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  • The Obama Oil Embargo

    From canceling oil leases in his second week in office to denying the XL Pipeline this year President Obama and his administration have offered up a non-stop assault on affordable energy.  Now that high gasoline prices have come home to roost, the president is flailing around for an energy policy.

    His recent attempts at energy policy include:

    • Nobody can do anything about high gasoline prices.
    • Maybe I should release crude from the Strategic Petroleum Reserve.
    • There is a lot of drilling that I haven’t been able to stop.  Don’t I get credit for that?

    The latest attempt is to blame everything on speculators.  And why not?  Previous polling shows that 80 percent of Americans believe petroleum price spikes are caused by speculation, which means no more than 20 percent believe it is caused by the fundamentals of supply and demand.

    There are several flaws in “the speculators did it” theory.  The first is why do they only do it occasionally?  That is, why don’t speculators want to make unconscionable profits all the time?

    Second, why do the index funds and all the other bad guys only speculate in oil?  Where are the profiteering speculators in natural gas, whose current price is about half of what it averaged over the last decade?

    Third, there are sophisticated traders on both sides of the petroleum markets.  For every speculator who makes money on a trade, somebody else will lose money.  Blaming speculators on continued price increases requires an endless string of chumps to take the other side of the speculators’ deals.  If anybody should be the chumps, it should be the newbies from the insurance industry and hedge funds, but they are at the top of the most-wanted list.

    Finally, for speculation to drive up prices, the speculators must either cause oil production to slow down (which they haven’t) or to pull oil off the market.  If the flow of petroleum and its products remains unchanged, the price at the pump will not change.  If petroleum is pulled off the market, which can happen even though there are limits to what can be stored, it will eventually come back on the market.  And the question becomes, “When the oil comes back on the market, is the price higher or lower than when it was pulled off the market?”  The price will only be higher if the amount supplied at that time is lower or the demand is higher.  In either of those cases, speculators have helped moderate price fluctuations and will be rewarded with profits.  If the price is lower, then the speculators did a bad thing and will be punished by losing money.

    The real problem is that combating high gasoline prices requires a greater supply, and this administration’s policies have pushed the other way.  It seems the administration does not really want lower gasoline prices.  Steven Chu, Obama’s non-car-owning Secretary of Energy, famously said we need to get our gasoline prices up to the $8-$10/gallon level they are in Europe.

    Unfortunately for the president, the voters want more gasoline and lower prices.  So, in the time-honored Washington tradition, he creates a boogeyman and blames his energy failures on speculators.

    Posted in Energy [slideshow_deploy]

    8 Responses to The Obama Oil Embargo

    1. "Unfortunately for the president, the voters want more gasoline and lower prices. So, in the time-honored Washington tradition, he creates a boogeyman and blames his energy failures on speculators." Gas and food prices throw sand in the gears for an anemic recovery. Obama is getting hoisted by his own petard. Only 20% may understand supply and demand, but 100% understand $4 a gallon gas.

    2. Bobbie says:

      The President of excuses. Logic is not his forte which is unusual for the average intelligence not to grasp onto naturally. Can't wait to get the wiser in office, someone that faces the problem and man enough to fix the problem without mention of pixie dust and silver bullets but using real intelligence!

    3. JB07652 says:

      Shouldn't there be oversight of the GOLD market?? That's been run-up by speculators too…..CORN, SOY? I wonder if Harvard and Columbia still brag about this guy being an alumnus.

    4. Stirling says:

      Just thank you local Enviromentalist for putting the "planet" above the welfare of it's people.. The POTUS, is just catering to a political voting block, as he has done with every other policy decision of the past 3+ years.

      From a Religious standpoint, God created this planet to "support" us, by giving us the means to survive off the resources of the land.. But now we have a leadership that is not willing to use the gifts of God to achive those ends.. This is the perversions that you get when you turn away from God, as this administration has done in removing him from our public spaces, as well as putting false gods (The Planet, Government) higher then God.

      • Stanley says:

        God calls on us to be stewards of His sacred creation. Currently species are going extinct between 100x to 1000x faster than normal rates which shows we are not treating His creation with care — this call to stewardship is part of our sacred calling and an indication of our gift of free will. Christ taught to create true, lasting prosperity without greed and recklessness. Let's fulfill our duty to care for and respect this beautiful creation as we were entrusted with free will to do so.

        • Stirling says:

          While I agree with some of your points that respecting Gods creatures is important it misses the point that Humans are higher in Gods design then animals. (We were created in Gods Image, and have free-will, while animals were not.) Devine Providence chooses what become extinct, and what survives, (with or without our intervention).

          My issue (again) is when man thinks that they can interviene and change God's natural process by limiting our choices they are being "God" (not repspecting him) which is blasphemy to the allmighty Lord. Oil is a creation as animals are in the world we live in, both have uses and a place in our world, to limit importance of either is close minded.

    5. Blair Franconia, NH says:

      Obama's going down.

    6. Dave Greenup says:

      obama -wants 10 dollars a gallon for gas–so he isn't done untill he thinks of being relected

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