Exactly how much are oil speculators actually driving up the price of oil?

[DesertPirate]

Does this make anyone else suspicious of a Bush/Oil Company boondoggle?

Actually, no it doesn't. It does make me wonder about the Cartel that controls 80% of all oil production and sales. Those people don't like any westerner.

 

[Handprints]

For financial professionals, there are two ways to speculate directly on oil prices. The first is the same as you a I betting on a baseball game (long v short futures in the oil market): money may change hands but it doesn't affect the outcome of the game - the score. If the oil spot price is the dog, futures are the tail: which one does the wagging? Our bet depends on the equivalent of the spot - the score - but doesn't change the spot.

The other way to speculate on oil prices is harder: it's the equivalent of buying hard commodities like gold or platinum. You buy low, hold on, then sell high. Unfortunately for would-be oil moguls, storing oil (unless you're a well-owner) is a serious bitch. It is absurdly expensive to leave volatile, hard-to-insure oil sitting on a tanker/in a bunker, which is why oil storage is almost exclusively a government operation: everyone else who takes delivery of oil puts it straight to work. You can't buy an "oil ownership certificate" or equivalent, the way you can with hard commodities, to be redeemed when you like. The stuff is more or less perishable, so the best you do - as with pork bellies, coffee, etc - is buy a long-dated future, which takes us back to the baseball game. There are, on rare(ish) occasions, some money to be made speculating by storing: you can read about contango and backwardation elsewhere. It rarely produces an opportunity which can deliver more than a handful of basis points above storage costs, and those opportunities rarely last more than five days or involve more than 0.00001 of spot oil volume.

There are much better ways to speculate indirectly on oil prices: the easiest one for the past two years has been to bet that the dollar will fall. Every company which has clear forward oil needs has been approached daily - if not hourly - for the past 18 months by people selling this hedge strategy. Clearly this has been a very profitable hedge: not terribly surprising given the US trade deficit, current account deficit, war spending and the fact that said war is being waged over an oilfield...

What makes that hedge even more attractive is the fact that OPEC is not increasing supply. If you like, that's the only really speculative move that matters. They bet that oil prices were relatively inelastic and that stretching out the life of their reserves was a better source of future funds than pumping it out now. Right on both counts, in my view. Increasing oil costs, in dollar terms, amplify the scale dollar's fall because the US is a net oil importer and can be expected to have worse trade and current account deficits as oil prices rise...

That's it for speculative effects, folks: a badly-managed currency (not helped by the absence of anything resembling an energy policy) and OPEC's decision to prolong their raison d'etre.

Hope that's of interest,
H

 

[rgraham666]

It is. Thanks.

I'm always glad to hear your take on the matter. It's, as far as I can tell, free of cant and ideology. Something often sadly lacking these days.

 

[trysail]

Election Season + $125 Petroleum = Wacky Politicians

The confluence of record oil prices and a presidential election year is proving to be an irresistible combination for Congress and the candidates, all of whom happen to be members of that esteemed body.

Two of the three U.S. presidential contenders are promoting the idea of a federal gas-tax holiday this summer. Two of the three (a different duo) want to enact a windfall profits tax on oil companies, a bad idea whose time has apparently come (again).

One of the three wants both. That would be Hillary Clinton, Democratic senator from New York.

Populist millionaire Clinton (millionaires make the best populists) has lashed out at the oil companies, accusing them of market manipulation and collusion. She's railed against speculators, those evil traders who buy when everyone else is selling and sell when the crowd is buying.

She labeled the Organization of Petroleum Exporting Countries a monopoly and threatened to file a complaint with the World Trade Organization. (Her Democratic opponent, Illinois Senator Barack Obama, inconveniently pointed out that Clinton hasn't signed on as a sponsor to a bill that would make oil- producing and exporting cartels illegal.)

Never mind that the Federal Trade Commission has never found evidence of price-gouging when Congress has asked the FTC to investigate oil prices. Or that oil companies aren't more profitable than other manufacturing industries, except at times when the price of the product they sell is soaring. Or that taxing businesses' excess profits -- How much is excess? -- will lead to a decline in oil exploration and development. Or that taxing business usually means taxing consumers.

``The individuals who bear the tax in the short run will be the shareholders of the oil companies at the time of the imposition of the tax,'' writes Gerald Prante, a senior economist at the Tax Foundation, a non-partisan educational organization in Washington. ``That's because the value of the individuals' stock holdings, which reflect expected future net profits, will fall as soon as the new tax is announced.''

Why oil companies are such a tempting tax target is a mystery. Most of the time the government makes out better than the shareholders, according to Tax Foundation president Scott Hodge.

Based on the data oil companies are required to file with the government's Energy Information Agency, from 1981 through 2006 cumulative oil industry profits totaled $1.12 trillion compared with cumulative taxes of $1.65 trillion, according to Hodge. That doesn't include foreign income taxes, which amounted to $518.9 billion over the 25-year period.

``Total taxes from all oil industry sources exceeded the combined profits of all companies in every year but the last three,'' Hodge said.

``It's a boom/bust industry,'' says Jerry Taylor, senior fellow at the libertarian Cato Institute in Washington. ``Prices are more volatile, returns are more volatile.''

Certainly the history of windfall profits taxes on oil doesn't justify Congress's laser-like focus. In November 2005, when Congress held a show trial to query Big Oil on the nature of Big Profits, Hodge recycled a Congressional Research Service report that found the 1980s windfall profits tax, which was really an excise tax, depressed domestic production and increased reliance on imports.

If the stated goal of government policy is energy conservation, energy independence and the development of alternative sources of energy, lowering the price of gasoline -- waiving the 18.4 cent-a-gallon federal excise tax for even three months -- is counterproductive. The demand curve is downward sloping, which is a fancy way of saying that at a lower price consumers demand more.

The good news is, the public isn't buying into the idea of a holiday at the pump, even though it's paying a record average $3.61 a gallon. A recent New York Times/CBS poll found that 49 percent of those surveyed said the gas-tax holiday was a bad idea, compared with 45 percent who said it was a good one. Seventy percent said the proposed holiday was intended to improve the lot of politicians, not of ordinary Americans.

Economists are against the tax holiday, arguing that producers can't supply more gasoline in the short run, which means consumers will pay the same price as before, with producers pocketing the tax saving.

If that's the case -- if oil supply is inelastic -- how do they explain the fact that Hurricanes Katrina and Rita knocked out about one-third of U.S. refinery capacity in 2005 yet produced only scattered shortages in the affected areas?

Forget for a moment about the elasticity of oil supply and focus on the precedent such tomfoolery would set. Every time the price of a key commodity goes up, the government gives the consumer a break and slaps a tax on the producer.

``We don't want a one-way form of capitalism where it's OK to lose money or make average profits but when you make above- average returns, the hammer of government comes down on you,'' Taylor says. ``That kind of system drives investment out of the sector and starves the economy of what you want most.''

What about the argument that oil companies didn't do anything to deserve such huge profits, that they're getting paid a bundle for doing the same old thing?

Taylor points to the ``windfall profits'' earned by builders, speculators and homeowners during the housing boom, with much of the gain exempt from taxes. Now that housing is in the soup, the government is here to help.

Congress clearly has different standards for different industries. Big Bad Oil remains more an American Nightmare than an American Dream.

 

[Stella_Omega]

I have some vague thoughts about the anger of dependency-- how, when huge groups of people have no choice but to rely on one substance, through a small number of suppliers, and that substance becomes scarce-- their reaction is to blame and attack those suppliers.

 

[trysail]

A new generation of nuclear power plants is on the drawing boards in the U.S., but the projected cost is causing some sticker shock: $5 billion to $12 billion a plant, double to quadruple earlier rough estimates.


NRG Energy Inc. hopes to add two units to the South Texas Project nuclear site.
Nuclear power is regaining favor as an alternative to other sources of power generation, such as coal-fired plants, which have fallen out of favor because they are major polluters. But the high cost could lead to sharply higher electricity bills for consumers and inevitably reignite debate about the nuclear industry's suitability to meet growing energy needs.

Nuclear plants haven't been built in meaningful numbers in the U.S. since the 1980s. Part of the cost escalation is bad luck. Plants are being proposed in a period of skyrocketing costs for commodities such as cement, steel and copper; amid a growing shortage of skilled labor; and against the backdrop of a shrunken supplier network for the industry.

The price escalation is sobering because the industry and regulators have worked hard to make development more efficient, in hopes of eliminating problems that in the past produced harrowing cost overruns. The Nuclear Regulatory Commission, for example, has created a streamlined licensing process to make timelier, more comprehensive decisions about proposals. Nuclear vendors have developed standardized designs for plants to reduce construction and operating costs. And utility executives, with years of operating experience behind them, are more astute buyers.

• The News: Estimated costs to build the next generation of nuclear power plants have soared to $5 billion to $12 billion a plant.
• The Debate: Questions are emerging over the affordability of nuclear power, despite its popularity as an alternative to polluting coal-fired plants.
• What to Watch: If Congress taxes greenhouse-gas emissions, nuclear plants, which aren't emitters, will become more attractive. But if coal and natural-gas prices decline, nuclear-plant economics will get worse. Now, 104 nuclear reactors are operating in the U.S. Most are highly profitable but that was not the case until fairly recently. For the 75 units built between 1966 and 1986, the average cost was $3 billion or triple early estimates, according to the Congressional Budget Office. Many plants operate profitably now because they were sold to current operators for less than their actual cost.

The latest projections follow months of tough negotiations between utility companies and key suppliers, and suggest efforts to control costs are proving elusive. Estimates released in recent weeks by experienced nuclear operators -- NRG Energy Inc., Progress Energy Inc., Exelon Corp., Southern Co. and FPL Group Inc. -- "have blown by our highest estimate" of costs computed just eight months ago, said Jim Hempstead, a senior credit officer at Moody's Investors Service credit-rating agency in New York.

On May 7, Georgia Power Co., a unit of Atlanta-based Southern, said it expects to spend $6.4 billion for a 45.7% interest in two new reactors proposed for the Vogtle nuclear plant site near Augusta, Ga. Utility officials declined to disclose total costs. A typical Georgia Power household could expect to see its power bill go up by $144 annually to pay for the plants after 2018, the utility said.

Bill Edge, spokesman for the Georgia Public Service Commission, said Georgia "will look at what's best for ratepayers" and could pull support if costs balloon to frightening heights. The existing Vogtle plant, put into service in the late 1980s, cost more than 10 times its original estimate, roughly $4.5 billion for each of two reactors.

FPL Group, Juno Beach, Fla., estimates it will cost $6 billion to $9 billion to build each of two reactors at its Turkey Point nuclear site in southeast Florida. It has picked a reactor design by Westinghouse Electric Co., a unit of Toshiba Corp., after concluding it could cost as much as $12 billion to build plants with reactors designed by General Electric Co. The joint venture GE Hitachi Nuclear Energy said it hasn't seen FPL's calculations but is confident its units "are cost-competitive compared with other nuclear designs."

Exelon, the nation's biggest nuclear operator, is considering building two reactors on an undeveloped site in Texas, and said the cost could be $5 billion to $6.5 billion each. The plants would be operated as "merchant" plants and thus would not have utility customers on the hook to pay for them, as is the case in both Florida and Georgia. Instead, they would have to cover expenses through wholesale power sales.

Several things could derail new development plans. Excessive cost is one. A second is the development of rival technologies that could again make nuclear plants look like white elephants. A drop in prices for coal and natural gas, now very expensive, also could make nuclear plants less attractive. On the other hand, if Congress decides to tax greenhouse-gas emissions, that could make electricity from nuclear plants more attractive by raising costs for generators that burn fossil fuels. Nuclear plants wouldn't have to pay the charges because they aren't emitters.

Some states are clearing a path for nuclear-power development, even before costs are fully known. They are inspired by a growing fear of climate change. "The overwhelming feeling in Florida is that nuclear power is popular and that's why it's going to go ahead," said J.R. Kelly, head of the Office of Public Counsel in Tallahassee, which represents consumers. "Our main concern is the tremendous cost."

In Florida, state officials are allowing utilities to collect money from customers to cover development and construction costs. In the past, regulators typically required utilities to bear the costs until plants were finished.

Many utilities said they are watching with interest. Ralph Izzo, chief executive of Public Service Enterprise Group Inc. in New Jersey, said his company may not be big enough to build a nuclear plant, even though it is a nuclear operator. "We're concerned by the rise in construction costs," he said.

 

[JagFarlane]

As a note: One of the nuclear operators in NJ near Toms River plans to build another reactor on site as well.

As for lack of skilled workers...hmmm -shakes head- There are plenty of em, homegrown American men and women... most of em still wearing blue coveralls at the moment

 

[Le Jacquelope]

I have some vague thoughts about the anger of dependency-- how, when huge groups of people have no choice but to rely on one substance, through a small number of suppliers, and that substance becomes scarce-- their reaction is to blame and attack those suppliers.

Especially when said suppliers cut production when they don't have to, in order to milk more profits out of every barrel.

This happened with energy in California.

 

[trysail]

Especially when said suppliers cut production when they don't have to, in order to milk more profits out of every barrel.

This happened with energy in California.

Horseshit. Y'all have billions and billions of barrels of KNOWN reserves of petroleum lying right off your coast. It's just sitting there.

The ignorance and hypocrisy of California is appalling. It is absolutely inevitable that the lights will go off in California— and you know what California will do? It'll blame everybody but itself.

California won't allow the production of KNOWN petroleum reserves that just sit off its coast gathering dust; California won't allow the construction of coal-fired generating capacity; California won't permit the construction of LNG importing terminals; California won't allow construction of nuclear generating facilities.

California is an accident waiting to happen— and when it happens, remember:

YOU DID IT TO YOURSELVES!​

 

[Le Jacquelope]

For financial professionals, there are two ways to speculate directly on oil prices. The first is the same as you a I betting on a baseball game (long v short futures in the oil market): money may change hands but it doesn't affect the outcome of the game - the score. If the oil spot price is the dog, futures are the tail: which one does the wagging? Our bet depends on the equivalent of the spot - the score - but doesn't change the spot.

The other way to speculate on oil prices is harder: it's the equivalent of buying hard commodities like gold or platinum. You buy low, hold on, then sell high. Unfortunately for would-be oil moguls, storing oil (unless you're a well-owner) is a serious bitch. It is absurdly expensive to leave volatile, hard-to-insure oil sitting on a tanker/in a bunker, which is why oil storage is almost exclusively a government operation: everyone else who takes delivery of oil puts it straight to work. You can't buy an "oil ownership certificate" or equivalent, the way you can with hard commodities, to be redeemed when you like. The stuff is more or less perishable, so the best you do - as with pork bellies, coffee, etc - is buy a long-dated future, which takes us back to the baseball game. There are, on rare(ish) occasions, some money to be made speculating by storing: you can read about contango and backwardation elsewhere. It rarely produces an opportunity which can deliver more than a handful of basis points above storage costs, and those opportunities rarely last more than five days or involve more than 0.00001 of spot oil volume.

There are much better ways to speculate indirectly on oil prices: the easiest one for the past two years has been to bet that the dollar will fall. Every company which has clear forward oil needs has been approached daily - if not hourly - for the past 18 months by people selling this hedge strategy. Clearly this has been a very profitable hedge: not terribly surprising given the US trade deficit, current account deficit, war spending and the fact that said war is being waged over an oilfield...

What makes that hedge even more attractive is the fact that OPEC is not increasing supply. If you like, that's the only really speculative move that matters. They bet that oil prices were relatively inelastic and that stretching out the life of their reserves was a better source of future funds than pumping it out now. Right on both counts, in my view. Increasing oil costs, in dollar terms, amplify the scale dollar's fall because the US is a net oil importer and can be expected to have worse trade and current account deficits as oil prices rise...

That's it for speculative effects, folks: a badly-managed currency (not helped by the absence of anything resembling an energy policy) and OPEC's decision to prolong their raison d'etre.

Hope that's of interest,
H

Okay, let me get this right.

If I want to go out today and contact an investment bank and roll some cash into oil futures, I can't do that? Really?

 

[Le Jacquelope]

Horseshit. Y'all have billions and billions of barrels of KNOWN reserves of petroleum lying right off your coast. It's just sitting there.

The ignorance and hypocrisy of California is appalling. It is absolutely inevitable that the lights will go off in California— and you know what California will do? It'll blame everybody but itself.

California won't allow the production of KNOWN petroleum reserves that just sit off its coast gathering dust; California won't allow the construction of coal-fired generating capacity; California won't permit the construction of LNG importing terminals; California won't allow construction of nuclear generating facilities.

California is an accident waiting to happen— and when it happens, remember:

YOU DID IT TO YOURSELVES!​

Wrong. Whether or not we refuse to exploit new sources of oil, that does not logically mean that oil companies will not shut down existing refineries processing existing sources of oil, to raise oil prices.

To give a historic example, existing power plants in California were recently shut down to raise the price of electricity - this was proven in a court of law.

 

[Handprints]

Okay, let me get this right.

If I want to go out today and contact an investment bank and roll some cash into oil futures, I can't do that? Really?

Ok I'll try another metaphor. Let's say you and I each want to be on what the average temperature of every major city in New England is going to be at noon on September 4th, 2008. That's equivalent to us taking a three month futures bet on the oil price. We've both done a ton of research into weather patterns, historic trends, local anomalies and the like and our research has so impressed a pair of merchant banks that we've persuaded them to give us USD500m each to make an even-money bet with. For the sake of argument, let's say the research tells us that the average temp should be around 78 degrees. Let's say I want to bet it will be lower than that and you're betting higher.

Clearly, the fact that we're taking this bet will not affect the average temperature on September 4th.

So let's flash forward to Aug 28th. There's a heat wave going on and New England is roasting like a lobster. Your phone is now ringing off the hook from speculators who want to get in on your bet: they're offering to pay USD100m for USD50m of your action. I'm working my phones like a madman, trying to find someone who believes a freak cold front from Quebec might turn up and head south. Speculators are offering me USD100K for every USD5m of my action. The market prices of our futures positions have swung wildly in your favour but this flurry of commercial activity has not, in itself changed what the temperature will be on Sept 4th - it will be what it will be.

Another set of phones is ringing off the hook: the merchant banks'. Everybody's heard of our super-cool bet and now wants the bankers to start matching them up with bettors too. Only now, because of the heatwave, you can't get an even-odds bet at 78 degrees: 95% of the market thinks it will be higher than that. So the neutral strike in the futures market - the level at which half the market thinks the temperature will be higher and half lower - has risen to 84 degrees. Again, our expectations of where the temperature will be don't affect the sun, the atmosphere, the pollutant count, the jet stream or any of the other determinants of actual temperature on September 4th, just the neutral strike price of a future.

Finally, at 11:55am on Sept 4th, it's a balmy 82 degrees across New England. Every USD1m of your action can now be sold for about USD1.995m because your bet is a lock. I can't give mine away. The merchant bankers are setting a neutral (also called fair-value) strike price of 82.005 degrees for last-minute bettors. A flash of last-minute cloud over Boston and Providence means the average temperature in New England at 12:00 on Sept 4 comes in at 81.972 degrees. You win. Don't spend it all in one place.

Nothing we did affected the spot price. The temperature was going to be 81.972 whether we took a futures bet or not. More to the point, over the couse of the last few hours and minutes, the neutral strike for future moved from 78, when we took the bet, up to 84, when the market got busy, then dropped to within 1% of the spot in the final moments before the strike date.

This is how futures work: the neutral strike prices is highly volatile while uncertainty about the final spot price exists (the actual temp observed at the actual moment the bet finishes), then converges sharply to the spot when time eliminates the uncertainty. If you can explain to me how our bet changed the weather, you (ok, more likely me, since I'll just steal your idea and run with it) will win the Nobel Prize for economics and change our understanding of how markets work forever.

Best of luck with that.

H

 

[S-Des]

This is how futures work: the neutral strike prices is highly volatile while uncertainty about the final spot price exists (the actual temp observed at the actual moment the bet finishes), then converges sharply to the spot when time eliminates the uncertainty. If you can explain to me how our bet changed the weather, you (ok, more likely me, since I'll just steal your idea and run with it) will win the Nobel Prize for economics and change our understanding of how markets work forever.

The single best explanations on how the futures market works I've ever read....thank you. Now if I can just get another 20 or 30 of these examples, follow the market for a year or two to watch the daily variations, and 6 months of small investments of my own, I think I'll almost understand it.

 

[Le Jacquelope]

Ok I'll try another metaphor. Let's say you and I each want to be on what the average temperature of every major city in New England is going to be at noon on September 4th, 2008. That's equivalent to us taking a three month futures bet on the oil price. We've both done a ton of research into weather patterns, historic trends, local anomalies and the like and our research has so impressed a pair of merchant banks that we've persuaded them to give us USD500m each to make an even-money bet with. For the sake of argument, let's say the research tells us that the average temp should be around 78 degrees. Let's say I want to bet it will be lower than that and you're betting higher.

Clearly, the fact that we're taking this bet will not affect the average temperature on September 4th.

So let's flash forward to Aug 28th. There's a heat wave going on and New England is roasting like a lobster. Your phone is now ringing off the hook from speculators who want to get in on your bet: they're offering to pay USD100m for USD50m of your action. I'm working my phones like a madman, trying to find someone who believes a freak cold front from Quebec might turn up and head south. Speculators are offering me USD100K for every USD5m of my action. The market prices of our futures positions have swung wildly in your favour but this flurry of commercial activity has not, in itself changed what the temperature will be on Sept 4th - it will be what it will be.

Another set of phones is ringing off the hook: the merchant banks'. Everybody's heard of our super-cool bet and now wants the bankers to start matching them up with bettors too. Only now, because of the heatwave, you can't get an even-odds bet at 78 degrees: 95% of the market thinks it will be higher than that. So the neutral strike in the futures market - the level at which half the market thinks the temperature will be higher and half lower - has risen to 84 degrees. Again, our expectations of where the temperature will be don't affect the sun, the atmosphere, the pollutant count, the jet stream or any of the other determinants of actual temperature on September 4th, just the neutral strike price of a future.

Finally, at 11:55am on Sept 4th, it's a balmy 82 degrees across New England. Every USD1m of your action can now be sold for about USD1.995m because your bet is a lock. I can't give mine away. The merchant bankers are setting a neutral (also called fair-value) strike price of 82.005 degrees for last-minute bettors. A flash of last-minute cloud over Boston and Providence means the average temperature in New England at 12:00 on Sept 4 comes in at 81.972 degrees. You win. Don't spend it all in one place.

Nothing we did affected the spot price. The temperature was going to be 81.972 whether we took a futures bet or not. More to the point, over the couse of the last few hours and minutes, the neutral strike for future moved from 78, when we took the bet, up to 84, when the market got busy, then dropped to within 1% of the spot in the final moments before the strike date.

This is how futures work: the neutral strike prices is highly volatile while uncertainty about the final spot price exists (the actual temp observed at the actual moment the bet finishes), then converges sharply to the spot when time eliminates the uncertainty. If you can explain to me how our bet changed the weather, you (ok, more likely me, since I'll just steal your idea and run with it) will win the Nobel Prize for economics and change our understanding of how markets work forever.

Best of luck with that.

H

Okay, so going by your analogy, my investment in oil futures does not actually determine the price of oil. This totally flies right in the face of the fact that hedge funds and trader banks largely control the price of oil, as well as OPEC and its willingness to arbitrarily cut production... not to mention the opacity of the oil trading market and the lack of control of said market.

http://www.financialsense.com/editorials/engdahl/2008/0502.html

 

[Handprints]

Okay, so going by your analogy, my investment in oil futures does not actually determine the price of oil. This totally flies right in the face of the fact that hedge funds and trader banks largely control the price of oil, as well as OPEC and its willingness to arbitrarily cut production... not to mention the opacity of the oil trading market and the lack of control of said market.

http://www.financialsense.com/editorials/engdahl/2008/0502.html

The only real problem I had with that article is that it minimised the roles of the Illuminati and the Tripartite Commission. Good luck with whatever course of action the kinds of economic thinkers who wrote it recommend.

H

 

[Le Jacquelope]

The only real problem I had with that article is that it minimised the roles of the Illuminati and the Tripartite Commission. Good luck with whatever course of action the kinds of economic thinkers who wrote it recommend.

H

I want to get to some specifics in that article.

Over the past couple of years global crude oil production has increased along with the increases in demand; in fact, during this period global supplies have exceeded demand, according to the US Department of Energy. The US Department of Energy’s Energy Information Administration (EIA) recently forecast that in the next few years global surplus production capacity will continue to grow to between 3 and 5 million barrels per day by 2010, thereby “substantially thickening the surplus capacity cushion.”

Is he lying about that? Did the EIA not actually say that?

And I don't care about others as far as their solution to this problem: my solution is to get America less dependent upon oil.

 

[trysail]

And I don't care about others as far as their solution to this problem: my solution is to get America less dependent upon oil.

Okay; I'll bite. Just how do you propose to do that?

Current prices for petroleum and its derivatives (gasoline being, of course, one of them) are already cutting consumption and encouraging conservation.

In case you're wondering, I'll be very skeptical of any "solutions" that don't utilize the wonderfully efficient resource allocating capacity of the free market system. As Boone Pickens so succinctly and elegantly put it: "The solution to high prices is...

high prices."

 

[Le Jacquelope]

In case you're wondering, I'll be very skeptical of any "solutions" that don't utilize the wonderfully efficient resource allocating capacity of the free market system.

So sayeth you as you drive on roads built by mostly the Government and not the free market toll road system, as you post on an internet that would not even exist if it had been left to the "efficient resource allocating capacity of the free market system."

How much space exploration and research has been done using the "efficient resource allocating capacity of the free market system", versus the inefficient Government method of funding?

The "efficient resource allocating capacity of the free market system" has cracked itself wide open with flaws in the oil industry, too. See: cutting production and distribution in order to drive up prices.

As Boone Pickens so succinctly and elegantly put it: "The solution to high prices is...

high prices."

Bah. Tell that to the price of gasoline.

I utterly reject your implication that the market is an unblemished virtue. It's built on pure greed, and by extension, your argument utterly glorifies unrestricted greed. No thanks. I don't want your system any more than I want the USSR's - and despite what you think, there is a such thing as a world in between - and it is far more viable than either extreme.


Now, my solution for weaning us off of oil is to build more nuclear plants, and at the same time build a massive solar infrastructure that insinuates itself into every facet of construction. Solar roofs for homes and businesses, solar panels on traffic lights, solar panels here, solar panels there, solar panels everywhere. That'll cut down hugely on daytime draws on power plants, and provide a huge infrastructure for electric cars. More electric cars means less gasoline being used. More solar and nuclear plants means more power to support electric cars. I'll fund it by killing all oil industry tax breaks and let the "free marketeers" weep and wail and gnash their teeth.

The "free marketeers" had their day and they failed. It's time to go in a new direction.

 

[trysail]

...my solution for weaning us off of oil is to build more nuclear plants

Have at it. Good luck. How many nukes do you think we need to replace the nine million barrels a day of gasoline the U.S. consumes?

If you file an application to build a nuclear generating plant today, you ought to be ready to break ground in, let's see........, about........, ten years (if you're lucky).

... and at the same time build a massive solar infrastructure that insinuates itself into every facet of construction. Solar roofs for homes and businesses, solar panels on traffic lights, solar panels here, solar panels there, solar panels everywhere. That'll cut down hugely on daytime draws on power plants, and provide a huge infrastructure for electric cars. More electric cars means less gasoline being used. More solar and nuclear plants means more power to support electric cars.

Nobody is stopping you. Get started.

I'll give you a second chance to answer the question above (how many nuclear generating facilities does the U.S. need to replace the nine million barrels of gasoline consumed every day?) Hell, while you're at it, why don't you demonstrate your grasp of the subject by calculating the surface area of solar panels required to replace the current coal-fired electric generating capacity (show all calculations).

... by killing all oil industry tax breaks...

Would you be so kind as to list them. You always trot this standard boilerplate complaint out, yet you never cite an instance.

The "free marketeers" had their day and they failed. It's time to go in a new direction.

Ahhh— FINALLY— we get to the bottom of what you're all about. I suspected as much all along. The problem is simple: you don't know anything about economics and you refuse to learn; that qualifies you to run for political office: economic illiteracy combined with innumeracy.


Fortunately— for me— I don't have to spend my life trying to educate the uneducable. Unfortunately— for me— I end up having to pay for the follies of the Pied Pipers of magical thinking (read: Boxer, Feinstein, Dodd, Frank, Clinton, Cantwell, Dorgan, Pelosi, Mikulski, Kennedy, Reid et al) and the credulous, innumerate, illiterate, gullible believers in Santa Claus and the Tooth Fairy who repeatedly vote for them— together, they have utterly and completely bankrupted this country. The scary part is that they don't know it (yet).


"The greatest productive force is human selfishness."
-Robert A. Heinlein
The Notebooks of Lazarus Long
Time Enough For Love

 

[trysail]

Okay, let me get this right.

If I want to go out today and contact an investment bank and roll some cash into oil futures, I can't do that? Really?

If you're so smart, go make yourself a pile of dough! Nobody is stopping you.

You're perfectly free to buy some crude liquid futures for yourself. Hell, if you think "speculators" have driven prices too high, you can even short some crude futures. Put your money where your mouth is!

 

[Le Jacquelope]

Have at it. Good luck. How many nukes do you think we need to replace the nine million barrels a day of gasoline the U.S. consumes?

That entirely depends on the megawattage of the given plant itself.

If you file an application to build a nuclear generating plant today, you ought to be ready to break ground in, let's see........, about........, ten years (if you're lucky).

The sooner we get started...

Nobody is stopping you. Get started.

Done. My roofs are already solar. I've got 2 panels out back and more coming up. I've got one electric powered SUV and one Highlander hybrid. I've got a neighbor who's equally as solared up as me and who has been working perpetually on a biodiesel powered generator. I know people personally who are brewing ethanol from beer. Pure ethanol you can just put into the car and drive. You need a license for that, though.

I'll give you a second chance to answer the question above (how many nuclear generating facilities does the U.S. need to replace the nine million barrels of gasoline consumed every day?) Hell, while you're at it, why don't you demonstrate your grasp of the subject by calculating the surface area of solar panels required to replace the current coal-fired electric generating capacity (show all calculations).[/'quote]
It would take about 10,000 square miles of solar panels to power the entire US. Easy cheesy, just panel up some of the rooftops to augment solar farms.

Now, let's see. Coal plants make up 260,990 megawatts of America's power, and nuclear power produces 86,163 megawatts, according to this report... http://www.eia.doe.gov/cneaf/electricity/ipp/ipp_sum.html

So, basically, the answer is we take the number of nuclear plants we have now, and increase them by 3-4 fold. Is it doable? Over time, yes.

Would you be so kind as to list them. You always trot this standard boilerplate complaint out, yet you never cite an instance.

How about reduced corporate taxes for the oil industry, for starters? They pay an average of 11% in corporate taxes, whereas other industries pay an average of 18%. Source: Koplow, D. 1993. Federal Energy Subsidies: Energy Environmental, and Fiscal Impacts

Ahhh— FINALLY— we get to the bottom of what you're all about. I suspected as much all along. The problem is simple: you don't know anything about economics and you refuse to learn; that qualifies you to run for political office: economic illiteracy combined with innumeracy.

Your toadyish behavior regarding the free market system does not make you look like you know anything. It only shows that you have managed to replace knowledge with foaming at the mouth dogma. Not to mention how funny you look acting like you desperately want to lick the shoes of the first oil exec that graces your doorstep with a bone. You're like one of their dogs, trained to jump, roll over, bark, and even pose like Cujo when anyone threatens your world view.

I like how you ducked and dodged the examples I pointed out of where the market was completely or nearly completely absent in the siring of many things you enjoy today. Your continued use of the internet, which would never have existed without the nanny state's interference in the market, makes you a hypocrite.

Now let's get to some real issues about progress:
First Solar inc. is planning on being highly profitable with solar energy, to the point of not needing subsidies by 2010: http://investor.firstsolar.com/secfiling.cfm?filingID=950153-07-1657

Then there is Nanosolar, which is now geared to produce power cells that cost 30 cents per watt making it cheaper than coal plants. http://www.celsias.com/2007/11/23/nanosolars-breakthrough-technology-solar-now-cheaper-than-coal/

http://www.celsias.com/blog/images/nano_solar_comparison.jpg

 

[Somme]

http://forum.literotica.com/showthread.php?p=27392752#post27392752

 

[trysail]

My roofs are already solar. I've got 2 panels out back and more coming up. I've got one electric powered SUV and one Highlander hybrid. I've got a neighbor who's equally as solared up as me and who has been working perpetually on a biodiesel powered generator. I know people personally who are brewing ethanol from beer. Pure ethanol you can just put into the car and drive.

...First Solar...

...Nanosolar...

Every single behavior you just described is a rational and direct response to the pricing stimulus and the signals provided by the operation of a free market system. Your problem is simple: behind every rock, you see a conspiracy.

"Sometimes a cigar is just a cigar."


Competition is wonderful. Let the games begin.

How much have you invested in First Solar?
How much have you invested in Nanosolar?

Instead of ceaselessly whining, spurred by the incentives of free market pricing, the venture capitalists are busy:
http://www.kpcb.com/portfolio/portfolio.php?greentech
http://forum.literotica.com/showpost.php?p=25057391&postcount=127

Why do you think the venture capitalists are investing billions of dollars in the field? The answer is breathtakingly simple: they wanna make a buck.

They're hoping to make an absolute hogsticking— a killing— (dare I say it), a PROFIT !!

 

[Le Jacquelope]

Every single behavior you just described is a rational and direct response to the pricing stimulus and the signals provided by the operation of a free market system. Your problem is simple: behind every rock, you see a conspiracy.

A conspiracy? Really? You don't believe OPEC cuts production or distribution of oil? Have you not read the facts on this? They're producing more oil than we need. The issue is they're not sending it out. Somme just showed you some documentation on this.

It's a known fact that manufacturing a shortage raises prices. Simple law of economics. This was what the energy companies were convicted of doing in California. Go look up megawatt laundering and overscheduling if you don't believe me.

You keep believing in that free market fairy. It's nothing more than a religion based on faith in unproven beliefs that are routinely contradicted by reality.

Better yet, why don't you just find a country where laissez-faire principles are practiced and try living there. Or make your own island and try it out. America is all stocked up on crazy, we've got no room for the ragingly insane Lord of the Flies mentality of laissez-faire. Get over it, it ain't happening. Not while we citizens have a vote.

 

[S-Des]

I heard an interesting commentary on the belief that drilling here is irrelevant in the short term because we won't see the oil for up to 10 years (although I don't think that number is accurate). The person pointed out that there would be an immediate impact on the oil futures market because they would know sometime in the next decade, new oil would hit the markets. That price adjustment might not be instantaneous, but it would take place far quicker than the actual oil reaching the market. The funny thing about any change in our energy policies (even done at the individual consumer level) is that it is all going to take years (decades) to fully realize.

Obama is talking about pressuring car manufacturers to make more fuel efficient vehicles, which does nothing to affect people who haven't even paid off their current car (or might not be able to afford a new one anyway). New plants and refineries will take years to come on-line. Widespread energy technologies (solar, wind, etc...) will take at least that long to make a serious impact. The thing no one is addressing is that while we're arguing about things that aren't going to happen until long after our economy is in the toilet (and yes, it can get a hell of a lot worse than it is right now), the one thing we do have control over (drilling in our own territories) is being stalled at a 90% clip by the Democrats in Congress. Until that changes, we are at the mercy of oil producers, and I don't really see anything that can be done about it. You can argue about the "why's", but it doesn't change the reality of the situation.