today, every ounce of copper that the US housing market doesn’t need will be gobbled up by China, and thus copper prices didn’t appreciably fall when US demand fell. Copper remains near record highs.

In a deregulated market, prices rise and fall with market forces. Deregulation does not set a price floor, it allows prices to flucuate freely according to the laws of supply and demand. When prices are low, demand tends to be higher; and when prices rise demand tends to slacken. For the reasons stated above and in my previous post, demand has risen worldwide and that has caused oil prices to rise. US demand has slackened, but worldwide demand has not. Demand destruction in China would help lower oil prices. In China and other countries, retail gas prices are subsidized by the government. So as oil rises to 140 and gas prices in the US rise with it, retail gas prices in China and other countries are not rising, and thus there is litle if any demand destruction in the markets. China did raise gas prices recently, we’ll see what effect that has on the Chinese consumer.

Feeding the Strategic Oil Reserve did little if anything to keep oil prices high. The US consumes about 21,000,000 barrels of oil per day, there was 70,000 barrels per day going to the SPR. Speculators do not play a role here either; when oil futures contracts expire speculators must either deliver or take delivery of crude oil. You think there are oil tankers in the basements of hedge funds full of crude oil? So where is all this supposed excess supply of crude that would be present if you were correct?

Windfall profits Taxes, wage and price controls, and other regulatory actions that seperate prices from the laws of supply and demand are not the solution. Superdave is spot on about that. So sorry Buddy, the facts are not with you.

Superdave, my monthly check from the government isn’t nearly as fat as my bi-weekly paychecks from my law firm, where, by the way, one of our clients is a certain oil company that built the refinery in Wood River. I wonder what you do for a living not so Superdave? Since you are spouting that Carter bad - Reagan is God crap, I’m gonna guess you are 60-something working class Reagan-Democrat (which is a serious oxymoron) who can’t retire because the economic policies of the conservative political philosophy you endorse has screwed you so bad you can’t sit down.

I will also guess that you have never had a college level course in economics, because all you have done so far is agree with Tim (whose rant I rebutted) and then resort to insults. (Funny, how I predicted that would happen). Do you have anything intelligent to add to this blog? So far, you agreeing that moving from the gold standard was a bad idea has been the only thing. Just remember this Dave, the government intervention into the economy is a given, regardless if there is a democrat or republican in the White House.

With all the going back in the past to blame a politican, when gasoline was less than forty cents a gallon,for todays problems,why not go farther back and blame the Wright Brothers for the fuel used in airplanes,Henry Ford for the assembly lines that eventually put automobiles in reach of working people,if we had todays obstructionist politics then we could all still be walking or using horses and waggons for transportation,take a look at which party is blocking use of our own resources,whether its oil,clean coal use,nuclear energy,wind power generation,hydroelectric dams,or disturbing some remote animals location. It can get worse than it is now if peopole don’t wise up and throw the bums out of office,the liberals offer more of the same,only worse. LS

With all the going back in the past to blame a politican, when gasoline was less than forty cents a gallon,for todays problems,why not go farther back and blame the Wright Brothers for the fuel used in airplanes,Henry Ford for the assembly lines that eventually put automobiles in reach of working people,if we had todays obstructionist politics then we could all still be walking or using horses and waggons for transportation,take a look at which party is blocking use of our own resources,whether its oil,clean coal use,nuclear energy,wind power generation,hydroelectric dams,or disturbing some remote animals location. It can get worse than it is now if peopole don\’t wise up and throw the bums out of office,the liberals offer more of the same,only worse. LS

Hey Buddy-

I’m still waiting for that rant to be rebutted.