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Emergency Petition to Congress:  Lift the Offshore Drilling Ban Before Congress' Summer Recess

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CFTC Report on High Oil Prices - "Speculation My A$$"Posted by Nate Hagens at The Oil Drum: (click images to enlarge)

With a pending Senate vote on the "Stop Excessive Energy Speculation Act", it seems that we (not the TOD 'we', but the collective society 'we') continue the ongoing witch hunt to pinpoint any 'explanation' for our high oil and gas prices that is not related to finite geologic flow limits or Malthusian themes (i.e. benign). Greedy oil companies, dastardly OPEC plots, and off-limits drilling of the Arctic National Wildlife Reserve and Outer Continental Shelf are among the reasons oft floated in the conventional media for why oil has risen in price over 10 fold in the last decade. Yesterday, a report from a credible institution was released detailing why at least one of the high oil price bogeymen, 'the speculators', are not to blame. In this report, the Commodity Futures Trading Commission (CFTC), threw cold water on the recent rhetoric in Congressional testimonies and television commentary that high oil prices are caused by investment speculators.

Excerpt from Figure 1 from CFTC Interim Report on Crude Oil - Click to Enlarge

This is a long and detailed report, with many graphs and data supportive of a)the tightness in global supply and demand for oil and b)the lack of correlation between speculative positioning and price increase. It is worth a complete read for those interested in this issue (which has seemed front and center in many CNBC debates on oil speculation). Below are some excerpts of the main findings of the report (italics/bold added).

From the Executive Summary:

The Task Force’s preliminary assessment is that current oil prices and the increase in oil prices between January 2003 and June 2008 are largely due to fundamental supply and demand factors. During this same period, activity on the crude oil futures market – as measured by the number of contracts outstanding, trading activity, and the number of traders – has increased significantly. While these increases broadly coincided with the run-up in crude oil prices, the Task Force’s preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices.

Figure 2 - Oil Intensity and Use by Country Click to Enlarge

The world economy has expanded at its fastest pace in decades, and that strong growth has translated into substantial increases in the demand for oil, particularly from emerging market countries. On the supply side, the production of oil has responded sluggishly, compounded by production shortfalls associated with geopolitical unrest in countries with large oil reserves. As it is very difficult to rely on substitutes for oil in the short term, very large price increases have occurred as the market balances supply and demand.

If a group of market participants has systematically driven prices, detailed daily position data should show that that group’s position changes preceded price changes. The Task Force’s preliminary analysis, based on the evidence available to date, suggests that changes in futures market participation by speculators have not systematically preceded price changes. On the contrary, most speculative traders typically alter their positions following price changes, suggesting that they are responding to new information – just as one would expect in an efficiently operating market.  (continue reading at The Oil Drum)

The Ball in in Congress Court now, let's see if they do the right thing for America.

The president finally stepped up to the plate and removed the second-to-the-last obstacle in the way of allowing oil companies to recover the oil from the massive fields that line our shores and elsewhere. The last obstacle is the political will of the Democrats in Congress. They seem hell-bent on obstructing the development of our natural gas and oil resources to reduce our dependency on foreign oil. They insist that conservation and the development of alternate forms of energy is the only way to be energy-independent. That’s a noble goal, but as usual, liberals are incredibly short-sighted.  [snip]this country must continue to use oil to fuel our vehicles, allow our economy to expand and maintain our standard of living. Naïve Democrats never consider that there must be a transition period of when America is weaned off oil while these new technologies take root, rather than being cut off like an addict from his heroin supply.  [snip]

 

Wind power would be great, if wind blew all the time, and windmills didn’t kill endangered birds and weren’t such an eyesore. Just ask Sen. Ted Kennedy.

 

Solar energy sounds good too, except that the sun doesn’t shine 24 hours a day and solar panels don’t look good on an English Tudor style house. Not to mention that they’re expensive.

 

Hydrogen is promising, but with few refueling stations, these cars are limited as to where they can operate.

 

Battery operated vehicles work well - if you can afford the higher price and the electricity costs, and don’t mind the limited miles you can drive in between charges.  (continue reading)

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Comments

[Mark A. Sadowski]

All voters to to get informed on this issue and I found this aricle to be concise and to the point:

http://courtney.house.gov/UploadedFiles/Natural%20Resources%20energy%20report.pdf

Drill Now is transparent political pandering that will accomplish little except to destroy our coastlines. But if the Republicans really want it, bring it on. Where will the drilling take place? Mostly in red states. I say drill them until they can't take it anymore. Line their coasts with rigs as far as the eye can see. Gas will still be $4 a gallon (or more). But they can have the insane satisfaction of losing yet another election while completely destroying their own beaches. Maybe then they'll wake up. But it will be too late.

[David]

There you go, using nonsense phrases like, "Congress Doing The Right Thing"

Mark Twain was truer than true when he called congress America's only native class of criminals.

[Aurora]

It's hard to reason with a congress that cares little about the prosperity of the American people and everything about looking ideologically-correct to its brainwashed constituency.

[Debbie]

Findalis:

I agree completely, we need to do EVERYTHING that can help, and we need NOT rule out anything.

Debbie

[Findalis]

What we need is a 2-step approach. Drilling at home to end our dependence on foreign (Arab) oil and research into new energies.

Doing both works out best for the US in the long term. Doing only the first will hurt us in the long term, and doing what Obama wants will hurt us now.