News from the blogs

Looks like there's plenty to keep y'all busy today, so I'll just point out a couple of relevant posts from other blogs.

A couple of days ago, Gristmill's Tom Philpott reported on a Wall Street Journal article suggesting that the Chinese demand for oil is slackening this year.

Environmental Economics has a great quote from Sen. Pete Domenici, who asked the oil company execs to explain to him how the price of oil is determined, since "my constituents and, I believe, most Americans think that somebody rigs these prices".

Both of these blogs also mention that the provision to drill in the Arctic National Wildlife Refuge has been removed from  the spending bill (just in case you hadn't heard).

The Senate Committee on Energy and Natural Resources grilled oil company executives yesterday about their role in recent oil price increases. For some reason I did not find any coverage in the mainstream media of this very interesting exchange between the senators and oil tycoon Jed Clampett.

Funnier in concept than execution, but I enjoyed it anyway.

Too bad they don't play Hill Billy background music during those huff and puff, Ivest-i-gations by the honorable gentlepersons from the Hill.
I believe I heard a radio report today that said the oil execs were NOT under oath.  If this is true, it's a travesty and an even bigger waste of everyone's time.

And to stress something I've said before--eventually ANWR will be drilled, as will the coastal areas currently off limits.  I don't see how anyone can understand peak oil and think that politicians won't approve drilling for it wherever oil companies say there's recoverable oil.  

If you were a politician and people were screaming about $5 gasoline and sky-high heating oil bills, would you vote against drilling known oil deposits, even if you knew it wouldn't lessen the economic pain?

Look, this makes great political theater, but that's all it is.  I thought we here at TOD were more informed than the average American.  We are here because we understand that oil is running out.  

You and I both know that if you have something that is vital to the consuming public and it suddenly goes in short supply we all know that the price is going to rise.  We all know that the holder of this precious commodity is going to profit handsomely from this event.  These companies are in business to MAKE MONEY. They have no other real purpose for existance.  If they don't MAKE MONEY they go out of business.  

If the public doesn't like the amount of money they are making they need to elect people who will tax their profits to a much greater degree.  However, as we all know, this will have NO IMPACT, or at least NO POSITIVE IMPACT on the price of gasoline to consumers.  Of course it may have a NEGATIVE IMPACT, as fewer companies will explore for and develop supplies of oil.  But again, we know that the Senators really don't want to get to the bottom of the problem - they just want to get on TV looking tough for their contituents.

I guess some of you guys are getting tired of my posts on the political response to high gas prices, but I'm fascinated by it for some reason. Partially, I think it's that it gives us a sense of how long it's going to take the public to realize what's going on. I know many of the readers think that the government response is just totally not worth examining at all, but I think we're missing something if we don't keep tabs on it. As long as the government ignores the issue of depletion, the people will stay in the dark too. And I still firmly believe that nothing is going to change until a majority of the populace realizes what's going on, and demands some kind of action (or starts conserving--which only happens when governments force them to).

Bubba says that no matter what the government does, it won't make a difference as to what the gas prices are. Yeah, I think that's probably true, but the rest of the country doesn't. Furthermore, to some extent, we do rely on the politicians to bring awareness of some issues to the public, which is why it would be great to really push for the Bartlett for President 2008 idea. Not because he'd win, just because he'd bring the issue to the public.

no matter what the government does, it won't make a difference as to what the gas prices are. Yeah, I think that's probably true

The political arena is fascinating to many of us, particualrly if it means "we" are going to war and "we" are going to make the "ultimate scarifice".

Government has a great deal of influence regrading what "demand" the public will make for various goods & services. Remember when no one was buying French wines and eating only "Freedom" Fries?

Regarding the Wall Street Journal article: it seemed to have a big impact on the oil market (along with the weekly EIA figures) so I read it a couple of times. The most interesting sentence to me was the one that said that Southeast Asian oil demand (ex-India and China) grew as quickly last year, as China's did. Pity they didn't specify whether they denominated this growth in percentages or in barrels consumed. I THINK they implied that Southeast Asia accounted for nearly 16% of incremental world consumption last year -- is that how other readers interpeted it? Tellingly, the article did NOT postulate any drop in Southeast Asia consumption growth rates this year or next.

I think at least some oil traders may have gone with the headline and lead, therefore concluding that China's consumption was dropping in absolute terms. In fact the atrticle forecasts a drop in growth RATES from stratospheric to merely mind-boggling. On the other hand, if you are long oil futures based on stratospheric growth and you don't see stratospheric growth, there is one rational thing to do: sell.

Meanwhile the article seemed to postulate that, after factoring out one-off events like preparations for the Beijing Olympics, and coal supply bottlenecks that forced power plants to burn deisel, China's oil consumption might be expected to grow as fast as China's GDP -- a cool 9.4% this year, not too shabby.  At 9.4% compounded, Chinese oil consumption would double in less than 8 years. The Journal's conclusion that if China's oil consumption growth continued at this sort of pace, the world might have more slack in the system to cope with emergencies like Katrina --that was unsupported by the reporter's own facts.

Downright sloppy if you ask me.

Interestingly, AGEdwards just revised their "fair market value" from $43.00/b to $ 57.00/b. They have an interesting model to determine fair market value, partly based on the reaction of price to inventory change, and that is the main variable that led to this increase. It's quite a remarkable change.  Murray