Hi All, As Thomas Friedman says below, the new Bush energy plan is "Get more addicted to oil." How is it possible that the Oil Gang thinks that the American people will buy this? Is it "the Bigger the Lie the Better it Works?" The novel "The Body Politic" by Lynne Cheny and Victor Gold is a window into the thinking of the current masters of the universe.
This hilarious book is based on Section 2 of the Twemty-fifth Amendment to the Constitution of the United States which says "Whenever there is a vacancy in the office of the Vice President, the President shall nominate a Vice President who shall take office upon confirmation by a majority vote of both Houses of Congress." Lynne Cheny probably knows as much about the vice presidency as anyone, and also probably shares the same attitudes as the current incumbent, her husband (my fingers wanted to type "Darth Vader"). The plot is based on the President's plan to sell the Vice Presidency to each of several Senators in return for their support of his nomination at the convention. They are all told secretly from each other that the Pres intends to dump his current VP, who messes up the plan by dying in the arms of a leading journalist. This untimely death, which could force the Pres to name one person prior to the convention, sets up a very funny situation comedy in which the VP's press secretary is given the task of hiding the body and keeping the VP's death secret. Ultimately, the dead VP, through the efforts of his press secretary, becomes the most popular politician in the country, ready to seize the nomination from the President. The real fall guy in this comedy is the American public, which Lynne Cheny portrays as infinitely gullible. I think she, as well as Darth, sincerely believe this. So it is not surprising that the Oll Gang thinks that the Bush - McCain energy plan to drill in ANWR and off the shores of California and Florida will be swallowed by the American public hook, line, and sinker -- such suckers can easily be convinced that the U. S. addiction to rock oil can only be treated by swilling more oil. Is it hopeless to remind our fellow citizens that we didn't leave the Stone Age because we ran out of stones? ------------------- http://www.nytimes.com/2008/06/22/opinion/22friedman.html?hp COLUMN from The New York Times, 6-22-08, By THOMAS L. FRIEDMAN [Toking on the oil pipe] ``Two years ago, President Bush declared that America was "addicted to oil," and, by gosh, he was going to do something about it. Well, now he has. Now we have the new Bush energy plan: "Get more addicted to oil." Actually, it's more sophisticated than that: Get Saudi Arabia, our chief oil pusher, to up our dosage for a little while and bring down the oil price just enough so the renewable energy alternatives can't totally take off. Then try to strong arm Congress into lifting the ban on drilling offshore and in the Arctic National Wildlife Refuge [ANWR]. It's as if our addict-in-chief is saying to us: "C'mon guys, you know you want a little more of the good stuff. One more hit, baby. Just one more toke on the ole oil pipe. I promise, next year, we'll all go straight. I'll even put a wind turbine on my presidential library. But for now, give me one more pop from that drill, please, baby. Just one more transfusion of that sweet offshore crude." It is hard for me to find the words to express what a massive, fraudulent, pathetic excuse for an energy policy this is. But it gets better. The president actually had the gall to set a deadline for this drug deal: "I know the Democratic leaders have opposed some of these policies in the past," Mr. Bush said. "Now that their opposition has helped drive gas prices to record levels, I ask them to reconsider their positions. If Congressional leaders leave for the Fourth of July recess without taking action, they will need to explain why $4-a-gallon gasoline is not enough incentive for them to act." This from a president who for six years resisted any pressure on Detroit to seriously improve mileage standards on its gas guzzlers; this from a president who's done nothing to encourage conservation; this from a president who has so neutered the Environmental Protection Agency that the head of the E.P.A. today seems to be in a witness-protection program. I bet there aren't 12 readers of this newspaper who could tell you his name or identify him in a police lineup. But, most of all, this deadline is from a president who hasn't lifted a finger to broker passage of legislation that has been stuck in Congress for a year, which could actually impact America's energy profile right now, unlike offshore oilcw -- that would take years to flow -- and create good tech jobs to boot. That bill is H.R. 6049, "The Renewable Energy and Job Creation Act of 2008," which extends for another eight years the investment tax credit for installing solar energy and extends for one year the production tax credit for producing wind power and for three years the credits for geothermal, wave energy and other renewables. These critical tax credits for renewables are set to expire at the end of this fiscal year and, if they do, it will mean thousands of jobs lost and billions of dollars of investments not made. "Already clean energy projects in the U.S. are being put on hold," said Rhone Resch, president of the Solar Energy Industries Association. People forget, wind and solar power are here, they work, they can go on your roof tomorrow. What they need now is a big U.S. market where lots of manufacturers have an incentive to install solar panels and wind turbines, because the more they do, the more these technologies would move down the learning curve, become cheaper and be able to compete directly with coal, oil and nuclear, without subsidies. That seems to be exactly what the Republican Party is trying to block, since the Senate Republicans, sorry to say, with the help of John McCain, have now managed to defeat the renewal of these tax credits six different times ... Our future is not in oil, and a real president wouldn't be hectoring Congress about offshore drilling today. He'd be telling the country a much larger truth: "Oil is poisoning our climate and our geopolitics ... And we're also going to go on a crash program to dramatically increase energy efficiency, to drive conservation to a whole new level and to build more nuclear power. And I want every Democrat and every Republican to join me in this endeavor." That's what a real president would do. He'd give us a big strategic plan to end our addiction to oil and build a bipartisan coalition to deliver it. He certainly wouldn't be using his last days in office to threaten Congressional Democrats that if they don't approve offshore drilling by the Fourth of July recess, they will be blamed for $4-a-gallon gas. That is so lame. That is an energy policy so unworthy of our Independence Day. '' ------------------------- http://www.pbs.org/newshour/bb/business/jan-june08/oilprices_06-24.html TRANSCRIPT from The News Hour, 6-24-08 ``Concerns over high oil prices continue as lawmakers struggle to find production solutions. Two energy consultants discuss the factors behind the ongoing price jumps and analyze the trajectory of fuel costs for the near future. RAY SUAREZ: Oil sells for over $135 a barrel, more than double what it was a year ago. Some on Capitol Hill are asking whether market speculators after a fast buck are partly to blame for record high prices ... This past weekend, Saudi Arabia, the world's largest oil exporter, convened an emergency meeting on the issue of supply. Saudi King Abdullah addressed the assembled delegates. KING ABDULLAH, Saudi Arabia (through translator): There are several factors behind the unjustified swift rise in oil prices. And they are: speculators who play the market out of selfish interests ... RAY SUAREZ: And we look at what drives higher oil prices with energy analysts who report on this field in their own newsletters. Peter Beutel is president of Cameron Hanover, an energy risk management firm in New Canaan, Connecticut. And Stephen Schork is the president of The Schork Group. He also consults for major oil firms, OPEC member countries, and hedge funds. So, gentlemen, if I ask you first, Peter Beutel, to give me a quick tour of petroleum economics, why is the price of oil now so high? PETER BEUTEL, President, Cameron Hanover: Well, there are lots and lots of factors. I would have to say that, since August or September [2007], probably the biggest single factor was the fact that the Fed tipped its hand and let everybody know that it was going to cut interest rates. That put selling pressure on the U.S. dollar. And since commodities are denominated in dollars, that has made all commodities cheaper for Asians and Europeans. And it's meant that Americans have had to bid the price higher ... We have had lots of problems in Nigeria, ongoing now for about a year. We've had lower refinery runs, a curious little thing. Gasoline prices are not as strong against crude oil as they were, say, a year or two ago. And that's meant that independent refineries or people without oil in the ground have not been able to run as much. So it's a combination of factors, but if you ask me, who is the biggest culprit in the last 12 months? Curiously enough, it's been the Federal Reserve. RAY SUAREZ: Stephen Schork, first, do you agree with that analysis? And how would you explain a doubling over the last year? STEPHEN SCHORK, Energy Analyst: Absolutely. I am on board with Peter with the Federal Reserve's decision in August [2007]. We have to remember that, in January of 2007, crude oil was below $50. Now, we moved from $49.90 back in January to on the cusp of $80 by the end of July 2007. Now, if you look at the net length held by large traders, quote, unquote, your "speculators," your large hedge funds, they were holding record length at the end of July. Well, what happened last August? You had the credit meltdown. And, therefore, you had all these hedge funds that also had large positions in the commodity markets who also had large positions with exposure to the credit meltdown. Therefore, when those markets began to get hit and the margins started racking up, these hedge funds had to sell. We know they sold because, at the end of July, like I've just said, they were holding record length, the net obligation to own 127 million barrels of oil at some point in the future. Four weeks later, at the end of August, these funds were holding only 21 million barrel obligations. They sold the equivalent of 100 million barrels inside of four weeks. Therefore, that drove the price down of oil from about $80 to back below $70. Now, in September [2007], as Peter just said, the Fed tipped its hand. They were going to cut interest rates. That meant a cheaper dollar. So these hedge funds that liquidated all that selling back in August started piling back into the market back in September. And prices have doubled since then. RAY SUAREZ: Well, Stephen Schork, you used the word "speculators." That was a word in great use on Capitol Hill this week. Who is it that we're talking about? Who is it that trades notions about what oil is going to cost three months, six months a year down the road? STEPHEN SCHORK: Well, the speculator is a very broad term. They've been in the futures markets. Without the speculator, you would not have futures markets. You would not have someone telling you about the disconnect between supply and demand. And this is what the speculator is telling us. So this speculator is, hey, it's Goldman Sachs, it's Morgan Stanley, it's the 97 hedge funds that have been created over the last year that focus specifically on hedge funds. It is also the doctor, the lawyer that has the disposable income that's plowing money into the index funds. And this is because, first and foremost, great returns ... PETER BEUTEL: ... What has happened now that is different than, say, what had been going on for 100 years is that now we have some traders that really don't know what they're doing. A lot of them are union pension funds, college foundations, people we normally think of as good guys. They have been buying and holding commodities, unlike most speculators, who buy, then sell, then sell, then buy, who are equally as comfortable selling things they don't have as they are buying things they don't want. These guys, the new investors, have been buying and holding. And this has created a different signal. The market interprets it as long-term end users. These people are really speculators, only I'd be willing to bet many of them don't even know it. And I'd be willing to bet that, if you went and told some of these people, one, that they're helping to push the price higher and, two, what incredible risks that they're taking on that they'd be mortified that they were actually doing this. RAY SUAREZ: Stephen Schork, you've both cited dollar weakness and supply and demand as factors, along with speculation. This week, both the House and Senate heard testimony that there was a sizable portion sitting on top of that $135 price of oil -- the estimates went anywhere from $30 to $65 a barrel -- that was pumped into there strictly by speculation. Is it possible to separate out that part of the price that's being created by the way the market mechanism is working right now? STEPHEN SCHORK: The only way you can really do it is look at the current price path. Now, oil prices have from moved from the start of this bull run in the fourth quarter of 2001 up until about the third quarter of 2007. Prices moved from $20 to ... $80, a $60 move. [From 9-07 through 6-08] We have moved another $60 above and beyond that. Now, a commodity is generally ... grows at a discounted rate of growth, plus a small convenience yield for the right of holding that. If you based on these formulas and the current price path that we have seen ... the estimates are that oil right now [should be] about $95 a barrel. This is essentially why all the major Wall Street houses back in December, when they were given us their 2008 forecast, all their average ranges ranged between $85 and $95. So anything above and beyond that, if you want to call it a balloon, you want to call it speculation, you certainly could lop that off and said what is above and beyond now what this, quote, "fair value" is essentially this speculative bubble. RAY SUAREZ: So you're estimating about a third of the entire price, quickly, before we go? STEPHEN SCHORK: Oh, absolutely. This market has been moving in a linear function, but in the last two months a parabola has been drawn into this price path and prices have gone virtually straight up. There is no doubt what we are seeing now is long-term bullish prognostications; 2, 5, 10 years down the road are being compressed into the prompt market. This has created a panic. People are moving in this market. And it's -- hey, this is nothing unlike what we saw in the dot-com market in the late 1990s. When this bubble bursts -- and it will burst -- we're going to go right back to where we started from, below fair market value, below $95, back towards $70, when this all began last August. RAY SUAREZ: Stephen Schork and Peter Beutel, gentlemen, thank you both. STEPHEN SCHORK: Thank you. PETER BEUTEL: Thank you. ------------------------- http://online.wsj.com/article/SB121418815138595945.html?mod=rss_Politics_And_Policy&apl=y&r=618536 NEWS ARTICLE from WSJ Digital Network, 6-24-08, By Stephen Power and Ian Talley ``Panel Cites Surge in Speculative Oil Trades WASHINGTON -- Speculative traders' interest in crude oil has grown to the point that they now account for roughly 70% of all trading in West Texas Intermediate crude on the New York Mercantile Exchange, compared with 37% in 2000, according to an investigation by a congressional subcommittee that forms part of an escalating political assault on Wall Street's role in the run-up in oil prices ...''
