Posted on 06/25/2008 6:38:22 AM PDT by kellynla
"I believe there needs to be a thorough and complete investigation of speculators to find out whether speculation has been going on and, if so, how much it has affected the price of a barrel of oil. There's a lot of things out there that need a lot more transparency and, consequently, oversight."
Those are the words of presidential candidate John McCain. This man is the Republican?
There's more.
"I am very angry, frankly, at the oil companies not only because of the obscene profits they've made but at their failure to invest in alternate energy to help us eliminate our dependence on foreign oil. They're making huge profits and that happens, but not to say, 'We're in this so we can over time eliminate America's dependence on foreign oil,' I think is an abrogation of their responsibilities as citizens."
Let me get this straight. A potential president of a putatively free country scolds companies for "obscene profits," failure to invest in competing products, and therefore irresponsible citizenship. Why? Is McCain running for national economic commissar?
This is not the first time McCain has displayed what I would call an anti-capitalist mentality. In an early presidential debate he countered former businessman Mitt Romney's claim to superior executive experience by saying, "I led the largest squadron in the U.S. Navy, not for profit but for patriotism".
Why the put down of profit?
It's clear McCain does not understand how markets work or why they are good. He certainly doesn't understand the role of speculators and other middlemen. He's not alone. Speculators are among the most reviled people in history. When they were members of ethnic minorities, they have been easy targets for economically illiterate people who were jealous of their success.
McCain wonders "whether speculation has been going on." He needn't wonder. Speculation always goes on. Speculation means to take a risk on what the future holds in hopes of making a profit. The world's stock and commodities markets are based on this principle. Sen. McCain must have meant it when he said, "I know a lot less about economics than I do about military and foreign policy issues".
I doubt that speculators are responsible for much of the run-up of oil prices. Why didn't they run them up sooner? Besides, there are too many other explanations: increased demand from China and India, the declining dollar and Middle East tensions.
Even if speculators did play a role, what McCain apparently doesn't understand is that speculators perform a valuable service. Most people don't realize this because on the surface speculators don't seem productive. They buy what already exists and resell it. How does that help society?
In fact, the hated speculator is a good guy because his buying and selling reduce volatility and uncertainty in an unpredictable world. He may only be out for his own profit, but that doesn't matter. As Adam Smith wrote, "It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest".
The prices of commodities often change unexpectedly, making business risky. The speculator brings a degree of certainty to otherwise risky ventures. When supplies of a commodity are plentiful and prices low -- but speculators expect the price to rise later -- they buy -- cushioning the collapse of prices. When supplies become scarcer and prices rise, they sell -- easing the shortage and lowering the price. Also, speculators may agree to buy a commodity in the future for a price locked in today. This reduces the risk for an oil producer or farmer who fears investing because he doesn't know what price his product will sell for next year.
As a result of these activities, volatile supplies and prices are evened out over time. Occasionally, speculators increase volatility. Markets are never perfect. (Although they are better than government regulation.) But in general, speculators increase liquidity and keep the market on a more even keel. This makes long-term planning easier for everyone.
It would be nice if McCain would finally learn some economics.
Compared to the alternative, McCain is a genius. I have no desire to return to Carternomics.
With no speculators prices would even be higher because we’d have oil shortages. Speculators are essentially insurance for the suppliers.
What ever happened to the Good Ol' Days when everybody just assumed the oil companies were buying up competing technology and squashing innovation in order to maintain their energy monopoly? You know, the old technology exists to produce a car that gets 100 MPG, but the oil companies are preventing it from coming to the market trope, beloved of scam marketers of magnets and fuel filters everywhere.
It is BS, of course. But at least it is BS that recognizes that the oil business has an interest in promoting the oil business, and not competing technologies. This notion that the oil companies should be working diligently to put themselves out of business is just stupid.
What ever happened to the Good Ol' Days when everybody just assumed the oil companies were buying up competing technology and squashing innovation in order to maintain their energy monopoly? You know, the old technology exists to produce a car that gets 100 MPG, but the oil companies are preventing it from coming to the market trope, beloved of scam marketers of magnets and fuel filters everywhere.
It is BS, of course. But at least it is BS that recognizes that the oil business has an interest in promoting the oil business, and not competing technologies. This notion that the oil companies should be working diligently to put themselves out of business is just stupid.
A good economic primer.
Please read it Senator McCain! And you too Obama!
I'm sick and tired of this "obscene profits" argument and hope someone from the McCain camp reads this post. Algore, Mr. Earth in the Balance, has made millions sitting on the board of directors for Google and Apple. Spend 5 minutes on Yahoo Finance and you will find the following Profit Margins. You tell me which ones are "obscene":
Exxon - 10.85%
Google - 24.89%
Apple - 15.13%
This is one reason why I’m not voting for McCain.
Memo to McCain's handler's:
1) Tell him to learn some economics.
2) Tell him to never, ever start a statement with "I am very angry, frankly"
Who is Frank? And why is John McCain so mad at him?
McCain is convinced he can win without conservative positions and that conservatives will vote for him anyway because they don’t have a choice. He won’t be conservative if he wins election and he won’t be able to appoint conservative judges because a true conservative will be blocked in the Senate. I’m inclined to give him the benefit of the doubt re: not wanting my vote since he thinks moderates and independents will carry the day for him. I’m voting third party.
I doubt that speculators are responsible for much of the run-up of oil prices. Why didn't they run them up sooner? Besides, there are too many other explanations: increased demand from China and India, the declining dollar and Middle East tensions.
The Middle East tensions are speculator related unless he's trying to say that Middle East "events" are actually reducing the supply of oil. Last I saw Iraq was pumping a fair amount and more then when the prices were lower.
As T. Boone Pickens said, it’s merely a matter “supply & demand”, there is a reserve presently of less than 27 million barrels a day with a demand for about 28 million barrels a day and if there were a more substantial dependable supply available (read MADE IN USA), those contracts that speculators/traders hold for $140 barrel oil wouldn’t be worth the paper they’re written on...
DRILL HERE! DRILL NOW!
“There were two main reasons for the market’s sceptical response. Saudi Arabia has only offered to boost its output by 200,000 barrels a day (b/d), about 0.2% of the world’s current consumption of 87m b/d. Worse, its leaders had told various foreign grandees about their plans in the preceding weeks, so oil traders had already digested the news and were looking for more.
And even as Saudi Arabia’s output rises, Nigeria’s is falling. Insurgents in the country’s oil-rich delta region have attacked a pipeline belonging to Chevron and an offshore oil platform owned by Royal Dutch Shell in recent days, forcing both firms to cut production. Some 300,000 b/d of output has been lost, outweighing Saudi Arabia’s gesture.”
http://www.freerepublic.com/focus/f-news/2036098/posts
A perfect example of this is to compare USAir and Southwest right now.
USAir is cutting capacity, charging baggage, and other, fees, charging for drinks, upping prices.
Southwest are totally add-on fee free.
What’s the difference?
Southwest are currently paying for fuel at prices that they bought forward on a year ago.
A perfect example of this is to compare USAir and Southwest right now.
USAir is cutting capacity, charging baggage, and other, fees, charging for drinks, upping prices.
Southwest are totally add-on fee free.
What’s the difference?
Southwest are currently paying for fuel at prices that they bought forward on a year ago.
Yep. If you really want to screw the speculator, the way to do that is DRILL, DRILL, DRILL!
Right now, they are speculating that the US government is run by a bunch of chumps who will run the economy into the ground to cover their butts and for short term political gain.
Sounds like a pretty safe bet to me!
I hear you! I just screened for the next rank up in the Navy and I will not put it on until next year. I am very afraid that the Messiah will waltz in and put a freeze on all military advancements as soon as he takes over.
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