"The question is: Who is doing the manipulation? What the man from Exxon-Mobil was likely referring to is the impact of speculation by hedge funds and other institutional traders upon the price of oil. No one knows how much of the current price is due to traders' bidding up the price -- estimates ranges from 20 percent all the way up to 60 percent. We don't know because a huge percentage of energy trading is done on unregulated electronic exchanges that don't have to report big market moves to the government -- because of a law, signed by Hillary Clinton's husband, that exempted those exchanges from close government scrutiny. If Clinton really wants to start cracking down on oil market manipulation, the first place to start is in regulating energy futures trading to the point that the government actually knows what's going on. In the long run, that would be far more meaningful than a gas tax holiday or even a windfall profits tax.
Which is not to say a windfall profits tax is necessarily a bad idea: The oil companies are obviously benefiting phenomenally from current high prices; why shouldn't they share some of the pain everybody else is going through? But in normal circumstances, when the price of oil rises, the likes of Exxon and Chevron and BP do their best to boost production. But the most telling aspect of the current oil market is that they have been unable to do so. As David Strahan, author of "The Last Oil Shock," wrote in an Op-Ed piece in the Telegraph, the "righteous indignation over the level of profits reported by Shell and BP ... entirely misses the point. These issues are trifling compared to global oil depletion."
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The most charitable way to interpret Hillary Clinton's position is that she wants to provide Americans with some short-term help while engaging in a long-term plan to address the challenges of "foreign oil dependence." But the problem with that defense is that any serious long-term plan to address the two great challenges of the 21st century -- climate change and the energy crisis -- will require that the price Americans pay for energy goes up. There will be pain. The sooner we start biting the bullet the better. "
Wednesday, May 07, 2008
For Jess: a note on peak and Hillary
Hillary's comments this week on "Elite Opinion" disgusted me because they smacked of anti-intellectualism and pro-truthiness. Andrew Leonard disected the remarks in depth, though, and says,
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I'm truly no economist. But if I understand supply, demand, investment and depletion correctly (which I guarantee I do not): This is not (for once) oil companies fault. They suddenly have a limited number of barrel chips to throw in, and they're damn well going to get as much as they can for them. I hardly blame them for this. They're all in. If I was clearly, obviously running out of my product, as was the rest of the clamoring world, I'd hell yeah start charging outrageous prices for it. That's capitalism for ya.
Hillary wants to give tax breaks to help consumers get cheap gas this summer, to buy votes. But Bly is absolutely correct: the sooner Americans kick cheap gas, and the entire infrastructure that goes with it, the better. A true leadership move, from, say, Obama, would be to propose RAISING the gas tax instead, to force more cars off the road, decrease comsmuption, improve quality of life, and use the revenues for greater investment in alternative energy, public transportation, and tax credits for any family, corporation, or business that can document a lowered carbon footprint. Double that credit for any oil company that moves entirely into other (preferably renewable) sources. How much of a tax break would it take to get Exxon, Mobil, and Shell to go rape Venus for noxious burnable chemicals?
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