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Lunacy – D.C. Style
High grade crude for gulf delivery hit the highest price since the
spring of 2008 this morning. This is the raw material for gasoline, so
look for another big spike at the pump over the next few months. I think
that premium gas will be at $5 by July first in many parts of the
country. If the trend towards ever higher crude does not turn around
soon we are going to hit a wall before the summer is over.
Don’t worry about a thing. Congress is working on a new solution.
New legislation is being drafted as we speak that will fix the problem
overnight. So what is the magical solution? The USA is going to sue OPEC! (Reuters link)
WASHINGTON, April 5 (Reuters) - A U.S. Senate panel will vote on legislation this week that would allow the Justice Department to sue OPEC members for price fixing as surging gasoline prices once again threaten the economy.
A sponsor of the bipartisan Senate legislation, Herb Kohl of Wisconsin, said the so-called "NOPEC" measure would prevent future gasoline price increases.
So the US is going to sue OPEC using the anti-trust statutes. This will never work. The most likely consequence would be that some OPEC states will just arrange to sell their production to the Chinese.
Does Senator Kohl really believe that this is viable? Does he think
that our pal Hug Chavez down in Venezuela is going to give a damn about
this? How about our new friends, the rebels in Libya? They don’t care either. Or our best buds in Iran? They are laughing at this. How about our really good friends the Saudis or Iraq? Does anyone believe that a threat of a lawsuit by the DOJ is going faze them one bit?
The USA is still using about 25% of global crude production so what we
do actually does make a difference in the global market for oil. But a lawsuit is not going to change the outcome by even a cent.
If Senator Kohl were really serious about getting the price of crude and
gas down about 20% all he would have to do is lean on Mr. Bernanke. If the Fed were to end QE and nudge up the federal funds rate to 2% oil would drop by $30. But that is not going to happen. Ben will not let up on the gas and crude is headed to new highs.
I don’t really think that Senator Kohl believes that his lawsuit
legislation will accomplish anything. This is just an effort to show the
folks back home that he is really-really trying to fix the problem. It’s just a bluff by Mr. Kohn. OPEC knows it already. The US people will find out by the end of the summer.
Old Note:
Way way back around 1970 I connived/snuck my way into a presentation by
the then head of OPEC, Sheik Yamani. He spoke to an audience of bankers
and other financial types. This was just a few years after the first
major oil shock in the country. Things had calmed down a bit and
stability had resumed in the oil markets.
Yamani was a very bright guy who spoke very clearly. He first told the
audience what it wanted to hear. That OPEC understood that it had the
power to crush the Western economies. But that it would be foolhardy for
OPEC to do that as it ultimately leads to less petroleum demand and
that ends up hurting the exporting countries.
But he was also clear on what this “peace” would cost over time. When he
said these words you could have heard a pin drop. I’ve never forgotten
them. This was forty years ago. Every word has come true.
OPEC and the
industrial world can achieve a lasting stability that creates prosperity
in all nations. But there is a price that must be paid and understood
by all. From this point on and for the next hundred years, the wealth of the West must flow to the East.
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Bruce,
you will probably appreciate the angle on things by William Engdahl, who was present at a private meeting of Sheikh Yamani in the 70ies as well
http://www.larsschall.com/2011/03/12/%E2%80%9Cwe-are-in-the-midst-of-an-...
grateful, I'm grateful.
"The wealth of the West must flow to the East." Really? By my count, the wealth of the West flows to the East, then flows right back to the West as the Arabs buy treasuries. It should never be forgotten that ALL of the middle eastern oil exporters exist as nations because they were created by the U.S. and Britain, and that their oil industries were created by Anglo-American oil corporations. Other than Iran, all of those countries are still under Anglo-American control. The British and now American system of indirect colonialism is much more efficient than the Portuguese, Spanish, and French direct colonialism. Just because the union jack doesn't fly over Riyhad doesn't mean the House the Saud is in any sense independent of the Western powers.
Opening day of the 2012 Presidential Campaign. Phone rings at the FOMC.
Hello Ben
Hello Mr President
Ben we need to bring energy prices down. What can you do?
I can raise interest rates, but I'd rather not, Mr President
Well suppose you raise them slightly and faceflap or whatever
Jawbone sir, yes we could raise rates a tiny bit, and talk about more. Meanwhile you can talk about Natural Gas sir, time to move the old shell around a bit. Your predecessor used corn as biofuel. What crap, but they bought it.
Yes, and we can't imagine what harm it might do if some of those Tea Party people had this number on speed dial.
Absolutely.
What about the stock market?
Oh it has plenty of cushion, and we can do some things to keep the animal spirits going. Stock rotation, the old shell game. And of course even if we raise rates money might want to go into bonds, but for a quarter point, it hardly seems worth it. We can constrain supply if we need to.
Yes the only way I can imagine that is if the Republicans force us to take spending cuts. In any case I just need to let Wall Street know we have their back.
Of course sir. And you could move the wars we are fighting off budget.
Fine idea, no one will bother to look there.
You might even consider a spending freeze, force our vendors to accept a freeze in payments, while we continue to inflate commodity prices.
Yes and what about labor cost increases
Hahahah
Hahahah
That was good sir.
I hope we can work together another four years, Ben
Yes sir its been a pleasure, and a second term allows you to pretty do whatever you want.
Yes, I might find a couple sexy interns and just hole up in the oval office.
Precisely sir
"High grade crude for gulf delivery..."
Does that mean in the great tradition of BP it's to be likewise dumped in the GoM?
My friends in the oil business really do need a new term of art regarding delivery. I know a bunch of folks of a certain persuasion that would take great umbrage at that description. Lots of gnawing, gnashing, angst and agita....
I'll have to specifically sneak it in with them sometime.
great article. remember, "the wealth of the West was flowing to the East" as British traders bought CHINA PRODUCTS for voracious English customers... during the 1850s. The inability of the English traders to find anything of value to sell to China (that China would want to purchase), led directly to the bloody, murderous English (and their Euro/American allies in imperial rape, pillage, & plunder) whipping up the OPIUM WAR to FORCE the Chinese to import, dammit, SOMETHING from the parasitic, extortionate, enslaving Brit "traders."
Not only would the Brit financial elite enslave Indians (to grow the opium; witness British hired mercenaries smashing the heads of Ghandhi's salt-tax protesters, for daring to try to stiff the Brits out of their extortionate salt taxes), and enslave China to opium drug addiction; but of course in the name of "FREE MARKET PROFITS" the British elites would ENSLAVE THEIR OWN men & women.
On the eve of WWI the Royal Flying Corps was so class ridden, that officers actually presumed that enlisted men were "too stupid" to be able to learn to become pilots. (And the British navy was even worse; one admiral refused to allow forks and spoons at the ships mess, he regarded the untensils as making the men "too soft"; and of course during the age of sail, an officer could have the men flogged for the most trivial of offenses.)
The "elites," having learned nothing of the causes of WWI & WWII, are up to their genocidal, imperial greed & power lust all over again:
- all wealth to the elites (using various rothschilds based financial swindling & monopoly extortion techniques, i.e. "vampire squid" economics) under the banner "Free Market Enterprise" - AS IF growing opium in India, selling it to China, or waging wars of imperial blood lust have anything to do with "free" markets!
PS to prior post. What's not an illusion is the impoverishment of the people of the USSA.
The price of oil retains its long-term ratio to gold, showing that the rising oil price is nothing but an illusion. It's all monetary inflation. Nothing more.
Only a harvard mba could be dumb enough to think the slogan was "drill me baby drill me."
Perhaps this fucktard, supposedly responsible for writing laws, could ask one his water carriers what sovereignty means. Perhaps some of his constituents might want to consult a more reliable mba factory as to the oil price ramifications for force majeure being declared on oil supplies destined to the US, before they return him to DC next time.
The wealth of the West has been flowing to the East rather quickly in the past 40 years, helped along by the Wall Street/Washington Kleptoligarchy.
If I knew I was being sold out back then it would have been nice; expatriation would have been easier and more fun in my youth.
The debates in CONgress are tragically humorous because they are voiced by the delusional or those wishing to delude.
The Fed could easily reduce the price of oil. Raise interest rates to 2% and end QE. The resulting 30% unemployment would crash demand. Oil prices would decline.
Alternatively, we could drill into the infinite supply of $15-a-barrel unicorn farts.
The voters of Wisconsin are morons. This is well established.
Ill just go ahead and say what everyone already knows, all Wisconsinites are morons, not just the voters.
-Vikings fan.
Of course not! It is simply a crazy idea so he can get political points by saying he is doing something. Its like convicting bin-laden of murder. justice is served! vote for me again please!
This just shows you the faith Liberal Democrats have in Federal judges being willing to do the heavy lifting for them!
We outsourced that one to. It's Bollywood! I gotta admit Bush Junior is a Fudge Packer. I sAW IT WHEN HE fUCKED UP THE tEXAS rANGERS. (SP) INTENDED. At least he was rewarded with conviction! At least he got his ass off the couch, and didn't suck down cigarettes in private. I swear rarely. But this ass clown is out of control. Czars on every corner. I'm really proud of (Medvedev) right now. He is stepping up against Putin!
Ha haa ha haaaa ha ha hah ahhhhhhhhhhhhhhhh. Sue OPEC!!! That is the stupidest
joke I've heard this week. Yaah yaah, its all those bad guys in that bunch that is
responsible. We are just innocent victims. Yaah, that's it, we're victims.
Is my bottle ready yet? Make sure it isn't too hot. I don't wanna burn my widdle tongue.
The most remarkable thing about that oil chart is how hard and fast it can fall back to $50.00.
They should also sue Mother Nature for 1) not forming crude faster, and 2) not spreading it evenly around the globe.
+1!
Could it be that the Fed is raising the price of oil because they
All this based upon real and spun projections of what could happen in MENA.
It becomes obvious that oil may become the World reserve currency. How is the US dollar doing? Who runs the show?
Yes to 1, 5, 6 and 7.
Don't know what 2 means.
3 and 4, definitely not. The future that is being prepared is a 'green' future, in which there will be neither enough people nor enough industry to need oil or other high-value energy sources. Hence they are pushing alternatives with a net energy not much better (and in some cases worse) than wood.
nobody can stage manage such a complex agenda...only God...which Ben is not!
If we really wanted to keep a lid on the price of oil, we would start enforcing much higher CAFE standards, provide even more subsidies for electric vehicles, improve mass transit, and start using more natural gas for transportation purposes. But wouldn't it be "simpler" to prevent the Fed from causing so much inflation and revise the rules which govern commodity speculation?
i see the rise in oil prices as political manuevering. Yes, gasoline will go to 5$, but it will be back down to $3.50 by election day.The best way to work the public psychology is to take something away (cheap gasoline), and then give it, (or win it) back. The price of crude is following Fed monetization policy.The spec premium rides the dollar bashing policy. In a few months, they quit bashing the dollar, and oil prices start down. Mostly this will be jawboning. They will actually start talking about the strong dollar, and part of it that their weak dollar policy was a short term strategy, which will have achieved its desired effect. As we approach election day there will be more troop drawdowns. The MSM will be invited to report on these things. Johnny comes marching home. Whether or not all this gets Obama reelected is a moot point, its part of the political theatre that goes on in Washington. How far Obama has to go to win the election is about how satisfied the GOP is with Obamas accomodative policies, which so far is good for them. In other words oil prices might not come down as much as they might ordinarily, if the fix is in, four more years. How will we know the fix is in? The GOP will trot out the latest incarnation of Bob Dole, a nice guy, without a clue, to run around the track. The current odds on the fix, are about 60/40 in favor of the GOP backing Obama in the election, by just not showing up. That can all change of course, if Obama does something to offend their decency. Considering the monarchial way Obama is running his Libya policy, and the GOP hasn't made much noise, they are okay with the status quo, which is a win for Obama. In that case, yes gas prices will remain firm, if Obama has to fight for his life, they'll come down.
Policy is not determined by politics. The politicians are impotent puppets. Period. Next...
Funny how you peg cheap gas at $3.50. It wasn't that long ago that $3.50 was a "holy shit" number at the pump. I guess we've seen it long enough now that it's becoming / has become the new baseline.
it should go a lot lower, but you're right, the 350 number has symmetry. the two sides are fighting over about 30 billion in spending but there is no real problem within the one party system. Obama doesn't seem to have a plan for reducing debt, other than to allow Republicans to make the hard choices, and then blame them for the pain it causes. Once Obama gets reelected, watch out. Then he owes nothing to anyone.
Liquidate speculative positions in the American exchanges controlling futures prices and you will see oil drop to 35$,its all about price fixation by American government,every one at establishment is happy,producers happy,corporations half happy as they need translate oil hike into consumers-consumers pay all this increase,there is agreement between FED and OPEC on keeping prices fixed and thats why Lehman Brothers liquidation caused to oil drop to 35$,this was relocation of the power to the FED controlled exchanges,they felt uncomfortable that World number 2 position futures markets kept by Bear Stearns and they killed both,now it under the FED control-thats why markets going all way up no corrections,that why all commodities going in parallel regardless anything.Stories you create on the way:China demand soars,Vietnam had eaten all strawberry,Poland unsused pesticides killed cotton-whatever,Katrina,Marina and other girl friends of the importents like Bernanke,they just do not care,they want to short us taking us by balls and our habits to spend,some times by habits unable to change habits-why not instead stay in the traffic to use electric or gaz wheecle.HHH,here they put taxes too,the question is-why shoudl you pay taxes if the FED ectually do not need your money,it can print whatever it need.I Tell you:this is a way to control your power,high prices is the way government limiting your ability to fight,unite and strike-thats is the only purpose to make taxes-rob you before you can strike!
You are people became disconnected each with other,became superficial,untrust each other and splited in opinions,polarased-that what top class wanted you to be and untill you can really kick off your own Ago,nathing will happend,shake your asses,cut on oil consumption and vote for FED to be destoyed:
http://trendybull777.blog.com/2011/02/21/hello-world/
liquidate the NAKed, totally casino style derivatives market and you bring sanity to financials, irrespective of what it does to oil price. The issue is FINANCIAL MAYHEM...DEATH OF CAPITALISM...MUCH BIGGER DEAL...Keep your eye on the real issues.
...who flunked English class, and wonders what that odd little button for spell-check is for.
What'd he say?
Did you check out his "blog". JFC. What a mess.
Nothing of any value.
Back to bicycles bitchez ...
It helped to produce 10% plus growth in China for years and years ...
Why ride one in the gym when you can ride to work?
Disclaimer : Long deodorant
we have a trillion zillion gallons of oil in the US with shale and everything... but the democrats are going to let the venezuelans and russians STEAL IT FROM US cuz they care about water or something
.
we could produce 20million barrels aday BY OUR SELVES... drill baby drill
You are sadly mistaken.
With current technologies, it takes almost 1 barrel of oil-energy equivalents to extract, process, and refine 1 barrel of oil from shale. The factor to consider is Net Energy Invested to Net Energy Gained. And oil shale as an economically viable source of energy is stillborn.
What this all comes back to is peak oil, we really have nothing left to find except more and more shady ways to cover up the fact that oil has no future. Collapse is inevitable now, we can sue OPEC all we want...
www.forecastfortomorrow.com
Great piece. Gotta love the Sheik. May not like it but at least Yamani was telling it like it was/is.
Too bad there aren't a few politicans around doing the same.
And who, praytell, is going to serve Abdalla Salem-El Badri the subpoena ? Eric Holder ? Ruth Bader Ginsberg ?
More theatre. Considering the potentiality of the stratospheric rise of the price of gasoline in the American economy, and the economic effects of said price thereupon, a tragedy worthy of Coriolanus.
You're getting warm.... think level playing field.... man to man... like olden duels... bigger guns.... just call it a political event/campaign stop/vacation....
USA imported same amount of oil as in 2000... well population is up by +10%.. so demand is way off..
what was the price of oil in 2000?
oil price is v. easy to fix back to $50..
make all traded contracts delivered + hike margin no less 10% per contract...
unlickly there's benny and his magic print machine..
unless wont be workable plan to fix US federal budget deficit back to at least bush jr levels around $500 bln +100$ oil is here to stay and we are fucked.
alx
after soaring to $500 a barrel. other than that should be a "no brainer" i agree.
At $500/bbl the only folk who got oil/petrol/JP-4* is Nancy Pelosi.
* (MIL-DTL-5624, a 50-50 kerosene-gasoline blend used in big AF planes which ferry congresscritters, et al about the globe 24/7.)
The Fed knows how to get us back to $30 oil.
But but but but but so why's everybody mad at the Fed? That's what happens when a whole boat-load of money is printed. The prices of stuff goes down because there's more stuff to spend money on so there's less money buying stuff which makes prices go down.
That's what happens.
-Paul Krugman
P.S. I wanna sign that thingie that the other Nibble Prize fellows got asked to sign, too.
Please.
or I'll write more articles
for the NY Times
great newspaper
oughta be subsidized so I can write more articles
then the price would go up
The Fed sure does, by backing their US Dollar product with gold, thus a troy ounce of gold = 70 barrels of oil (the ~15 barrel/gold range is far too low).
Schork is wrong. Yemen, Saudi, Iran, Bahrain, Syria (I know, no oil nor conduit) have not played out. And Libya far from settled.
Schork Says Oil May ‘Plunge’ $20 a Barrel If Libya Calms: Video
Schork is a dork, no offense meant to our Dork of Cork. As for suing the OPEC that is typical kicking the can tactics that is like shooting the man on the moon to stop lunar eclipses. BS said to avoid talking about real issues. Only a mega deflation/depression way beyond current one and which brings down China/India will send oil to 35. I don't see that happening. The East is now 50% free of US market. A large chunk of rest is EU not exports to US. If the USD falls in five years they're out of those woods...China/India.So its the USA which is now going to have to change its business model and PRONTO.