Posted on 03/09/2011 10:44:06 AM PST by gleeaikin
Oil's surge to more than $105 per barrel -- which has caused the average price of unleaded regular to jump more than 40 cents in less than a month to about $3.50 per gallon -- is rooted more in psychology than in fundamentals.
Globally, there's no shortage of oil, nor any lack of gasoline in the U.S., but traders' fears that the civil unrest in minor oil exporter Libya may spread to major oil exporters Saudi Arabia or Iran has led an oil price spike, led by market speculators and large end users of oil.
However, the U.S. government is not powerless: It can help take some pressure off oil's price -- if it addresses both market psychology and oil's fundamentals. Here's how:
1. Random Releases From the Strategic Petroleum Reserve
Previous draw-downs from the SPR, which currently holds 727 million barrels of oil, in 1990-91 (Desert Storm, 17 million barrels), 1996-97 (deficit reduction, 28 million barrels), and 2005 (Hurricane Katrina supply disruption, 11 million barrels) did cause prices to decline somewhat. Another sale in 2011 might do an even better job, if properly structured.
For example, if Washington announced that it plans to release, at random times, an unspecified amount of oil from the SPR, that would immediately create more downside price risk and scare some of the speculative net long positions -- for oil traders who don't take delivery of oil -- out of the market. This psychological component -- not the actual amount sold -- is the SPR's primary price weapon.
See full article from DailyFinance: http://srph.it/empNgF
What would help is making oil buyers be the real thing, you buy it you pay for it and take delivery then you can resell it. Just like wal mart, it is called adding value.
1) Get
2) Out
3) Of
4) The
5) Way
Short term is just suck a really, really, really, hard concept to grasp, now let’s talk about what we can do for five years from now. Dang!!!!
You want lower gasoline prices>>>
I would limit oil futures speculation. The hedgies and Wall Street parasites like Goldman Sachs can take unlimited large positions. Ten years ago this was not allowed. Only producers (like Libya) and consumers (like an oil refinery) could take unlimited large futures positions.
GS and Wall Street has everyone (the right DC hacks) so paid off ..... so DC would rather see consumers get gouged and raped plus the Obama crowd like high oil prices to better pimp their green energy boondoggles
Take Wall Street and hedgers out of the oil futures game and petroleum will be $40 less.... about $65
I'd like to see electricity prices driven down very low.
Stop the ethanol program and put all research funds into the following:
Don't fund any production program until the research says it's ready and viable.
They don’t want the oil prices to fall. They WANT our BEHAVIOR to “improve” according to their “smart” plans.
I’ve never understood the logic of #5. how much would we all save if we went 20 mph? why does this have to be a law? what a stupid idea that was.
Lowering gas taxes means illegal aliens dont pay nuthin.
Drill baby drill.
You’re right, of course.
Enforce 55 MPH speed limit. Stick 55 n your ear. My car is geared for the Autobahn, so driving 55 is not efficient as driving 70.
Suspend state and Federal gas taxes. (Monkeys flying) That's hilarious.
Cut the gas tax (average 43 cents per gallon), release some of the Strategic Petroleum Reserve (we can replenish it later if need be), drill, baby drill — both offshore and on. Build more nuke plants and extract and use more natural gas.
And Bakken - andn the Rockies.
The strategic reserve is for strategic purposes; like war. Planes, tanks and ships don't run well on ethenol.
Just saying we will open Alaska —just the words themselves will put a chill in the hearts of the speculators and lead to some drop in place. HERE is My List:
1. FIX Libya with an invasion—and get rid of the mad man. Get other Islamic states to help—let Europeans take a lead— Maybe Turkey-Egypt too. Solve it quickly. THEN get out.
2. More Nuke Plants—newer and better nukes like the ones in Germany or south Africa. Build 75 new plants—If we are going to have electric cars we will need em.
3. Built new oil refineries—one new one for each state—build them on old military bases if we must.
4. Open all the coastline to drilling—and Alaska too. That and the National Parks too—
5. Get that oil shale conversion plants going—so we can make gas from shale/coal.
6. Dump environmental laws that hinder growth- BUT keep safety rules in place. No more little fishes or spotted owls putting American in the 19th Century.
And as soon as we find some we'll build refinery capacity within a stone's throw of the field to handle it without having to ship it all over hell's-half-acre. Refineries don't HAVE to be so big and complicated. Sure, it's complicated process, but no more so than making a good whiskey, and it doesn't even need the aging process.
Like so much of what America has done for the last 70 years or so energy has fallen prey to the bigger-is-better idea. We WILL figure out how to do without foreign energy when the chips are down. It would be much smoother and less stressful and expensive to do it NOW, while we have some cushion.
Diesel is the same way, CA is highest with an overall rate of 76 cents/gallon (taking out the fed rate of 24.4 cents/gallon, that leaves 51.6 cents/gallon as CA taxes (again per gallon excise tax and sales tax). Alaska has a total rate of 32.4 cents/gallon, again only 8 cents of which is Alaska's take once the 24.4 cents for the fed is removed.
The mix varies as to how the states tax fuel, but many only have an excise (per gallon) tax. Some add other taxes (sales tax, for example). As an actual cost of fuel, unless a sales tax is included, excise taxes as part of the fuel cost go down as prices rise. Take Idaho, for example, the fuel tax there is 25 cents a gallon for both gasoline and diesel, so at $1.00/gallon price the state excise tax is 25% of the total cost of the fuel. At $3.50/gallon, the tax dropts to 7.14% of the total cost.
The US average tax per gallon of gasoline in January of this year was 48.1 cents/gallon. Taking out the fed rate of 18.4 cents/gallon, then the average state tax per gallon of gasoline is 29.7 (again includes excise taxes and other taxes). For diesel, it's 53.1 cents/gallon. Taking out the fed rate of 24.4 cents, the average state rate is 28.7 cents (excise and other).
I strongly believe in developing multiple sources. I don’t want us to use up too much of our petroleum sources as in the far future, if we survive as a country, we will need them for all the other useful products derived from oil. Definitely develop non food commodity sources of ethanol and biodeisel. Get a really robust scheme of immediate action resources and supervision for Gulf and continental shelf drilling and accidents.
Regarding commodities, restrict LARGE positions to end users, like oil for airlines, grains for cereal companies. Allow small positions for traders. This would also help the rampant speculation in rice, wheat, soy, etc. that is going to cause more war dangers as people on $1 a day income go hungry.
Allow, make it easy, for small producers to feed the grid and produce biodiesel from waste oils. I watched a recent hearing in Washington, DC on TV regarding solar power. More than 500 people there have already put solar power on their roofs. A half a dozen small companies testified that they had grown from 2 to 15 or 20 people in the past 2 years serving this activity. There was a law that the local utility should incorporate their electricity production before going out of the area to look for renewables. The utility was ignoring this law and going as far as Michigan, NY, PA, and NJ to get renewable energy. Unless this was changed these small, growing businesses employing local people were going to have to lay off workers, or even fail. I believe that one aspect of the Tea Party movement is more “power” in the hands of the people.
Serious research into alternative energy sources would have more impact than any of those cockamamie ideas. That would depress oil prices, as movers and shakers in the market started hedging their bets that the stuff just wouldn’t be needed 10-20 years down the road.
You’re right, you’re right, you’re right.
I have some sympathy that random, very limited withdrawals from the reserve might work to break the cycle of rising oil prices (since speculation generally operates out of a pack psychology), but your fundamental point is unarguable - at some point the Straights of Hormuz are going to explode, and at that point whatever we’ve got in the strategic reserve is going to be too little.
Right on the button on every point.
It is a tragedy that we could have so much positive control over our energy costs (and hence our overall economic outlook), and instead we let the Sierra Club and the producers of “The China Syndrome” and the like, along with their enablers in the Democrat Party drive us to Third World status (while the Chinese and the oil sheikhs laugh at us while salting away our dollars).
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.