Are oil speculators the cause of sky-high gas prices?
U.S. Senators must think that market speculators are the reason why gasoline prices have skyrocketed in recent months. They voted 94-0 on Tuesday to move ahead on legislation to curb speculation in oil markets. Few expect anything to come of it.
The Senate bill would require the Commodity Futures Trading Commission to set limits on trading in oil markets by investors and speculators and close a loophole that allows speculators trading on the London oil market to escape scrutiny by U.S. regulators.
But the majority say the bill will only end with both parties blaming each other for not doing enough to combat this summer’s $4-a-gallon-plus gasoline prices.
House Speaker Nancy Pelosi, D-Calif., says in the story that she won’t let the House or any of its committees or subcommittees allow a vote on offshore drilling. She and other Democrats say the oil companies should first look to areas offshore and in Alaska where drilling is already allowed.
But despite another round of huge quarterly profits, giant oil companies such as Exxon Mobil and ConocoPhillips insist they’re trying to find new oil that might help bring down gas prices, but the money they spend on exploration is nothing compared with what they spend on stock buybacks and dividends.
But that’s not true, according to a report by Rice University’s James A. Baker III Institute for Public Policy.
The report says that the five biggest international oil companies plowed about 55% of the cash they made from their businesses into stock buybacks and dividends last year, up from 30% in 2000 and just 1% in 1993. The amount the companies spend to find new deposits of fossil fuels has remained flat for years, in the mid-single digits.
Are oil market speculators really the cause of our high fuel prices? Or should we be forcing big oil companies to use larger portions of their huge profits to find new sources energy, be it oil, solar, nuclear or wind power – or something else?
Mac–the problem with comparing this to California is that prices didn’t spike anywhere besides California. It was clear that the price increases had nothing to do with a shortage of energy or the cost of doing business.
There’s real evidence that oil supply is tighter. Go read the EIA update on oil supply and demand–in general, the only place in the world with any excess supply is Saudi Arabia. That’s very different from 10 years ago.
There’s also real evidence that companies are investing in oil that is harder to get out of the ground. The “break even” point on projects begun by oil companies has increased steadily over the past few years. Look at the billions of dollars being spent on oil shale–Big Oil wouldn’t be spending billions on such a tough source of oil if it knew the real market price was something materially lower than what it really is on the NYMEX.
D. Walker–should we nationalize all of our farms, too? Since food just as vital to our lifestyle and its price has also shot through the roof.
Just FYI, the energy shortage in California was because of two things: 1) All the environmental lawsuits holding up the construction of new power plants, and 2)the fact that the business was not COMPLETELY deregulated. California “deregulated” the market but did not let higher costs get passed on to comsumers, so when prices went up for the companies there was no way to pass on the cost to end users. Therefore the end users had absolutely no reason to conserve power because it was still costing them the same. The classic populist price control idea that has ruined whole nations like Venezuala and Mexico almost brought down the power grid in California. That is why oil prices are dropping because people DID have a reason to use less gas when the prices went up and, just as supply and demand dictates, the smaller demand for gas (as a percentage smaller than the month before for the last several months according to AAA and other organizations that track gas usage) has started pushing oil prices down.
It’s simple economics, EXCEPT when states like California take away market forces on the end users of a product.
D Walker is apparently a communist. Should we take the land away from hospitals too since medical care is expensive, D? Google populist price controls and read about how your line of thinking has destroyed the economies of whole countries…
Paul,
The answer is NO. The situtions are totally different. For example there are enough ordinary people here who can grow their own food, barter crops and sell them among one another, communities etc.., we really don’t have to have commercial farmers if it ever had to come to that, NOT THE CASE WITH OIL. Doesn’t take much common sense to see and understand this, and is why I am so puzzled that you would even ask me such a question.
Tim,
America has a history doing just what you have asked me, JUST TAKE WHAT WE WANT! But, no I do not agree with this. You do realize that the land I speak about for drilling by the governement already belongs to the government and the oil companies only lease this land. Now they (the oil comapny) want more of it and has done nothing with what the government have already allowed them to have.
But the truth be told, it is not the oil companies desiring this off-shore lift, but Republicans making it an issue, like they did abortions in 2000. Oil companies are not even interested in off-shore drilling. What a stupid joke!
You guys certainly do not know much, do you?
Perfect illustrations.
Again… I assert :
Only two kinds of people deny the impact of speculation on the oil market.
1. “Flat Earthers” who are just too uneducated on the issue to fully understand it :
like Paul :
Uhm… that would be because California was the first and only state to deregulate at that time. As my daughter would say… “duh”. If you had taken the time to educate yourself a little bit - you could see that in NOT ONE of the states that have fully deregulated electrical energy has the price actually gone down - on average - they’ve MORE THAN TRIPLED since deregulation.
Paul isn’t dishonest. He’s simply a “flat-earther”. Uneducated and unwilling to learn the truth because it conflicts with what he wants to believe so deeply.
Tim… on the other hand… knows the truth - but is intellectually dishonest.
Despite the conviction on Federal charges of Enron executives and despite the 10’s of thousands of newspaper articles, books, magazines, and headline news stories explaining the California energy meltdown - Tim insists on screaming “SUPPLY AND DEMAND!” in shrill tones - not because HE believes it (he doesn’t) but because he needs YOU to believe it (we don’t).
Energy prices for consumers in San Diego (the first county in CA to be hit with the new laws) TRIPLED in ONE BILLING CYCLE.
Tim in uninformed, in addition to being intellectually dishonest.
And… as if you needed on more shining example of Tim’s shocking level of dishonesty…
That just… pretty much speaks for itself.
Mac
http://www.brownsludge.com
The IEA
D. Walker said :
See Mr. Walker, this is the problem.
The Republican Party, MY party, has been taken over by people like this. It’s becoming increasingly difficult to find an AUTHENTIC conservative who hasn’t bought into the Gordon Gekko “greed is good” pablum that so pervades the party.
Real conservatives, “authentic” conservatives, care about people. They want the government out of EVERYONE’s business, not just Corporate American’s business. It bothers a real conservative when American jobs are shipped overseas and when American interests and economies are damaged. They have a sense of pride in their country and they don’t want to see it sold to the highest (foreign) bidder.
The sale of A-B should be a wake-up call to everyone who considers himself or herself a “conservative” - because it is a perfect example of what happens when we as conservatives worship at the altar of the false god of the “global economy”.
I know I’ve said this before, but you will see the great ‘correction’ to this come this fall, when we are thrown out of the White House and BOTH houses this November. The gubernatorial outlook is pretty freakin’ grim too.
Which is a good thing really. Once the party has sort of been “purged” of these men of low intellect and the libertarian poseurs - the conservatives will have to begin to put the American PEOPLES interests first - or they will face political obscurity - (can you spell WHIGS?).
Then you and I can go back to arguing about abortion and the place for unions in our nation and the other classic left/right squabbles.
Mac
http://www.browsludge.com
Mac I usually respect you and your arguments, but you are way off base on this and are guilty of either out and out lying to make your point or completely unable to understand the reasons behind the California Energy Crisis. Read and learn:
The state of CA, expecting energy prices to decrease as a result of deregulation, wrote into the law a cap of energy prices at the pre-dereg price that could be charged to end users. But, to avoid energy disruption, they ALSO wrote into the law that utility companies were required to buy electricity from spot markets at uncapped markets when demand outgrew available supply. Also, the price cap became a disincentive for companies to fight the lawsuits on new plants since long term prices were capped and recouping those costs proved impossible.
When the demand outpaced the supply in 2000-2001, and no new plants coming on line, companies had to buy their extra power on the open market but still could only charge end users that mid-90s fixed rate. Since the end users had no reason to curtail usage because they were paying, at most, the ceiling rate from the mid 90s, the demand for power did not decrease. When Enron and others manipulated the open market, it caused havoc. The bankruptcy of Pacific Electric and the PUBLIC bailout of SC Edison were some of the results. (How much did that cost taxpayers verses raising rates to curb usage I wonder?)
You mention San Diego. Prices went up, but only as high as the FIXED ceiling rate set in the mid-90s! Prices had initially gone down once deregulation hit in San Diego so producers could still raise rates some. But, again, consumers in the entire state were never charged rates high enough to curtail usage.
This, Mac, is why it was not COMPLETELY deregulated, and those populist price controls were partly to blame.
Gas prices, meanwhile, are set on a free market. Do you want to know what “speaks for itself”? From MSNBC.com business section today: “Wednesday, when oil tumbled $3.98 to settle at $124.44 a barrel, its lowest finish since June 4. Crude has fallen in six of the previous seven sessions, and is now trading nearly 15 percent below its peak above $147 a barrel earlier this month”. Also, “Americans used 2.4 percent less fuel over the past four weeks than they did last year, the latest figures by the Energy Department’s Energy Information Administration show. While that may not sound like much, industry experts say it represents a significant shift by the world’s largest energy consumer.”
AAA tracks gas usage also, and reports decreases every month for the past several months. Check their website for confirmation if you like.
It’s uninformed and intellectually dishonest for you to comment about economic issues when you obviously have no clue what the data means or how to interpret it. Too much brownsludge between the ears methinks…
You’ll notice that Tim never speaks to the facts. Ever. He never once addresses any fact given in my previous post. He simply continues to post the same data from the same Wiki page over and over and to scream “SUPPLY and DEMAND!” at the top of his lungs like a frightened woman.
Said the guy who is trying (with a STRAIGHT FACE) to convince people that Enron was able to triple energy bills in California because the market wasn’t regulated ENOUGH.
ROTFL.
Laugh… I thought I’d die.
Never… ever… wonder why the Republican party is going down to a historical, stullifying, ignomious defeat this fall. It’s because of libertarian poseurs like Tim. While people are being exploited and caused to suffer real damage by unethical and predatory practices - people like Tim like to sneer and scream that it’s “SUPPLY and DEMAND!”.
As I stated before: California’s energy bills TRIPLED. Overnight. That’s a fact that any sixth grader with an internet connect and a rudamentary knowledge of how to “google” can look up. The fact that they were ‘capped’ as Tim keeps reposting from the same Wiki page meant very little to the poor, elderly, fixed income, and small business people who were bankrupted by the treble increase.
They TRIPLED because of what Enron did to manipulate the market. Anyone trying to argue that fact is… well… in a place where they simply can’t be helped I’m afraid to say.
Here is a little exchange between the energy traders at Enron - laughing about the energy companies who wanted their money back - caught on tape and a matter of public record :
These are the people and the behaviors that Tim admires and is trying desperately to defend.
Another fact that I stated that Tim just ignores is the fact that deregulation has resulted in higher energy bills in every state that has allowed it.
http://www.usatoday.com/money/industries/energy/2007-04-21-electricity_N.htm
Read that and learn.
Tim also states that oil is traded under a “free market”. If Tim had ever spent a day in an economics class he would have learned that we do not have an unrestricted “free market” economy in the United States. We have a “mixed” economy - where the government is partially responsible for making sure that the market’s aren’t gamed or manipulated unfairly.
And this what REALLY chaps Tim’s behind.
Because if he and his other libertarian buddies had their way - there would be NO government oversight of ANYTHING.
His statements that Enron was allowed to rip the people of California off because the market was only PARTIALLY deregulated stand in absolute testimony to that truth.
Interestingly enough - congress has acted recently to stop up the Enron Loophole, and the thing that every reputable financial publication from Money and Fortune to the Wall Street Journal has called the SPECULATIVE BUBBLE has began to pop.
But you keep screaming “SUPPLY and DEMAND!” like a little girl Tim. Perhaps someone will believe you.
I don’t.
And the people who USED to vote Republican don’t any more either.
They see what the deregulation of healthcare has done to that system and what deregulation is doing to the energy markets and know that they simply can’t afford to buy the lie anymore.
Mac
http://www.brownsludge.com
Mac,
Once these people are purged from the Republican Party, I will try my best to keep an open mind. These people have caused much trauma to the psyche of many of our citizens, including myself.
The moron (you can’t drill anywhere) DEMOCRATS
are the real reason for high gas prices…..Grrrrrrrrrr
Mac, you insulted me and pretended to rebut me while ignoring my main point. That’s impressive.
Until you can explain how a one state’s increase in prices when the rest of the world had comparably stable prices compares to the change in prices for the ENTIRE WORLD’S OIL MARKET you have a useless comparison. All you have explained is that California did an extremely poor job managing their electricity market relative to the rest of the world. Congrats on making such an obvious point.