Posted by AzBlueMeanie:
I have Joe Scarborough to thank for this quote: "Newt Gingrich thinks he is the smartest guy in the room. If Newt Gingrich is the smartest guy in the room, you're in the wrong room." Nailed it!
The big thinker of big ideas, the disgraced former House Speaker and preeminent housing historian, had this to say about U.S. energy policy:
"There is no reason not to believe that we couldn't stabilize with American production by drowning demand in supply the old-fashioned, free market way," he explained. "There's not reason we couldn't have a stable price around $2 or $2.50 [per gallon]."
Well, yes there is "professor." FAUX News Sunday host Chris Wallace tried to explain it to him. Gingrich: 'You Can't Put a Gun Rack on a Volt':
In an interview on Sunday, Fox News host Chris noted that if Gingrich attempted to increase oil production in the U.S., OPEC would decrease production to keep international energy prices high.
"You can't guarantee $2.50 a gallon," Wallace explained.
"You can't guarantee anything," Gingrich agreed. "But you can guarantee that under the Obama plan, there's going to be less American production, higher prices."
Less American production? Does the "professor" not keep up with his homework assignments? CNN Money reported, Gasoline: The next big U.S. export - Dec. 5, 2011:
The United States is awash in gasoline. So much so, in fact, that the country is exporting a record amount of it.
The country exported 430,000 more barrels of gasoline a day than it imported in September, according to the U.S. Energy Information Administration. That is about twice the amount at the start of the year, and experts and industry insiders say the trend is here to stay.
The United States began exporting gas in late 2008. For decades prior, starting in 1960, the country used all the gas it produced here plus had to import gas from places in Europe.
But demand for gas has dropped nearly 10% in recent years. It went from a peak of 9.6 million barrels a day in 2007 to 8.8 million barrels today, according to the EIA.
* * *
To be sure, the United States is still importing plenty of oil to make that gasoline -- and is still dependent on foreign countries for well over half the crude it uses.
But now the country's massive refining infrastructure is producing more gasoline, diesel and jet fuel than the United States needs, freeing it up to be exported to places like Brazil, Mexico and Chile where demand is still strong.
[Instead of "drowning demand in supply" and driving down the price of gasoline in the U.S., as well as oil company profits, which would not be "the old-fashioned, free market way."]
The Wall Street Journal, which reported on the export trend last week, said the United States is on track this year to be a net exporter of refined products for the first time in 62 years.
"We've got plenty of excess refining capacity," said Jonathan Cogan, a spokesman for EIA. "It's a reminder that this is a global oil market, and it's reflected by the movements of products to where they will get the highest prices."
Did you catch that last part, "Professor"? Oil is traded on an open global market, and oil will move to where producers can get the highest prices for their product. The United State has only about two percent of the world's oil supplies. Is the "professor" proposing that we nationalize U.S. oil production and pass a law requiring all the oil we produce to be used in the U.S. market to stabilize prices? (On the scale of Richard Nixon's wage and price controls?) Even if we produced the very last drop of U.S. oil, it would never even come close to "drowning demand in supply" as the "professor" dreams. This is utter fantasy.
Speaking at a World Petroleum Congress panel, OPEC Secretary General Abdulla Salem El Badri said the world has plenty of crude but that the number of barrels of oil changing hands in the financial markets is 35 times greater than the actual supply.
The numbers he cited were 3 billion barrels per day traded on global exchanges, but only 76 million barrels per day in actual supply.
"Oil resources are clearly plentiful," said Badri, a Libyan. "Speculation is playing a very important part in inflating these prices."
Yet Badri doesn't think the cost of oil -- currently near $100 a barrel in the United States -- is excessively high.
"The current price is comfortable for producers and consumers," he said. "It allows producers to make investments, yet doesn't hinder the global economy."
Yeah, well, OPEC would say that. As long as consumers are still willing to pay, OPEC has not exceeded its price point.
If you think gas prices are high now, just wait. With Israel and many American politicians threatening military action against Iran this year, any hostilities and/or disruption of oil supplies will drive speculators to send gas prices soaring to record highs. Crude Oil Analysis for the Week of February 20, 2012:
When the U.S. and the EU decided to impose sanctions on Iran, they were both counting on the rest of the oil producing world to cover any production shortages. This part of the plan is pretty clear. They were also assuming that oil traders would understand the rational behind the plan. Unfortunately, they were not counting on a possible panic in the oil markets.
If the plan had unfolded as expected, oil prices would have remained relatively steady, but instead traders shifted their focus on the erosion of spare capacity. This created uncertainty in the market making traders nervous about further supply interruptions. Until the world markets can adjust to the change in supply, a nervous tone will dominate the price action.
Worries about disruptions in supply tend to cause buyers to overpay, creating volatile price swings. Prices are expected to continue to surge as long as buyers are willing to chase the market higher and nervous shorts are willing to pay anything to cover their positions. With last week’s action highlighting both of these events, one has to conclude that traders are panicking and that higher prices are to follow.
Although the fundamentals seem to be lined up for higher prices, there is still some debate as to whether Iran had followed through with its plan, or if it is only a threat at this time. This is because one news agency reported that Iran had cut exports to six European nations while another reported that Iran had only issued threats. As you can see from the price action, however, it really doesn’t matter to speculators because when issues regarding supply disruptions and oil come up, traders tend to overreact to the upside.
Key point: "[T]his move is being driven by political maneuvers and not by true supply and demand fundamentals. Traders are pricing crude oil as if there is an actual shortage in the world market and so far this hasn’t been the case."
"Keep in mind that traders are nervous about the 'erosion' of spare capacity. Until this actually begins to show up in the global demand numbers, it’s all speculation. This means that in order to continue to fuel the rally, the political posturing and saber-rattling must continue or speculators will lose interest and begin taking profits."
"The fact that the market hardly reacted to the supply and demand numbers is further confirmation that the rally is being fueled by Iranian headlines."