UnionLeader.com attacks Democrats on oil prices

[JaJae]

MAYBE THE quickest way to lower oil and gas prices would be this: Immediately enroll every Democratic member of Congress in an entry-level economics class.

The lack of even a basic grasp of economic concepts has led Democrats to oppose sensible policies that would begin to lower oil and gas prices. Instead, they push hair-brained ideas that make no sense.

Senate candidate Jeanne Shaheen howls incessantly about speculators. She claims that speculators trading on electronic exchanges and overseas are driving up the price of oil and if only we cracked down on them the price would fall.

But here is what Walter Lukken, chairman of the Commodity Futures Trading Commission, said about that idea last week: "We haven't evidence that speculators are broadly driving these prices."

To the extent that futures trading is increasing prices, the major culprits are not unregulated traders, as Shaheen keeps saying. The real problem is that with demand continuing to outstrip supply, traders see no end to rising prices. The value of a barrel of oil today stays high because traders believe it will be more valuable in the future.

Any step Congress takes to produce a large increase in future supply -- opening the outer continental shelf to drilling, for example -- will reduce current prices. If there will be a lot more oil 10 years from now, a barrel of oil today loses some of its investment value, and its price falls.

As Harvard economics professor Martin Feldstein wrote in The Wall Street Journal on July 1, "Increasing the expected future supply of oil would also reduce today's price. That fall in the current price would induce an immediate rise in oil consumption that would be matched by an increase in supply from the OPEC producers and others with some current excess capacity or available inventories."

This is pretty basic stuff. And yet Democrats are oblivious. They adamantly oppose more domestic drilling, claiming that it won't affect prices for decades. Clearly, they have yet to grasp the basic concepts of supply and demand.

Then there is Rep. Carol Shea-Porter's pet policy: forcing oil companies to drill on land they already lease. Economists and oil industry experts have roundly criticized this proposal as completely useless. It would force oil companies to drill speculatively or where there is no or little oil -- or into oil wells that are already tapped! Meanwhile, she refuses to let them access America's largest untapped oil reserves.

The solution offered by Sen. Barack Obama and other Democrats: Impose a windfall profits tax on oil companies. But of course, that will do nothing to increase the supply of oil or reduce demand.

Because the party that controls Congress has no idea how the economy works, it looks like we are going to be stuck with high oil and gas prices for a long, long time.

UnionLeader.com - New Hampshire news - Hitting rock: Dems oblivious on oil - Sunday, Jul. 13, 2008

Basically the article attacks Democrats for not understanding basic economics. I would say that Democrats know more than the author gives them credit for, but they can't go against their platform and they're covering their ears and shutting their eyes to the issue. The Democrats consistently vote in favor of more government regulation (which drives up prices) or taxation (which drives up prices). Basically their two ways of "resolving" the issue revolves around making oil more expensive so we use less. This was the goal of the anti-capitalist environmentalists all along and it looks like they've finally got their wish.

Now the Democrats are not fully to blame for this. Obviously the US meddling in the middle east isn't helping matters any. Both sides have some blame in this, but at least the Republicans seem to work towards lowering prices. I keep getting annoyed when the Democrats block legislation that would lower our oil costs and reliance on foreign oil or push for some other agenda that would either intentionally or unintentionally increase fuel costs.

Oil prices are getting way too high to keep playing this cat and mouse game. We need to start doing something about fuel costs. We need to invest long term in a resolution as well as work on reducing current costs now. Nuclear power needs to get moving, we need to start drilling and we need to lay off the oil industry to allow them to function as efficiently as they can. These are three simple things that we could be doing, but are not because the Democrats won't allow it to pass.

[WickedLou9]

The author is confused about the problem. Insulting the others intelligence usually means that there is a lack of intelligence on his side to begin with. He is attemptingh to solve one problem, oil supply, and the democrats are trying to solve another, dependance on oil as the single major energy source for our country. Thier solution makes sense for the problem they want to solve. In fact, to those ends, it's better if oil stays expensive as it will push development into alternative energy even more quickly.

[Ardentfrost]

The guy is wrong anyway. I study a lot of economics and this oil thing isn't as cut and dry as "we need more supply." We have supply. The problem is related to a speculation of future supply problems that may never come to fruition.

I don't understand the government's role in our oil industry enough to comment fully on it. I know that they are intimately involved with regulations (environmental and otherwise) that govern the industry. I know that alternative energies are equally regulated which destimulates their ability to fill gaps. I know that because of government's favoring of large energy conglomerates, they are less willing to move to alternative forms of energy.

Maybe all that stuff combines to create our problem, but it's SO complex no single fix is going to fix the price of gas. Increasing our reserves may delay speculated supply interruption, but wouldn't get rid of it. Allowing more nuclear energy creation may drop our dependence on oil, but the price would still be going up.

Anyone who says "if we do this one thing, everything will be fixed" is looking at the industry with tunnel vision. A LOT of economic problems can be fixed by rolling back regulation or freeing up the economy, but our energy problems encompass MANY sectors and tons of factors.

However, I am convinced that asking for government to take on a more active role in our energy sectors is only going to hurt it further. Some want to punish speculators, some want to increase supply, some want to drill our own and get us off foreign oil (like that would happen), some want us to open the doors or even fiscally promote alternative energy. No single group is right, some are completely wrong, some wouldn't do anything.

[JaJae]

Originally Posted by WickedLou9

The author is confused about the problem. Insulting the others intelligence usually means that there is a lack of intelligence on his side to begin with. He is attemptingh to solve one problem, oil supply, and the democrats are trying to solve another, dependance on oil as the single major energy source for our country. Thier solution makes sense for the problem they want to solve. In fact, to those ends, it's better if oil stays expensive as it will push development into alternative energy even more quickly.

I agree that insulting the intelligence isn't a good thing to do. But, I disagree with much of what else you said. There is no reason that I can see that we shouldn't be working to lower fuel costs as well as find alternatives. No matter what we will be oil driven for some time. That is not going to change just because we make it more expensive. In fact, taxing the oil companies and damaging our economy is only going to make it more difficult to find alternative power sources.

[WickedLou9]

Originally Posted by JaJae

I agree that insulting the intelligence isn't a good thing to do. But, I disagree with much of what else you said. There is no reason that I can see that we shouldn't be working to lower fuel costs as well as find alternatives. No matter what we will be oil driven for some time. That is not going to change just because we make it more expensive. In fact, taxing the oil companies and damaging our economy is only going to make it more difficult to find alternative power sources.

Im not necsarily saying that we should or shouldn't.It was more of a critique of the author. He called the democrats stupid for not "understanding" simple supply and demand. The fact is that they fully understand the concept, they are merely trying to solve a different problem.

[JaJae]

Originally Posted by WickedLou9

Im not necsarily saying that we should or shouldn't.It was more of a critique of the author. He called the democrats stupid for not "understanding" simple supply and demand. The fact is that they fully understand the concept, they are merely trying to solve a different problem.

Trying to solve one problem isn't an excuse for ignoring another that is damaging our economy.

[Stylerod]

Originally Posted by JaJae

Trying to solve one problem isn't an excuse for ignoring another that is damaging our economy.

.

[WickedLou9]

Originally Posted by JaJae

Trying to solve one problem isn't an excuse for ignoring another that is damaging our economy.

it's the same ultimate problem, limiting the economic damage of the high cost of oil. One goes about trying to solve the problem of the simple price of oil, the other goes about trying to find something other than oil to use.

Same ultimate goal. Different paths to that goal.

[Stylerod]

Originally Posted by WickedLou9

it's the same ultimate problem, limiting the economic damage of the high cost of oil. One goes about trying to solve the problem of the simple price of oil, the other goes about trying to find something other than oil to use.

Same ultimate goal. Different paths to that goal.

Sorry, that makes no sense to me at all.

We know we can get more oil in the near future if we want. We will not have a replacement for oil in the near future, no matter how much we make people suffer. So why make them suffer? Just because we can?

[JaJae]

Originally Posted by WickedLou9

it's the same ultimate problem, limiting the economic damage of the high cost of oil. One goes about trying to solve the problem of the simple price of oil, the other goes about trying to find something other than oil to use.

Same ultimate goal. Different paths to that goal.

It doesn't have to be a this or that though. I don't understand why we can't do something to reduce our oil prices now. Democrats keep moving toward raising oil prices through taxation and regulation. That is counter productive and further damaging to our economy.

The Democrats are purposely working against reducing the cost of oil. They favor more taxation, more regulation and less nuclear power and alternate power sources that we currently have available to fight for "alternative energy." Everbody wants new methods of energy to get us off oil. But the best way to accomplish this is through sound economic principles. Purposely damaging our economy and praying for alternative energy to come about through tax credits is not a viable solution.

[JaJae]

Originally Posted by Stylerod

Sorry, that makes no sense to me at all.

We know we can get more oil in the near future if we want. We will not have a replacement for oil in the near future, no matter how much we make people suffer. So why make them suffer? Just because we can?

Exactly. We all want a replacement for oil. I just don't think damaging our economy is a sound way of bringing it about.

[WickedLou9]

Originally Posted by JaJae

It doesn't have to be a this or that though. I don't understand why we can't do something to reduce our oil prices now. Democrats keep moving toward raising oil prices through taxation and regulation. That is counter productive and further damaging to our economy.

The Democrats are purposely working against reducing the cost of oil. They favor more taxation, more regulation and less nuclear power and alternate power sources that we currently have available to fight for "alternative energy." Everbody wants new methods of energy to get us off oil. But the best way to accomplish this is through sound economic principles. Purposely damaging our economy and praying for alternative energy to come about through tax credits is not a viable solution.

It's sort of a tough situation. If we do something about the price of oil right now, the motiviation for research into alternative energy goes away. It's the free market, if oil is cheap why invest in an alternative to oil?
The trouble is that the market can be short sighted. Oil, inevitably, will become more and more expensive and potentially more scarce, as time goes on. We know this will happen eventually. When? Who knows.
If we spend the money now on alternative energy we solve a number of problems. We reduce pollution which is a desireable goal no matter what. We reduce our dependance on foreign oil, which has benefits ranging from less foreign intervention, fewer wars to reducing the outflow of US dollars to countries like Iran and Russia who are not aligned with us. It would also ultimately reduce demand for oil which would help developing nations not yet able to particiate in the alternative engery market. ( presumably alternative energy would require significant investment in both infrastructure and technology, something which devleoping nations can't afford to do)
The problem with this plan is that it's speculative. What if we can't find a workable solution to get us off of oil? What if the damage that high oil prices RIGHT NOW, are so great that they offset the gains we could make by investing in alt. energy?

I know there is no solid answer but there is merit in both sides of the arguement. It's just a matter of which form of speculation you tend to agree with.

[JaJae]

Originally Posted by WickedLou9

It's sort of a tough situation. If we do something about the price of oil right now, the motiviation for research into alternative energy goes away. It's the free market, if oil is cheap why invest in an alternative to oil?

Oil is beyond becoming cheap again. All we can do now is reduced the impact on our economy and citizens. There will still be a strong motivation to come up with an alternative energy source.

The trouble is that the market can be short sighted. Oil, inevitably, will become more and more expensive and potentially more scarce, as time goes on. We know this will happen eventually. When? Who knows.
If we spend the money now on alternative energy we solve a number of problems. We reduce pollution which is a desireable goal no matter what. We reduce our dependance on foreign oil, which has benefits ranging from less foreign intervention, fewer wars to reducing the outflow of US dollars to countries like Iran and Russia who are not aligned with us. It would also ultimately reduce demand for oil which would help developing nations not yet able to particiate in the alternative engery market. ( presumably alternative energy would require significant investment in both infrastructure and technology, something which devleoping nations can't afford to do)
The problem with this plan is that it's speculative. What if we can't find a workable solution to get us off of oil? What if the damage that high oil prices RIGHT NOW, are so great that they offset the gains we could make by investing in alt. energy?

I know there is no solid answer but there is merit in both sides of the arguement. It's just a matter of which form of speculation you tend to agree with.

I'm not arguing against finding alternative energy. But even you're saying the situation is only going to get worse. We have nothing right now in terms of alternative energy, no semblence of a timeline or any realistic ideas just yet. So until then we're banking our economy on a pipe dream. To me that's completely irrational and irresponsible. I think we should help fund alternative energy, I think we should push for alternative energy. I think it should be a major priority. However, I don't think damaging our economy and reducing the quality of life of our citizens without a plan is a viable suggestion. It's completely irresponsible.

[Rouger2]

That is pretty funny Opec will increase oil production because of increased usage. They are a monopoly they decrease supply to raise prices so no matter if we decrease usage to a barrel a day that is what they will supply and charge the same as they are now for millions of barrels s day. We will never have them beat until will import no oil from them.

[6SpeedTA95]

Originally Posted by Rouger2

That is pretty funny Opec will increase oil production because of increased usage. They are a monopoly they decrease supply to raise prices so no matter if we decrease usage to a barrel a day that is what they will supply and charge the same as they are now for millions of barrels s day. We will never have them beat until will import no oil from them.

If we quit using OPEC oil it doesn't matter what OPEC does.

We have the ability to get our oil supplies completely independant of OPEC, the politicians would rather play games and claim "alternative" energy and "look at me I"m green" than do whats best for the nation and the people. We need to fund alternatives and we need to do something about our energy demand. Like it or not we're going to be using oil to power cars and run portions of our economy for as long as we're alive. The key is a diversified energy portfolio that includes using our own vast resources. This means that green/alternative sources must be developed in addition to supplies in friendly nations outside of OPEC. The solutions aren't overly difficult, they take time and require honesty on the part of politicians. Which is why we've gotten nowhere in 25 years.


edit: one other thing, if opec fears losing their biggest customer they're more likely to ramp up production to keep the world awash in oil than to let the US walk away from the table. Ultimately that kills their interest and with Europe begin to do substantially more oil and gas exploration OPEC could fade away if the US had the balls to do what was necessary.

[kombayn]

Cut the Federal Budget in half it'd still be a $500 Billion dollar budget. Right now thought it's about to bankrupt the country, it's why the dollar is devaluing and why inflation is causing consumer goods to go up. This country can't afford that.

[WickedLou9]

Originally Posted by 6SpeedTA95

If we quit using OPEC oil it doesn't matter what OPEC does.

We have the ability to get our oil supplies completely independant of OPEC, the politicians would rather play games and claim "alternative" energy and "look at me I"m green" than do whats best for the nation and the people. We need to fund alternatives and we need to do something about our energy demand. Like it or not we're going to be using oil to power cars and run portions of our economy for as long as we're alive. The key is a diversified energy portfolio that includes using our own vast resources. This means that green/alternative sources must be developed in addition to supplies in friendly nations outside of OPEC. The solutions aren't overly difficult, they take time and require honesty on the part of politicians. Which is why we've gotten nowhere in 25 years.


edit: one other thing, if opec fears losing their biggest customer they're more likely to ramp up production to keep the world awash in oil than to let the US walk away from the table. Ultimately that kills their interest and with Europe begin to do substantially more oil and gas exploration OPEC could fade away if the US had the balls to do what was necessary.

The only way that would work would be if we nationalized all of our oil companies and fixed the prices. Otherwise we will still be selling oil on the global market and if OPEC cuts production to drive prices up, we will still be paying those high prices. They won't be able to drive up prices as much as they did before but with supply so tight, even small interuptions can have huge effects on price.
Yeah increasing supply will help but you have to think of this on the global level. How much oil can we contribute the overall global market and what effect will that have on prices? It's not just the oil we use that we have to think about. It's the overall global demand. When you look at it in that context, the benefit that we will realize from drilling for more oil is not quite as large. That is, of course assuming you don't want to nationalize our oil industry.