oil
 

moving is a pain in the ass. if you move to a place that is not crosscut with wireless networks, one has to wait around for the cable fucking guy.

i've been interested in the analyses of the relations between oil and food price spikes. it seems to me that finding much coherent in the american press about it is curiously difficult, given the fantasy-consensus that markets are like weather. and besides, this is a bummer, so it's better to focus on lint. anyway, the first piece is an interesting short overview by daniel yergin, which sets the stage:


http://www.ft.com/cms/s/0/57b6ff18-2...0779fd2ac.html


so what do you think is driving this and what might be done?
yergin makes two different types of argument:

conjuncture-->
3 or 4 basic points:

a) rising production costs
b) weak dollar
c) commodity speculation
d) biofuels.

structure--->
a) the role and status of transportation/logistics in the current "globalizing capitalist" model.

the last point is probably the real connector between oil and food price spikes---and is a problem with the entire model (one of them)--but that maybe we can get to either here or in another thread.

focusing on the conjunctural factors, then, because after all this is amurica and we are only thinking in these terms...

the causes are probably all of these--with the first being the point which for me at least requires some research still (if any of you have been thinking about this matter and have investigated it, please post what you've found....)

this morning, though, i found two articles which emphasize basically different interpretations.

from a cluster of articles in the guardian about the ongoing food price spike/crisis whcih has been affecting the southern hemisphere quite radically already--and which i'll make another thread about once the comcast asshat shows up---this piece about the connections of american biofuel production and its underlying subsidy pattern (go neoliberalism, its ideology and its reality) and fuel costs:

and from this morning's financial times, an article concerning commodity speculation and oil prices which centers on george soros:

http://www.ft.com/cms/s/0/5dbd0ffe-3...nclick_check=1


then there's the story of the collapsing value of the dollar since january...

this is still partial, but enough to maybe set the wheels of thinking into motion:

what do you think is going on here?
what if anything can be done about it?

perhaps this can be a collective thought experiment more than the ususal differend between folk who like the idea of markets in the abstract as over against folk who see economic activity as a type of social activity more broadly and so who reject the separation....

The price of gasoline should go higher. I propose a gas tax to place a floor price of $6/gallon on gasoline. I have to give some thought to what to do with the proceeds - my first instinct is to set up superIRAs for the populace - but to me that's less important than making gasoline more expensive. This is a basic Pigovian tax, and the benefits would flow broadly: environmental improvement, land use rationalization, increased population densities (with corresponding cultural benefits), better mass transit. And best of all it wouldn't force anyone to do anything - if you still want your SUV, you can have it, but you have to be willing to pay for the fillup.

Reducing subsidies to oil & gas and meat & dairy industries would help as well. This would result in increased (and more realistic) prices of oil and animal-derived food products. People would then use these with more moderation. You know, closer to what the rest of the world uses. (Even if you exclude the Third World.) The money could then be diverted into areas that would help with energy and food challenges.

I don't have much time right now to comment on the big picture of this issue. I will think more on this. It's been on my own mind lately too.

Maybe we should put an Iraq War tax on oil in order to pay for it now instead of letting the old guys in the congress/senate pass the buck to the younger generation.

What we need to focus on is renewable power generation and improving the electrical grid. Then we can figure out how to transport people using this power source.

But the first article got it right. I bet most of this was caused by former housing/dot-com speculators dumping money into the safe bet that is oil. More and more people are wanting to use it, and we aren't making any more than before.

with all due respect, this idea sucks. $6/gallon gas would not only make it cost prohibitive to drive, but would also make it nearly impossible to afford to fly, would make grocery bills go through the roof, etc., etc., etc. perhaps you're a trust fund baby or self-made millionaire, but some of us can't afford to pay $6/gas PLUS $6/gal for milk, $2.50 for bread, etc. due to the cost of shipping goods

There are too many people on the planet and it's making this issue a lot more difficult. "What can we possibly replace oil with?!" With 7 billion people? We probably can't. I mean we can give it a shot—combining a thousand different alternatives at once—but ultimately it seems pretty clear that there will be a lot more walking and bike riding in the near future. If we reduce consumption of energy to moving and cultivating food, AND we reduce the population by requesting (or providing incentives) for smaller families, we might end up with an equilibrium. Well we might have ended up with an equilibrium had we started already. We haven't, so we probably won't.

i don't buy that this is entirely a supply/demand thing. Venezuelans still pay $0.29/gal for their gas. it's equal parts a political thing (ie the Chavez and/or the Middle East hanging the US out to dry on supply) plus a market thing (commodities are the trendy thing to trade these days, but hopefully the bubble will burst soon)

as with all worldwide and nationwide issues, it is the average citizen (you and I) that both pay the price as well as set the policy. For example, in my city (bedford, TX) there is only one form or public transportation. A train that goes from Fort Worth to downtown Dallas. 6 months ago, there were only a handful on that train at 7 am. Now, it's standing room only and there is absolutely no parking spaces available. So full in fact, that the local PD visits every half hour to write parking tickets for all the illegal parking.

One has to wonder, is this the market playing itself out or is it a conspiracy to make us even further slaves to the corporate controlled government? (probably just got this thread moved to paranoia)

It's not exactly the case you've tried to make here.

Here are your top five exporters (barrels per day, March '08) of petroleum to the United States:

1. Canada (2,542)
2. Saudi Arabia (1,542)
3. Mexico (1,358)
4. Nigeria (1,174)
5. Venezuela (1,033)

The rest of the top 15 each exports less than 1,000 per day, most of them less than 300.

I can't agree with you that it's equal parts politics and market speculation. That is a bit of a stretch. You should not discount supply and demand, as it is a significant factor. The market speculation factor should be a short-term one, and time will tell just how much of an impact it has. Though many analysts doubt oil will drop below $100 anytime soon, if at all. Some are predicting $200 by 2010. The factor that few have raised here on TFP is that elevated oil prices expand the domestic markets where oil is produced. Look at Alberta.... BOOM! What happens next? Alberta's domestic demand for oil increases to fill the void of the expanding economy. Demand has risen, meaning there will be less to export in the long term. Speculation may have fueled demand in this case, but realize the two are connected, and the latter lasts much longer than the former. Oil prices will remain high, especially if they're right about peak oil.

So...if oil prices continue to rise, the alternatives begin to look better. Biofuels: Are they the answer? I don't know. I'd like to think they are one solution amongst many, but we're going about it the wrong way with corn. We feed much of that low-grade stuff to raise dairy and meat animals. Your rich foods will soon be more expensive. The price spikes will likely outstrip the spikes seen in grains, mainly due to the extended use of oil and grain products to raise and transport the animals. But I don't mind; we should be eating less of that stuff anyway--maybe start following the food pyramid more closely.

Market. I think the corporations would rather you all drive your own cars than take the train. False sense of independence and all that.

Much ado over nothing. Start taking accountability and personal responsibility for yourselves. EX:

1. Be a smart consumer. Budget carefully and LIVE WITHIN YOUR MEANS.
2. Drive less, consume less oil/gas
3. Grow your own vegetables. I started a vegetable garden earlier this year. It's so much better for you, really.

As a Conservative, I feel it is my duty to conserve resources. That is the core of being conservative.

There is no population crisis. There is a population distribution problem however, including things such as refugees, migration.

No more taxes, please. It only hurts the poor and middle class. If anything, time to reduce taxes and reduce spending.

Personally, I would like to see alternative energy (not corn or ethanol or hydrogen thank you!) more readily researched and studied. I don't understand why we don't go this route and become truly energy independent. Our current policy is extremely short-sighted and stupid (pardon my language). Solar, nuclear, tidal, wind: so many options we could explore. My Republican buddies were one of the first families to have a solar powered house when I was a child growing up in New England. It has more than paid for itself by now.

As a liberal I feel it's my responsibility to liberate alternatives.

What's wrong with conserving resources and alternative energy resources??

Why would you think there was anything wrong with them??

Wait, I don't think there's anything wrong with them (see post). I guess your post made it seem like it was contradicting my post or something like that, because you were quoting my post. *dizzy*

Ah, well...reset :)

I'm razzing you. Consider it 6-months-away hazing.

roachboy, temporarily, demand has outpaced supply, more supply is predicted to come on line in the next two years, as high prices push down demand, and the price of oil will plummet. I predict $2.00 gasoline in the US, in the next 18 months, and the cycle will play out again, as it did in '86 and in '98......

We in the US use 25 percent of entire world daily output, everyday....21 million bbls of petroleum equivalents, more than 60 percent of it imported. I think US consumption will drop 7 or 8 percent between now and next memorial day, especially if gasoline price stays above $3.50, for much of that time span.

Why do you think these guys are sitting on their hands? They have a disincentive, this late in the cycle, to commit to increasing supply, because it will come online into what they forsee, will be a glut of new supply, during a period of an economic contraction that gained momentum from the previous price spikes.....

This was why I did a recent thread proposing US government takeover of the petroleum exploration, drilling, and refining businesses in the US. It is no longer a business to be left to private business to be trusted with the responsibility of providing a prolific, lowest possible priced, domestically sourced supply of energy. This is a business that does not respond to classic demand driven price incentives, because the price rises, just as it does in homebuilding, to the point that the market gets crushed, collides with a growing supply, and kills the suppliers who are more nimble than they are greedy and ambitious. All of the national scale homebuilders will be bankrupted in the next four years, and the major oil companies will do their best now to be lean, mean, and underinvested in exploratory petroleum projects, until just before the next cycle low.....4 or 5 years from now.

Couple things to add to the mix:

The economic "downturn"makes commodity production slightly less attractive. Conversely, speculation in raw materials & basic necessities has become that much more appealing. Call it a vote of no-confidence in the capitalist system on the part of the capitalists themselves.

Reducing consumption in the US would be a good thing, but the infrastructure isn't there. For example, US railways are jammed up with freight trains. There is a need for more track. Instead of a debacle in Iraq, we could have had real high speed rail, running on its own track.

Only if you think the only feasible energy source going forward is petroleum. If petroleum gets expensive, other alternatives become more economically feasible. And behavior patterns change to account for the new market realities. (That's why Derwood's post up top is unpersuasive - it ignores economic dynamism and human adjustment to new circumstances. Which doesn't mean there won't be some difficulty in the short term for some people.)

The only real driver of the price of oil is the speculators. It's not demand vs. supply - the demand has dropped. Ask GM or Ford how much of an increase they have for pick-ups/suv's. Oh wait, they're suspending those operations.
The speculators need to be controlled as they were for power following Callifornia's brown outs.

I agree we need to get yourselves off the oil. It's the process that concerns me. As the price goes up, without any viable options, the middle class and poor are going to get screwed and screwed hard. If diesel goes up so does everything you need like food. People are already having trouble paying their mortgages. Add 25% to 50% to their needs costs and there's going to be real problems for many.

Simply pricing gas at $10 a gallon and waiting for the market to find another way for people to get to work or find a way to afford the increased price of food sounds like a bad idea to me. I don't think the problems will be as short term as you seem to think. Most peoples largest investment is their house. If this "plan" ends up costing, as I think it will, a large % of people their home the effects will most certainly not be short term.

the idea of a market finding a solution is a strange anthropomorphism.
it imputes agency to a network of networks.
why does that come from? hegel? god?

infrastructure-level change requires planning. capitalism in its particularly american variant has trouble with long-term thinking and trouble with even maintaining infrastructure without state support much less building it (think electricity markets in kali or attempts to sell off water supply management)...so the requisite change in infrastructure that would enable rail transport to become a more central (and rational) part of getting from a to b would require state action, like it or not. state action requires a plan.

gotta go.

You make it sound like speculation is the only problem.

As I hinted at in a previous post, as the price of oil rises, exports begin to falter as oil-producing countries hang onto more of it for local use while their economies expand on oil profits. This invariably causes a further rise of oil prices.

Oil inventories are another concern. It seems we aren't completely sure if some nations (yes, even in the U.S.) can meet demand during certain periods. (This fuels speculation.) Also, some oil-producers (Mexico, for example) are seeing dropping output. (This fuels speculation.)

You cannot isolate this issue to one cause. There are several. It is complex. Our economies are deeply dependent on this resource, and it isn't just for personal transportation. There very well might be a bubble, but if it pops (yes, "if"), don't expect things to return to "normal." Cheap oil as you know it is a thing of the past. I doubt we'll ever see oil drop much below $100/barrel, if ever. And I'd consider us fortunate if we don't see it hit $200 in the near future. An oil bubble isn't like a housing bubble or other bubbles. It's a different story here.

just something to watch: corn futures have hit limit up fairly repeatedly recently. IE, thye traded too high too quickly and were locked from trading for periods of time..

corn is now a huge part of our Energy AND our food...

just something else to throw in

When you throw in the energy needed to raise maize in the American style, i doubt the net gain amounts to very much, if anything. So, no, it's not really that big a part of our energy resources.

Ethanol from maize is yet another Bush disaster.


The common factor in all bubbles is a wave of valuation sweeping through a particular sector of the economy, be it tulips, land, or stock. When the wave passes through tulips, that value usually goes on to the next thing. (But not necessarily; the possibility of a net loss in value is always there. See, for example, 1929) Money is not going into stock markets. It is not going into land. It is going into oil and other raw materials.

How quickly does consumption in oil-producing countries increase?
It is very difficult to explain the spike in oil prices with an increase in consumption. You would be more correct to say that current prices reflect what the average mind thinks the average mind thinks the ration of future consumption to production will be.

Value is a phantom. It is not real.

here is an interesting bit of testimony from michael masters (his titles, etc are on the title page of the pdf, so in the interest of getting you to have a look, i'll be coy about them here) from 20 may concerning the price spikes in both petroleum and food

http://hsgac.senate.gov/public/_files/052008Masters.pdf


--his argument reinforces and to some extent explains soros' position outlined in the guardian article from 3 june that i bit for the op---and centers on institutional "index speculators"---

a cliff notes version from a blog i stumbled across, which was linked to the testimony:

after reading the entire testimony (with a couple interesting appendices), i'll just say read the whole thing and treat the above as a teaser or trailer. the actual argument is stronger than this.

the conclusion that masters advances is that index speculation be banned in itself, outright. finito.

what do you make of the argument?
how compelling an explanation do you find this to be--personally, i just finished reading it and am thinking things over, and have only reached the conclusion that this has to be a bit too simple.
nonetheless, it does a job on the claim that there is a demand spike originating in china and india, arguing that there is indeed a splike, but it is in the futures market and is driven by index speculation.

which leads to another question: if this is true, then why is the american press not talking about it?

but maybe it's not.


that's all for the moment.

No way. As a consumer I am fairly pissed now that gas is up around $1.34 for no apparent reason other than the gas companies can do it.
I predicted this during the first Gulf War, when gas jumped about 10 cents per litre to 56 cents. I figured that they would never go back down. Simply because the consumer would be level set to pay the new price.

Now, gas is double last year's price and 40 cents/litre (roughly $1.60/ American gallon) more than it was 2 months ago. WHY? because the gas companies can do it. That's why. There's no Gulf war, no Hurricane Katrina, no supply shortage. Just oil companies fucking with us.

Now entire GM truck plants are shutting down due to low demand. sure not everybody needs a pick up truck, and GM needed a kick in the pants... but sooner or later the oil companies are gong to learn that short term profiteering is just going to drive people away.

roachboy, does it (or anything else) go into detail in terms of which foodstuffs are increasing and by what rate? If corn is skyrocketing, this means other foodstuffs are too. (The meat and dairy industry is fueled largely in part by low-grade corn.)

I thought about this today because I heard a news bit on CBC Radio today that reported little price increases for food over the past year in Canada. (Under 2%.) But, then again, we don't have a devalued dollar, a housing crash, nor a threat of a recession.

And to answer you question on speculation, I think it is a simplistic answer, though it does explain a lot. The media is reporting on this, but it seems only to be in financial media.

Drive them away to what? That's part of the problem there is no viable option to be driven to.

to cheaper alternative vehicles made in countries where the oil companies have no market (China or Venezuela)

I don't understand.

The customers are driven to buying cheaper alternative vehicles made in countries where the oil companies have no market like China and Venezuela?

How does that help me get goods from ship to shore, or from central distribution hub to store to household?

or are you talking that people will buy bikes made in China or Venezuela?

we'll have $6.00 gallon and $200 a barrel by christmas. it's $4.41 9/10 here now and tha's $0.20 up since last week when I got gas.

Unfortunately we live during a time of 'short-term' market change. The world market will eventually settle on a stable rate. Meanwhile, a year...5.. or 20 years, the world will be forced to make changes. Market corrections are rough for the people who live through them, but necessary for the future
of a stable market.

Or cars. Already China is making really cheap vehicles for export. So is India.

a few months ago, a comrade who works on american agricultural policy and its history told me that there was a Problem coming and that what would drive it were arcane new financial devices created over the past 20 years and put into motion in the context of deregulated markets, trading in basic commodities by way of futures and/or derivitatives--the nature and meaning of these devices are not obvious, the implications of the trade not known.

i remembered this conversation this morning as i was reading the following, which is another bit of information which runs counter to the increased demand for oil line that folk seem to want to believe is responsible for this price spike.

read on...

http://www.globalresearch.ca/index.p...xt=va&aid=8878

[global research is a group i know little about the website for which i am looking at between sentences here. a canadian ngo, it has generated a series of analyses that link this bubble to food price difficulties in part by tracking movements with these same financial devices, in part by tracking the consequences of these movements.

see for yourself:

http://www.globalresearch.ca/index.p...heme&themeId=2

and evaulate for yourself...]]

now things become a little clearer (if you read this and the master's paper i linked yesterday)--to the extent that this sort of thing can become clear, given the opacity of these markets, the strange nature of the instruments, the particular character of the major institutional players---which amounts to a list of Problems, every last one of which neoliberalism has wrought.

deregulation of the financial sector has brought us to this place, in short.

the pollyanna assumption behind sch deregulation was and remains essentially imperialist--the americans are too politically powerful and too economically central to find themselves terribly effected by these markets, by deregulation, etc---but i think that you can assemble the elements of political devolution since 2004 in particular that have changed the reality (which was never terribly well described by neoliberal assumptions)

i'm still looking into this.
add more information if you are feeling inclined to look into it as well, comrades.

Venezuela? Why is Venezuela on the list? Gas there is around .20 a gal. Oil companies have a market there. Granted it's like Mexico and the only gas available is through the state run company, but there's a market.

As to China and other countries making and exporting small fuel efficient vehicles- most of those car don't and never will meet US safety standards.

How about this crazy idea- we start trying to making fuel efficient and alt. energy vehicles in the US. For freaking years now the US auto industries have focused on large fuel guzzling vehicles and have blown off the concept of anything else. Now they and their employees are paying for that strategy. Seems like after the gas lines of the late 70's they might have at least had a plan for this. No it's always "we have a prototype, it'll be out in 3-5 years." I've been reading this for 15 years now. They had, can't remember who made it, an electric car. People who leased them loved them. After all the leases were up they canceled them and took them out to the desert and crushed them. And they did this why?

baraka guru:

this isn't a direct answer, but here is a page from the ICE website which lists the commodity futures that it trades in. you may find this also something of the list you were asking about...

https://www.theice.com/commodities.jhtml

but those cars still use gas. and if the quality is anything like the quality of chinese manufactured goods that i've been receiving and using already, it's low quality.

the safety requirements are also an issue, standards of other measures as well such as distribution channels for parts, repairs. the infrastructure for selling vehicles in the US isn't as simple as putting out a shingle for a car brand. there's lots of regulation and logistics to figure out.

It is why many cars are not sold here from Fiat, Peugeot, Renault, SEAT, and Skoda.

I still don't understand how or what you mean that the oil companies will drive their customers away... drive them away to what?

Alternatives:

1. Public transportation.
   
2. Two-wheeled transportation.
   
3. Cycling.

The other thing that needs to be explored is intensification of population density. The continued development of urban sprawl in low density suburbs creates a demand for cars. It also works against efficient public transportation systems.

I still stand by my answer. Remember when Honda was a joke. And Toyota. And Hyundai. Now they are respectable. But I haved also switched out my car on most days in favour of my bicycle, and a 10 km ride to work. Like Charl said, intensification is a growing trend.

I don't doubt that. Volvo, Honda, Toyota, Hyundai all had humble cheap car beginnings.

But still run on gas, as far as 10KM ride, yeah that works in some climates, but won't do so good for others.

But your statement again the way I read it is that the gas companies are driving the customers away. Who's customers? GMAC's customer? then yes I agree, but if you're saying the gas companies.... then no I don't agree because Tata runs on gasonline.

I still need to read Jane Jacobs. :sad:

The thing to note about the cars coming out of China and India is that they are aiming for better fuel efficiency and are working on making cheaper hybrids. They could beat the other auto making nations to the punch.

My thought on the price of gas is that we should have a floor on the price that's somewhere around $4/gallon. It's at this price that other forms of energy become affordable. If the floor has to be kept by taxes so be it.

The higher prices can be met by an income tax break for the lower incomes.

Also, investments (either directly or via tax incentives) in alternative forms of fuel would come from the funds received from the taxes.

To me, it's more about making the West (read: US) less dependent on oil. Develop other forms of energy. Develop more efficient ways of living.

Gas company customers. When I look for alternatives, I am looking for options that would involve me using less of the product, thereby driving me away. I become less dependant on it.
- Vehicles that use less gas (hybrids, efficiency)
- alternative vehicles (scooters, motorcycles, bicycles)
- creative options (carpooling, autoshare or zip car programmes)
- purchase behaviour (reduced quantity at a single purchase, feuling based on dollar amount versus litres or fillup)

These are all ways to drive people away from using gasoline. My overall consumption has dropped in just the last two months. I live in what I would call a varied climate, yet I can manage to ride my bike through almost all except the most extreme temps. There are times when it isn't convenient, which are the times that I rely on my car.

Yeah I've read about this too. But not all the cars got destroyed...some people fought the car companies and got to keep theirs...bring back the electric car I say! I'm sure that originates problems all its own...nothing is perfect. Battery charging, volume capacity, autonomy...

Here is a link to an article on the documentary "Who Killed the Electric Car?"

I don't see that still. Even if you don't use gas in your car, you still use lots of petroleum based and products that could not have been created without petroleum. Plastics and machinining all require some sort of petroleum. The keyboard you are typing on, the mouse you are clicking with all have varing amounts of plastic which is derived from petroleum.

Just because you use your phone less doesn't send a message to AT&T that you're unhappy with their rates, LEAVING them as a customer is. If talking as a whole industry and you change from POTS to Wireless or even to Internet based... you're talking about customers being driven away.

So you are saying more like stretching your dollar spent on gas. I don't see that as "driving" them away. It's more like making the user of gas stretch their gas mileage out. If you are being driven away as a customer you'll do much more radical things like biking and walking to work. That is something I'll agree to as customers who have been driven away.

But if you are still using the product being offered... sorry you're not driven away, you're being mindful of how much you spend on the product.

note: i'm not sure but you may have to take one of the free subscriptions to the ft to see the video linked below.


http://www.ft.com/cms/s/0/5f4eb95e-3...0779fd2ac.html


the last two paragraphs are kinda interesting.

the problem of commodity future markets as the driver of this price spiral was at the center of the G8 meeting over the weekend. typical incoherence...

http://www.ft.com/cms/s/0/f6dddb5a-3...0779fd2ac.html


here's a little video clip featuring john damgard, president of the commodity futures association, who was interviewed late last week at the associations annual conference. it's interesting as well:

http://www.ft.com/cms/93ece7c0-07af-...4&fromSearch=n

his basic arguments are not terribly surprising:
he opposed any attempt to regulate the commodity futures market.
he invokes the spectre of american attempts to regulate being matched everywhere--at the same time, the underlying claim is that commodity futures circulate in an almost purely transnational context now and are in a sense beyond the reach of nation-state based regulatory moves.
the third main point: he claims, in that kinda wan manner, that what is driving prices up is the decision of institutional portfolio managers to shift into commodities markets, away from stock, etc., and the accompanying changes this move of very large players into this field have engendered. this he presents as "natural" as over against accusations of "manipulation"...

there is a scenario that one could build around this that would link up many factors unfolding in seemingly disparate areas over the past 8 years or so, including the neo-con rationale for the war in iraq--which i maintain was about attempting to alter the balance of power within globalizing capitalism in favor of the americans by establishing them as a military hegemon, the "lone remaining superpower"--which presumably would have enabled the americans to have a kind of political influence that would have protected them to some extent from the play of "market forces" that their economic ideology cannot but force them to understand as "natural"---well, that sure as hell didn't work, now did it? maybe this kind of scenario is, at the level of structure, what offended the neocon right about globalizing capitalism clinton-style: too multi-lateral, too much the americans as a player amongst players, not imperial enough.

if that's right, then structurally the americans are now in exactly the place that the neo-cons were worried about, but they arrived there because the neo-cons fucked up.

within this, there are the shorter-term problems/changes that i keep posting about to this thread---and it seems to me that the problem is becoming a bit clearer: this is *not* about supply-demand matters at the level of actual petroleum--this is a *political* problem. the politics are centered on the institutional consequences of neoliberalism itself.

there are probably intermediate steps to the above that should be filled in.

but let's say this scenario is accurate: that the primary driver of the prices spike in oil and by extension in food follows from activities in the transnational commodity futures market--that part of it is a function of the shift in institutional investment away from stock/binds etc and into futures--the index speculation that i've posted about above--these markets operate at a transnational level, so develping and imposing coherent regulation is going to be a problem for nation-states, even as the dominant political ideologies which inform decision-making are stuck, hopelessly it seems, with nation-states as their cognitive and operational center.

what happens now?

if this is the case, what relation is there between electric cars, say, and the actions of these futures markets?
seems to me that there is a disconnect between the responses folk have been talking about and what seems to be actually going on.
but what do you think?

Roach: I'm willing to look at data that suggests otherwise, but at the moment I really don't think that speculation is a primary factor in high oil prices.

You're talking about speculation in futures markets, but there is no intrinsic or necessary connection between futures and spot prices. Of course futures can have a significant impact - expectation of higher prices leads producers to hold off on selling, creating a short-term supply gap that is filled by higher spot prices than are justified by market fundamentals. BUT, opec countries have not cut back production, and I have seen no evidence that significant hoarding is happening anywhere in the supply chain - that is, there is so far no credible data indicating a rapid increase in oil inventories (although this is a difficult thing to tally and is not well-documented on a global scale). On the contrary, inventories so far as we can tell are at or near all-time lows. Krugman has talked about this in a number of recent columns.

This is one reason a bubble should be more visible in oil than it was in housing. It is very difficult to read the housing data and understand to what degree house purchases are driven by 'speculation' - consumers buying houses they can barely afford in the expectation that rising prices will leave them better off when they sell in a number of years - because it's not clear whether the home is an investment or, well, just a home. Those aren't even neat categories. In the meantime, you have large numbers of people living in homes that in their minds they intend to eventually sell [at profit], but these people's houses are obviously not counted as 'inventory' in the official numbers.

But in the case of oil, in the absence of excess inventory or reduced production, the story about demand seems to be the only one that makes sense with regard to the current rise in prices.

i'm in the process of trying to work out how to think this, hiredgun---and i'm also following the logic of the op i put up, which included the initial warning from george soros about futures trading, institutional investors and the "hoarding" generated (in the eyes of some) by the tactics these funds seem to prefer.
because i'm curious about it, and because the futures market seems of a piece with the transnational currency markets as areas of economic activity beyond the control of the nation-state, i've been focussing a bit on it.

i was looking at some data about production levels, oil supply levels and such over the weekend, but i can't seem to find it at the moment. later perhaps.

i don't think that the futures market is *the* driver, but i think it is am important one, particularly given the influx of large-scale pension/hedge players into the game.

the point is more that these levels are all interconnected, and that this may be a way to see the problems neoliberalism has wrought.

====================================
btw: i dont think the analogy between futures in oil and/or food and real estate holds.
futures is an explicit game. if most of the analyses i have read so far are correct (i've put some links above) the problem is not the futures market per se, but the changes in the rules of the game de facto brought about by the entry of new types of players into it.
driven out of bonds, etc. by things like the subprime crisis and weakness of the dollar no doubt...

on the other hand, i'm trying to figure out when these players started really shifting into futures--i just finished a 2006 piece that seems to have been an important factor in making the futures market more widely available--->

Facts and Fantasies about Commodity Futures. By: Gorton, Gary; Rouwenhorst, K. Geert. Financial Analysts Journal, Mar/Apr2006, Vol. 62 Issue 2, p47-68, 22p

which is interesting in that the language soros (for example) was using seems to have been taken largely from this article's ways of framing futures markets, assimilating their characteristics and possibilities to a readership more accustomed to equities trading, etc etc etc.


but am still looking around for information...

The piece below suggests that oil markets shouldn't be compared to the housing market, nor should they be compared to the tech bubble. Some interesting points below that outline the contrast....

Futures matter, sure, but the overall impact is likely to be minimal at most. I've thought this for a while now. I will maintain my position: Oil prices are up due to a lack of increased capacity (via new sources) and diminishing output (think Mexico), in conjunction with an overall global creeping demand. This will only get worse.

But it is political as well. This is a complex issue, which is why no one has any clear solutions. We tend to look for the silver-bullet solution (or magic pill, if you prefer) but this is oil. It isn't that simple. Throwing food into the mix only adds to the laundry list of pressures. It's hitting a critical mass. The question is, what are we going to see down the road that will make it worse?

It makes sense to approach the problems from many angles at once. The problems are certainly coming at us from several directions. I think you're right trying to find a "silver bullet" isn't the right approach.

As for what are we going to see down the road? I think we're already seeing some weather that could have a noticeable effect. The US mid-west flooding isn't going to help with food prices. Then there are other natural events, the recent earthquake in China comes to mind. All we need now is a huge volcanic eruption. I read an article a while back about Krakatau and it's eruption back in the late 1800's. It effected crops almost everywhere, if I read it correctly. Could end up being an even bigger mess world wide.

most issues that are of any interest are really many issues balled into one.
the only problem that complexity creates, really, is trying to figure out a way to think about it so that you don't simplify in the wrong direction.

there is a problem of supply.
there is a problem of falling-off of new oil potentials, so a sense of the finiteness of the resource as a whole.
there are a host of problems that all point to the degree(s) of dependence on petroleum and petroleum-based products. i look at my computer and see almost nothing but these products. i think about the fact i am on the internet and imagine how much of these technologies are petroleum-based. this is obviously way way bigger than gas prices.
but there is obviously a problem, a host of problems, of demand.
this seems far bigger than a matter of what car one drives, but maybe that's just me.

there is a problem of how prices for petroleum is set. this is obviously the space where the futures market comes in.

there is a problem of the collapse of the dollar, which impacts on prices independently of the futures market.

the problem of the dollar is an intersection between the transnational currency market and the political fall-out of the bush administration's actions and the assumptions made by currency traders as to the meanings of indices of economic activity in other areas as they impact on their sense of the dollar's prospects.

there is the problem of the increasing integration of markets for both oil and currency into a transnational space that provides at this point very little in the way of room to manoever for nation-states.

there is the strange matter of infotainment, televisual and otherwise, which seems to obscure as much as it informs about these matters.

there is the problem of neoliberal ideology, which is the frame of reference through which all this tends to be thought about, which is another matter.

there is a problem of the intertwining of petroleum dependency and agricultural production and distribution.
one way of thinking about this is the problem of scale---centralized corporate-style monocrop-based farming as the dominant paradigm for transnational agriculture may be starting to hit it's limits.
there are alternatives, but these are not matters of state policy at this point.
the transition from the present model to another may well suck for alot of people.

there is a problem of transnational logistics, the nature of food commodity flows, of food aid, of neocolonialism, which is also tied into all the above.

there are separate problems of how the prices for all these items are fixed. futures again.

there is also the problem of the dollar, again.

there is another, longer-term problem which has to do with the effects of fixing nitrogen, the revolution in fertilizer production this enabled, and the relation between that and global population and the relations between that and these other problems. this one freaks me out a bit when i think about it, because i take no particular solace in malthus, but it seems to push one toward that kind of thinking.

i'm sure there's more too.

it's pretty big.

roachboy, this is exactly what I'm talking about (and then some). All things considered, oil and gas is necessarily more expensive. In other words, it's been cheap for far too long.

Should we not be focussed less on oil itself and more on how we use it?

I see that I've been caught out in a consumer oriented rant, which will never hold up to a well ordered logical argument. I suppose nothing will and your point drives home how much of the short hairs the oil industry has the consumer by. Yes, all your points are true, yet as an emotional consumer I am allowed my rant. And I stand by it.

Creativity to find alternatives are as much to driving away consumers in this case as are turnstile hoppers are to detracting from the bottom line of transit systems. As are the potential benefits of avoided costs compared to the concrete benefits of net FTE reductions or reduced O&M and/ or Capital costs in a financial budget.

And in keeping with the spirit of this discussion, I wish to retain what little satisfaction I can get when saying that Big Oil is driving me away from consuming their product in this manner (yea gods, and I, a gas man himself!).

I'd like to point out another creative method that consumers are using to get out from under the heavey thumb of big oil: Hypermiling. This rather timely article came out in the Saturday Star:

http://www.thestar.com/article/442839

http://www.thestar.com/article/440653

around squeezing every last drop of forward momentum out of your gallon or litre of gas as you possibly can. Some of the suggestions are downright dangerous, some inovative, but a lot remind me of my tactic during my univesity days of purchasing gas in 5 dollar lots, hoping to find that cheaper gas station just down the road (you know, at 35 cents/litre, instead of 37), and puting the car in neutral to coast down the hills etc.

Here is the website, and some more references.

http://www.cleanmpg.com/

http://www.hypermiling.com/


Cheers :thumbsup:

An interesting article found here (LINK) about the potential end of Urban Sprawl. In other words, the intensification of population as a result of changing trends and high fuel costs.

the suburban model required considerable infrastructure (roads, highways) which were functions of decisions made at the state level concerning automobiles as the basis for the american transportation model. so it relied on automobile production, was a function of economies of scale...it also relied on the standardization of house construction. it also relied on the transformation of consumer credit right after world war 2, which enabled mortgages to be obtained by people whose socio-economic position would have prevented it before--the gi bill was a big part of this--so you have even at the most general level a combination of public and private, state and corporate actions---and if you push thinking about this into the 1950s, the other element which emerges is a kind of total advertising campaign to sell this model--which worked until it didn't.

from this only 2 points:

the suburban model as it developed after ww2 would not have happened without substantial policy choices entailing the directing of state resources to infrastructure development---it follows then that if the transportation model, and the housing model which is intertwined with it, are being challenged by the price of oil that nothing will necessarily come of it until there are policy-level decisions made to begin transforming infrastructures (like mass transit or rail)....in other words, these are not "market-driven"--that's backward. the other point is linked thereby: people want what they are told they want. we are nice like that. easily managed. so there'd also have to be a substantive marketing campaign, more or less on the order of much of 1950s pop culture, to sell the alternative "way of life"--which over time would become as inevitable and necessary as the current "ways of life" because we are pliable and nice like that as well. what's real is rational, hi de ho.

this is, btw, one of the reasons that the next presidential and congressional elections seem to me so important. whats a bit depressing is that i see obama as somewhat more likely to address these sorts of problems (a statement that makes me squirmy because it repeats this goofball ideology of All Logic Emanating from the Skull of the Leader), whereas mc-cain would in all likelihood try not to address them at all.

On speculation, which I continue to think plays only a minor role in current prices. Krugman explained it a few days ago almost exactly along the lines of my earlier post:

And for those who like theoretical models, there's a brief paper here:
http://www.princeton.edu/~pkrugman/S...Signatures.pdf


Roach: on the issue of infrastructural change and the need for policy direction, I am entirely in agreement. We are seeing some shifts in demand in the US - metro-rail systems are more frequently used than in many years, and bicycle shops are reporting that they are moving bikes so quickly that they can barely maintain their stock. Still, I am pessimistic that you can simply rely on the individual consumer pain of high prices to force really large-scale shifts in patterns of residence, distribution of businesses, etc.

I actually ride my bike to and from work now instead of taking the metro - a cool 7 miles each way, it is a wonderful way to start the day - and I am lucky that most of that distance is covered by a great bike trail, it feels a lot like a highway for bikes, complete with walls and guard rails on either side, on-ramps and off-ramps, exit signs, and a big yellow dividing stripe down the center of the path. I wonder what kind of investment it would take to ensure that all major urban areas are criss-crossed by a network of similar highway-quality bike trails. It doesn't seem any more infeasible than the equally impressive system of highways that we built in the 20th century.

Logistically, I would like to do this to (it's only 10 km to work) so tell me how you manage the clothing change, showering and carrying of your laptop, notes, lunch etc.

Actually for me to go along a quieter (less travelled by cars ) route, would extend the trip to 12 km. I would have to pack a change of clothes along with my work out stuff and an iron for my suit and shirt. Take a shower once I got there (luckily we have an internal gym).

I would need to get paniers that would hold a computer and briefcase. Are you managing in this manner?

I would ride more to work, except the bike access in Toronto between my place and work is atrocious. This city needs to do more to make it bike friendly. But, at any rate, I'm rarely ever in a car these days. The most I use public transit is the subway, and it's always packed, so I'm sure it must be somewhat efficient.

I work in a small office that gets hot in the summer anyway, so showering isn't a big deal. I just freshen up in the bathroom with a towel and deodorant. Leto, just get yourself a nice backpack. I'm sure you could manage up to 10 lbs. of stuff no problem.

My trouble is reducing my environmental footprint in other ways. I'm sure I'm burning too much oil in the consumer choices I make.

Sorry for the off-topic, but simply to answer the question that was asked of me:

I have a gym membership at a gym across the street from my office (have had it for a long time). This has come in very handy for biking in, because I don't need to bring a towel, soap, shampoo, conditioner (these are all provided). The gym locker room even has a decent iron. All I have to do is toss my work clothes in my backpack and I am good to go.

i've been commuting by bike for a few years---the place i am working now has a gym and locker room, which will be good--perhaps i'll wash off my daily dose of cash repellent in addition to sweat.

but it seems that maybe cash repellent is in the atmosphere.
yesterday oil went over 140 a barrel--the prediction below of 170 before "we" start to see a settling is kinda interesting.

http://www.ft.com/cms/s/0/0c984a74-4...0779fd2ac.html

today the cause is tension between israel and iran:

http://www.nytimes.com/reuters/busin...=1&oref=slogin


of course, and more than you may think, the bush people have been busy busy busy little bees in iran. this long piece from the new yorker.
it really should have its own thread, but it's long and works here too:

http://www.newyorker.com/reporting/2...7fa_fact_hersh

My feeling is that the short-term fluctuations in price do indeed reflect these sorts of temporary geopolitical murmurs - like increased tension between Israel and Iran. But these quick price moves are just the foam on top of a rising tide with altogether different causes.

On the Hersh piece: very interesting, although also not that surprising. StratFor had a bit of a unique take on it; they claimed that the administration deliberately leaked this information through Hersh (someone whom they knew would be credible) as a way of putting pressure on Tehran without the overt appearance of saber rattling. This in contrast to Rice's recent flirting with the idea of exchanging diplomatic personnel (though not embassies) with Iran could be a kind of good cop/bad cop or stick/carrot routine.

Crude is above $145 today, following ECB rate hikes. Dollar falls, oil rises, clock keeps ticking.

yup.

but imputing motive to these price fluctuations is the new astrology, don't you think?

http://www.ft.com/cms/s/0/f2bf5b14-4...077b07658.html

Going after speculators more harm than good?

http://www.economist.com/opinion/dis...ry_id=11670357

this is interesting--from today's guardian.
the claim is straightforward.
what surprises me in it is simply that the world bank hasn't published these results:

http://www.guardian.co.uk/environmen...enewableenergy

here is another article in the guardian--if you follow the link, you can in turn link to last week's oxfam report on this same linkage, which is largely confirmed by the world bank report. it is useful to read because it presents the above claims in more detail:

http://www.guardian.co.uk/commentisf...arbonemissions

or you can go directly to the report (full text as pdf) here:

http://www.oxfam.org.uk/resources/po...ent_truth.html

this is interesting for a number of reasons--one of which is it uncouples the food price spike from a direct relation to oil prices, but strengthens an indirect linkage.


here is a link to the world bank's main page, a feature and a report on the oil/foodprice crises:

http://web.worldbank.org/WBSITE/EXTE...K:4607,00.html

which does not include information cited in the guardian piece, but which does echo it....


what do you make of all this?


--trying to keep the different questions separated within the same thread. maybe we can get steered around by new information as it surfaces--so the matter of futures trading, which is interesting...but this is newer, so there we are....

The oil we eat

Remove the need for bio fuels. Obviously the chaotic implications of the overly complicated system is beneficial for a few only. Corn is also a very harsh crop on soil. I believe that the central Soviet republics exeperienced environmental break down due to corn and the need for excessive fertalizer repleneshment. Now it is the crop used for almost everything from bio fuels to candy.

Allow market forces to run with the cost of normal fuel, and finance alternative R&D. There is lots of oil. The world will get warmer or colder. live with it. The effect of canada or US on global warming pales in comparison to China or India, so let's be prudent but also lets ditch the enviro-McCarthyism.

Between this and high fructose corn syrup, can we now safely call corn the root of all evil? ;)

In seriousness - it has been commonly held by a lot of economists for a while now that biofuels were doing more harm than good. But I am surprised that the WB would hold this report confidential, and it would do us all some good to have some hard analysis see the light of day. Are there plans to release it now that it is out of the bag anyhow?

Hope this isn't too off-topic, now that we are talking about economic policy in general and all its various implications...

From economist Joseph Stiglitz, on 'The End of Neo-Liberalism' [a bit dramatic, no? ;)]

I think what he gets at towards the very end - about the mismatch between 'social' and private returns - is absolutely crucial. It is outrageous that those who engineered this problem - the lenders and shadow banks that issued, packaged and repackaged mortgages, among many others - inhabit a realm where this kind of colossal failure is met with multi-million dollar severance followed by retirement. I want to emphasize that this has nothing to do with moral outrage on my part, or any kind of class envy/hatred - 'how can they walk away rich when millions are suffering?' or anything like that - but is a simple matter of pragmatism. I believe strongly that people respond in regular and predictable ways to economic incentives, and in this case we have a systemic problem, where the entire edifice of banking and finance was rigged to incentivize what turned out to be horrendously risky behavior. I am arguing that the financial crisis we're seeing now was more or less an inevitable outcome of the set of incentives in place for top financial management, who by dint of their contracts could not lose by the actions they took, which have resulted in the complete erasure of the homeownership gains of the 2000s and at least a ten-year setback for equities, never mind the USD -> oil price spiral.

A counterpoint to my bullishness on oil prices. The distinction between his view and mine - which gets kind of buried, but is there - relates to confidence in the inventory data. He argues that producers are indeed holding on to more product to sell futures rather than for immediate delivery, and that eventually when a lot of these futures clear (with the 'speculators' holding the contracts uninterested in the black stuff itself) we will see a glut of supply driving spot prices way down.

http://www.nakedcapitalism.com/2008/...of-60-oil.html

i haven't had a chance to read this yet, but the guardian just released a copy of the world bank report on biofuels that was to be--um..suppressed:

http://image.guardian.co.uk/sys-file...0/Biofuels.PDF

i'll get back to this...

later:

hiredgun: i don't think that the steiglitz claim about a fundamental crisis unfolding for neoliberalism is at all melodramatic. we're already in it. but unlike the retrospective constructions of crisis so dear to historians and other analysts, who necessarily based their modelling practices on the past, a crisis in real time seems marked largely by incoherence and/or a certain randomness of actions, which are functions of instabilities of meaning. retroactively, crisis is typically modelled as transition--they aren't the same thing. it's a kind of pollyanna view, in fact, to see in crisis a version of "it all works out in the end"---which is what crisis models generally demonstrate. teleological fallacy and all that.

the world bank piece is interesting--it's claims are quite strong, quite clear and pretty well demonstrated by the data--but i'll defer setting about a debate, figuring that anything i say is a spoiler and it's better for you to read it and post stuff in response.

suffice it to say that if this report is right at all, what the bush people have been saying is yet another instance of ideology conservative-style, which is delusional claims supplemented with footnotes which reference information shaped by those same claims.

http://www.earthtrends.wri.org/searc...ex.php?theme=6

a couple posts ago, i mentioned the earthtrends database on energy---the site is back up, and this page is the index for the data.