Ashish -

Very interesting comment. Out of curiosity, do you work in finance?

A few observations:

I agree that further regulation of the US financial markets will cause companies to release their financial instruments in foreign, less regulated markets. That is a situation this country can ill-afford. The only saving grace for the US’s Balance of Payments is foreign capital flowing into our financial markets. Without that, this country could be in bad shape.

Just for my own clarification. In your suggestion to release 10 MM barrels of crude supplies, you mentioned a floor price. Do you mean a ceiling? Further, would the ultimate goals of the cooperative OECD release of their oil reserves be to counteract speculation and assuage the chokehold OPEC has upon global oil supply. That when either of the two aforementioned groups spike the price, the release would drive it back down? Correct me if I’m wrong in this conclusion.

Your measures to lower demand are quite interesting. My only problem is with your gas guzzler tax increase proposal. While I am all for this and feel it should have been done years ago, I fear the effect upon American car manufacturers. While these companies are making strides toward shifting their product mix toward fuel economy, their sales are still heavily reliant upon their work trucks. It would essentially be the death knoll for GM, Ford, and Chrysler.

This gas guzzler tax would also adversely affect those people who require such vehicles for their occupation, e.g., farmers, contractors, etc. The tax would increase their capital outlay for such vehicles. I understand that they will capitalize the expense, but it will have an effect on their cash account which a lot of them probably won’t be able to afford.

So, how would I improve your proposal? Initiate such a tax in phases. For example:
Yr 1: ^ $1K
Yr 2: ^ $2K
Yr 3: ^ $3K
Yr 4: ^ $4K

Also, you could have an inverse tax in relation to mileage…

This would allow American companies an opportunity to re-engineer such vehicles to mitigate the tax burden on their consumers without having too much of an impact upon their sales. Without such a “phasing process,” the drop in sales and necessary increase in R&D would be bad.

While a straightforward gas guzzler tax increase would aid in dropping oil prices, the ripple effect throughout the already weak US economy may be devestating.

Also, I have a question. Have you compiled or researched any studies as to the extent that demand for gasoline is correlated with the price at the pump? If so, I’m curious about the results.

Jim-

I’m not so sure you are correct. The CFTC is an independent commission that was delegated regulatory authority over commodities and futures trading. To promulgate further regulations in regard to such trading would not expand their authority. Rather, it would be utilizing the authority already bestowed unto them by Congress.

Regulations need not pass through Congress as legislation does. Such a requirement would negate the purpose of forming such a regulatory commission.

If Congress beleives the CFTC is overstepping its bounds, it may seek to enjoin such action. Further, if they feel the CFTC has gone too far or not far enough, they may enact legislation to repeal such regulations or fill the holes in the existing regulations.

Over the past 20 - 30 years the world has changed significantly.

OPEC has enlarged its’ “mandate”.

China and India have grown their respective economies to the point where they are now in direct competition with the US and Europe for oil.

Russia’s Gazprom is little more that a state monopoly which uses its’ oil as a new “nuclear” option when dealing with Europe and others. Venezuela has taken its’ cue from OPEC and Gazprom.

Add into this mix of demand, and, covert and overt criminal behavior, the element of “speculation”, then you have the makings for the next big world conflict.

Now the question remains, especially with the oil lobby so richly represented in this administration, who is in charge of regulation and investigation? True Congress may have created CFTC, but it is the President who appoints the “regulators”.

Phillip Bobbitt in his “Shield of Achilles” discusses fairly thoroughly much of what is happening now.

Suffice it to say, those speculators and oil lords who are raking in record profits will not be affected in the least by the “oil bubble” bursting. The other 98% of us will.

I am tired of people saying that drilling in ANWR and other US locations wouldn’t help in the short term. Oil trades on the FUTURES market which take into account what will happen in the FUTURE not the present. Put it into terms everyone can understand. Say our energy policy is a garden. If you don’t plant seeds today you will starve tomorrow. You also have to look past the next growing season and let some land lay fallow, rotate your crops, protect against erosion, etc. or the future is bleak. It isn’t just one thing. However, the most important point is you’ve got to eat today, or you will starve and the whole concept is moot.

Here is the link to Newt’s DRILL HERE, DRILL NOW petition.
http://www.americansolutions.com/actioncenter/petitions/?Guid=54ec6e43-75a8-445b-aa7b-346a1e096659

First, I am amused how the writers just say Soros is a legendary savvy investor. That’s it. Sounds like a nice guy. Why didn’t you say that he is a left-wing extremist who should be in jail but instead funds the Democrat parties 527’s? He has given $200 million to fight McCain.

Second, I would like to know what the price point is where blue collar Democrats say “enough is enough!” with the Democrat Party. I am not talking about the Urban elites. I am talking about the union workers who have to drive their old pick-up trucks a long ways to work everyday since they can’t afford to move or buy themselves a new Prius. What is your gas pricepoint where you call your Democrat legislators and tell them to quick cow-towing to the eco-fascists who control our goverment and tell them to start drilling and using coal and whatever they can to lower the price of gas. The price of a gallon of gas has risen $2 since the Democrats took over in Jan. of 2007.

Are we still paying more for bottled water than we are for gas at $4.00 a gallon?
What is congress doing besides pontificating about an energy problem which has been brewing for years?
The fed has devalued the dollar requiring many sources receiving dollars to seek higher prices to offset the devaluation.
Soros made his fortune and reputation betting against our dollar; It wasn’t hard to speculate how the us congress would outspend revenue, but just as the financial institutions have lost the bet on ever rising re prices at some point the energy speculators will take a bath.
By the way Exxons return on capital seldom exceeds 12-13%.

The best and long lasting way to reduce the price of oil is to increase the supply.
The real blame fall squarely on those in congress that voted down drilling in our country and building more refiners. And they also who blocked building more (safe) nuclear power plants and stopped wind power from being placed in their home states. Wherever there is a steady flow of wind there should be wind generators. Only bio-fuels that are made from none food commodities should be allowed. Corn based ethanol more energy to create it than the energy it delivers.

As I heard it said more lately. Drill now, Drill here, costs less.

Being independent of foreign oil should be our top security priority. Instead of saving our oil resources for when the rest of the worlds oil is all gone and then tapping into our own oil we should drill it now and while we do that we also should create the alternative power. Two different hydraulic engines have been produced and were put into vehicles and driven around town. One in the early 1950’s and the second in the late 1970’s. Both of which disappeared from view. On world speculate a conspiracy by big oil, or some other thief of technology development. Further tracking down of these two slightly different hydraulic engines is necessary. Not for putting into cars as much as building larger versions to run our power plants. Non neuclear and minimal consumption of non recyclable fuel.

Think about it.

Write your congress people and tell them to stop talking and just do it. Earn what we pay them and stop self dealing to themselves and be true patriots instead of pessimists.

I salute the St. Louis Post-Dispatch for striking up an editorial discussion worthy of the Pulitzer legacy. By that I mean it’s interesting, timely, and certainly news. Personally, I see no reason why stockpiling or hoarding oil without just cause should be tolerated by the people and their government representatives. Buying it for resale is fine, but only if the resale occurs within a reasonable timeframe. If not, let’s tax oil stockpiles with a special luxury tax, let’s say 10% of the value of stock not resold or refined within 6 months. Maybe that would give plenty of time for the market to operate freely, while creating a disincentive for holding on to lots of barrels of oil in hopes of excessive profit?

“Editorial Board”?

It’s hard to imagine traders manipulating the world price of oil.

What planet are YOU from?

It’s not hard to imagine at all.

Frankly, anyone who’s not familiar with ENRON and the way they conspired to MANIPULATE an entire states energy market has no business even speaking on the issue.

That has got to be one of the most intellectually dishonest things I’ve ever read.

Where there’s smoke there’s fire.

Genius.

Mac
http://www.brownsludge.com

Mr D,

Thanks for your comments.In answering your first question.I did work as an Energy Analyst for a Wall Street firm till July 2007 for a period of 4 years.My main responsibility was to Watch and Follow Demand-Supply Figures for Oil and make recommendations for Traders to place bets on the Price of Oil.In that capacity I got the chance to interact with lost of Traders,Oil drillers and the rank and file who actually run the Oil fields all over the world.But it was a massively stressful job (90-100 Hour weeks were routine)so I switched and I now work in IT.

For your second question,I meant a ceiling Price,Sorry for the confusion.Yes,it would work exactly as you suggested to counteract the influence of OPEC and Speculators on the market.

As for the Gas Guzzler Tax Idea,your recommendations definitely make sense in a rational world.However,$130/Barrel World is anything but Rational.Its when we need Drastic Action to curb Oil Prices and avoid any more inflationary pain not just for the Hurting American families but also for Millions of People Globally.That is why,I suggested a $10K Tax on each and every vehicle (with a mileage of less than 25mpg) made and sold in the last Five Years.You know ,one would think that with $4.50+/Gallon prices people in LA would change their Driving Patterns,But I don’t really see too many people here stop driving their Lamborghinis,Porsches,Corvettes,Explorers and Hummers.Its quite clear that this Gas Price has not hit them as hard as it should and as they are the major consumers of Gasoline,that’s why I suggested this Shock Therapy.Sure,GM and Chrysler would be forced to make Drastic Changes to their Production Lines,it would probably even affect the Economy by 0.2%-0.5%,but its a price which is worth paying.In GMs Case,they are already making the necessary changes to cope with higher prices.These measures would just help push them forwards more.As for American Farmers(except Hog Farmers),they are all already benefiting from the New Food Bill and Record Grain prices.They don’t need anymore help from us Taxpayers.

You know,when you say that “a straightforward gas guzzler tax increase would aid in dropping oil prices, the ripple effect throughout the already weak US economy may be devastating”.Its probably right,but it would cause only short term economic pain maybe three-six months at best.As against this long drawn torture that we Americans are currently being forced to face.What would actually happen is this,especially if the Tax Windfall (around $55 Billion minimum)is used to fund Social Security, Medicare, Medicaid and the Fiscal Deficit,it would actually bolster International Investor Confidence in the American Economy and push up the Value of the Dollar and redirect all this Hedge Fund ,Pension Fund money back into the Dollar.

Remember the fall in the Value of the Dollar is one of the major reasons why Hedge Funds and Investment Banks are pouring money into Oil and other commodities and as long as Oil continues to be priced in a falling Dollar it will not really affect the European and Chinese Consumers that much(whose currencies are rising against the US Dollar).

Yes,I have compiled Studies on Gasoline Consumption vs Gas Price,and I can share them with you. But I need to know what info exactly do you need.Currently the Average Gasoline Price in America is $4.04/Gallon.America consumed about 18.8 Mbpd in March 2008 of which
8.6 Mbpd is used for Transportation.Which has dropped from a peak of 21.6Mbpd(reached in August 2006).The Gas Guzzler Shock,coupled with 55Mph speed limit would bring Transport consumption to 5.5-6.0 Mbpd immediately.Which means you would get about 2Mbpd of Free Capacity instantly that would also force the Speculators/Index funds to flee the market and bring the Price of Crude to $80-90/Barrel levels.

America can easily absorb $3/Gallon at the pump,for every 10 cents rise above that value ,Consumption drops by roughly 200,000bpd.

But whatever,America or anyone else does Oil Price will not drop below $80/Barrel,even if everyone in America were to switch from their SUVs to riding Cycles overnight(not a bad idea considering the obesity problem we have in America!!!)That’s because we have already exhausted most of the Easily Available Oil and whats left is of the Heavy Crude /Tar Sands/Deep Offshore /Arctic Ocean/Bakken Crude variety.This is not Cheap to Extract and Transport to Consumers.So Oil Prices will stay in the $80-90 Barrel range for some time to come now.

As for bringing ANWR online.How much Oil can be extracted from ANWR? Remember the entire state of Alaska produced only 726,000bpd in March 2008.Lets say,for arguments sake, 250,000bpd at its peak which will last for 7-10 years or so.(most Drillers,Explorers on the Ground in Alaska will laugh at this estimate),but lets say this is the best case scenario.Lets also say Bush issues an Emergency Executive Order to Drill ANWR now.It will take a minimum of 14-18 months to get all the exploration equipment in place,Drill the most productive wells and even once that is done for the next two-three years after that do not expect more than 50000 bpd for the field which will be what it will average over the lifetime of the field.Jeez,that sounds like a lot but consider that it is less 0.3% of America’s Daily Consumption and one really wonders if its worth the Environmental and other related litigation,etc costs.

A better move to bring more Supply online would be to (if America does not put in place the Gas Guzzler Tax)fix the Security Situation (In particular Securing Oil Pipelines and Export Terminal Infrastructure)in Northern Iraq and Nigeria(Ogoni Delta).If America fixes the situation there,within six months we can get 550,000bpd of Oil(This Oil is proven and ready to be tapped immediately with all Production Infrastructure already in place) onto the Oil market and we also have it in our power to do so.

If Investors are really interested in making money,You should invest in Battery Manufacturers which are going to power all future Cars.One of the best bets is China Battery(CBAK on Nasdaq).You will profit immensely from this and related investments.

Anyways,its nice talking to and listening to all your insightful comments.

Thanks for the kind words.

regards

Ashish.