News Congressional Hearing on the Effect of Speculation On the Price of Oil

[mheslep]

... But add to this the economic theory that says oil production from ANWR will result in reduced production in other countries...and that squashes most of the expected gain in price. ...

Yes I see that argument posed quite a bit now. I havn't looked carefully, but it seems to me that if the 800 lb gorilla producer argument really held true then nobody would ever mine/drill/farm for some resource unless they were the world's largest producer, as then logically the larger producer could always just reduce its production rate and defeat your efforts to depress price. Visibly, this is not universally true. I suspect not mainly because the large producer most often maximizes income at high production unless a glut state is reached. The only impact the large producer can have is to cause short term spikes to punish or attempt to bankrupt smaller producers, which can't be done here.

 

[Gokul43201]

Yes I see that argument posed quite a bit now.

Here it is, being posed by the EIA(DOE):

With respect to the world oil price impact, projected ANWR oil production constitutes between 0.4 and 1.2 percent of total world oil consumption in 2030, based on the low and high resource cases, respectively.17 Consequently, ANWR oil production is not projected to have a large impact on world oil prices. Relative to the AEO2008 reference case, ANWR oil production is projected to have its largest oil price reduction impacts as follows: a reduction in low-sulfur, light (LSL) crude oil18 prices of $0.41 per barrel (2006 dollars) in 2026 in the low oil resource case, $0.75 per barrel in 2025 in the mean oil resource case, and $1.44 per barrel in 2027 in the high oil resource case. Assuming that world oil markets continue to work as they do today, the Organization of Petroleum Exporting Countries (OPEC) could neutralize any potential price impact of ANWR oil production by reducing its oil exports by an equal amount.

http://www.eia.doe.gov/oiaf/servicerpt/anwr/results.html

 

[mheslep]

Here it is, being posed by the EIA(DOE):

http://www.eia.doe.gov/oiaf/servicerpt/anwr/results.html

...Assuming that world oil markets continue to work as they do today, the Organization of Petroleum Exporting Countries (OPEC) could neutralize any potential price impact of ANWR oil production by reducing its oil exports by an equal amount.

Yes no doubt they could. The interesting argument is whether they would. I argued above it is counter to their interests to do so as they'd lose income. I observe that major commodity suppliers only cut production when supply greatly surpasses demand causing a possible glut and price collapse, such as with US farmers paid to leave fields fallow; that is not going to happen with oil given world demand.

 

[quadraphonics]

Sure, 5, 10, 20 years. A significant factor in the value of a commodity today is the expected quantity of supply in the future, reflected back to today's price by net present value calculation. The time lines relevant to someone calculating todays price are based on the time lines involved in changing the supply and the demand. That way if it is known, for instance, that the world supply of some commodity will be totally exhausted in 10 years at current demand, a price signal is sent _now_ that reflects that looming depletion, and of course vice versa if it is expected that the supply will increase in 10 years.

What you're missing is that the speculators are not bidding up on the premise that oil supply is going to run out in 10 years. They're bidding up on the premise that *demand* for oil is going to continue to ramp up over the next decades, due to China and India (not to mention the US). Increasing world oil production by a couple of percent is not going to alter that fact. It might produce a momentary slowdown in the increase of the price of oil, but on the other hand the signal it would send to consumers (don't worry about cutting back, just keep consuming) would tend to reinforce the specualtive pressures.

 

[mheslep]

What you're missing is that the speculators are not bidding up on the premise that oil supply is going to run out in 10 years.

I used that boundary case to show clearly how future demand / supply expectations are factored into today's prices, not to imply any serious market movers think the world supply will exhaust in 10 years.

They're bidding up on the premise that *demand* for oil is going to continue to ramp up over the next decades, due to China and India (not to mention the US). Increasing world oil production by a couple of percent is not going to alter that fact. It might produce a momentary slowdown in the increase of the price of oil, but on the other hand the signal it would send to consumers (don't worry about cutting back, just keep consuming)

Yes demand will go up but new supply will come on line like the large Brazilian offshore. I suspect the US is actually looking at a price hike up to $6-$9/gal in 5 yrs w/ no drilling, versus perhaps maintaining small price increases by opening ANWR and offshore. Certainly the current price is not telling anyone be happy, don't worry.

...would tend to reinforce the specualtive pressures.

The main speculative pressure is due to the weak dollar and inflation, not consumer spending habits which have indeed changed without oil price effect.

 

[edward]

People are apparently starting to conserve.

With gas prices at record levels above $4 a gallon, Americans are driving less and abandoning gas-guzzling vehicles, according to government data. Americans drove 1.4 billion fewer highway miles in April compared with the same month last year, and 400 million fewer miles than they did in March, according to the Transportation Department.

http://www.startribune.com/business/20586524.html?location_refer=Business

 

[edward]

The oil Futures Exchange has been labled The Dark Market.

http://www.businessandmedia.org/articles/2008/20080618102504.aspx

Edit: short video clip on link.

 

[mheslep]

People are apparently starting to conserve.



http://www.startribune.com/business/20586524.html?location_refer=Business

I don't know if conserve is the appropriate verb, but certainly gas use has declined.
http://www.greencarcongress.com/images/2008/04/30/cagg.png

 

[mheslep]

Some other opinions: $10-15/barrel

...However, one of the sidebars suggested another consequence of drilling. Speculators have been blamed for driving up oil prices, but as Alaskan Republican Rep. Don Young pointed out, drilling in ANWR would scare off some of the speculators driving gas prices up.

Young, ranking Republican on the House Natural Resources Committee, introduced a measure Wednesday to allow development in the coastal plain of ANWR.

“The way you address high gasoline prices is to increase supply,” he said.

Rolling out legislation to open ANWR has become Young’s personal never-ending task in the House, but this time he’s hoping consumer anger over record prices at the pump will spur moderate members of both parties to support the measure.

“If we passed ANWR, it would drop $10 to $15 off the price of a barrel of oil because speculators would see that we’re serious about increasing domestic production,” he said.

http://newsminer.com/news/2008/may/22/gop-ready-roll-out-energy-plans/

 

[wildman]

I not aware of any political leadership that says 'that is all we have to do'
Wildman you said get off oil 'and now', that's to what I was referring. Again, can you cite a plan for getting off oil 'now'.

Well duh! By "now" I mean we need to start working on the problem in a serious way now. The problem with most of the "drill more" people is that is all they want to do. They don't want to finance research, they don't want to encourage conservation, they don't want to do anything but drill, drill, drill. That is a plan alright. It is a plan for disaster. There isn't enough oil.

I am not sure what should be done, but the plan you are pushing will fail so you don’t have a plan either.

Here is a possible set of ideas. I don’t know if they will work, but we need to start thinking creatively.

The first thing we need to do is guarantee a bottom to oil prices so they Arabs can’t manipulate the price of energy in this country. Say $100 a barrel. If it drops below that level, we add taxes to the imported oil. (Domestic oil would not be taxed). That will give private companies a guarantee that they will not be taken for a big loss if they invest in energy like what happened in the 70’s. The people who invested in oil shale at that time had the rug pulled right out from under them. We need to prevent that from happening again. Keep in mind that the Arabs (unlike the rest of the World) are not yet at peak oil (maybe) and can therefore manipulate the price (if what I think is true). This is also the real reason a lot of the oil in the Gulf of Mexico hasn't been drilled. It is too expensive and the oil companies are afraid of be undercut by the Arabs.

Next, we need to change the tax laws to encourage conservation. Do you realize there is a law that gives people who purchase Hummers a big tax break? This is nuts. Tax the sale of new gas guzzlers and return the tax to the people who purchase hybrids or other gas saving cars.

Then greatly increase spending for research and development in the energy sector. This can come out of some of the money we are spending for defense right now. After all, the real reason we are in Iraq is the oil. It wouldn’t take too many days spending in Iraq to greatly increase energy research. Energy is security. After all, 9-11 was financed with Saudi oil money. No oil, no money, no terrorists.

There are lots of great ideas. They just need to be given the funding they need and private energy companies just need to be protected from predatory practices .

 

[DrClapeyron]

Being undercut by OPEC (not Arabs) has always been an issue with large scale projects, like the North Sea or Prudhoe.

ANWR is child's play and commodities markets do not speculate on supply and demand issue 10 years from now. Most investors are concerned with the immediate future: the present to whatever the longest term future is.

No congressman wants to truthfully say the US is a price taker.

 

[mheslep]

Well duh! By "now" I mean we need to start working on the problem in a serious way now.

The US is, now. Are you familiar with the sums of money being spent on renewable energy installation and research in the US?

...Here is a possible set of ideas. I don’t know if they will work, but we need to start thinking creatively.

The first thing we need to do is guarantee a bottom to oil prices so they Arabs can’t manipulate the price of energy in this country. Say $100 a barrel. If it drops below that level, we add taxes to the imported oil. (Domestic oil would not be taxed). That will give private companies a guarantee that they will not be taken for a big loss if they invest in energy like what happened in the 70’s. The people who invested in oil shale at that time had the rug pulled right out from under them. We need to prevent that from happening again. Keep in mind that the Arabs (unlike the rest of the World) are not yet at peak oil (maybe) and can therefore manipulate the price (if what I think is true). This is also the real reason a lot of the oil in the Gulf of Mexico hasn't been drilled. It is too expensive and the oil companies are afraid of be undercut by the Arabs.

I think the chief beneficiaries of that import tariff would be oil companies with domestic reserves and leases.

Next, we need to change the tax laws to encourage conservation. Do you realize there is a law that gives people who purchase Hummers a big tax break?

Not just people, only businesses can claim a light truck (>14000lbs) costs, or a portion of lighter truck costs (>6000lbs), or heavy truck costs like a tractor trailer, or farm equipment, or even a copy machine. Still, I'd go along w/ going the rest of the way and killing the business deduction for very light trucks intended for road use (leave the farmers alone).
http://www.bankrate.com/brm/itax/Edit/tips/Stories/sec179_deduction.asp

Then greatly increase spending for research and development in the energy sector.

Greatly increase it to what? $500B/yr? $1T/yr? Why don't you believe this would have the same effect as the Arab oil price manipulation above? Suppose I start up an oil-shale company scrounging madly for investors along the way, and all the federal funding at $500B/yr goes into biofuels and nuclear ( a good bet). How much success would I have getting investors then? Nill. The point: there's a downside to having the government pick R&D winners in a big way. Also, crash R&D programs only work on very narrowly defined problems. That is, one can define an crash program to send 2-3 guys to the moon, one can not do the same w/ a program to lift everyone in the country, say, just to orbit. I'd go along with some moderate increases in govt. energy R&D spending, but just throwing money at the problem doesn't mean its being addressed 'seriously'. Finally, after all of this expense and no drilling you may still come up with zip.

...The problem with most of the "drill more" people is that is all they want to do. They don't want to finance research, they don't want to encourage conservation, they don't want to do anything but drill, drill, drill.

The problem with most of the "renewables" people is that is all they want to do. They don't want to drill, they don't want to explore for more reserves, they don't want to do anything but research, research, research.

 

[Gokul43201]

Some other opinions: $10-15/barrel

Do you really think Don Young is a more reliable source than the DOE for doing this calculation right? Is there any other non-partisan/relatively reputable body that estimates anything like $10 per barrel?

 

[mheslep]

Do you really think Don Young is a more reliable source than the DOE for doing this calculation right?

No I don't necessarily consider him more reliable, I recognize he's politician. I also recognize even professionals at DoE, EPA can also have agendas and be misled, though I have no reason to doubt them here.

 

[WarPhalange]

The problem with most of the "renewables" people is that is all they want to do. They don't want to drill, they don't want to explore for more reserves, they don't want to do anything but research, research, research.

I suggest you look up the word "renewable". Then you might have a better perspective on why they don't want oil.

Just a suggestion.

 

[Astronuc]

Speculators' are responsible for 70% of all crude trades, up from 37% in 2000, according to Wall Street Journal report!

. . . .

Congress, however, has grown increasingly concerned over speculative investors' role in the energy market in comparison with those buying futures contracts to hedge against risk from price changes. Lawmakers are expected to consider legislation to set strict limits -- or in some cases, an outright ban -- on speculative trading in energy futures in some markets, the Journal reported.
. . . .

In 1991, according to documents provided by the agency to the committee's investigators, the Commodity Futures Trading Commission authorized the first exemption from position limits for swap dealers with no physical commodity exposure, the report said. This began what Dingell said was "a process that has enabled investment banks to accumulate enormous positions in commodity markets," according to the report.

No risk, yet big profits/bonuses or big losses, and the consumers pay. So increased cost and not added value - it's simply overhead.

 

[Astronuc]

Gas could fall to $2 if Congress acts, analysts say
Limiting speculation would push prices to fundamental level, lawmakers told

WASHINGTON (MarketWatch) -- The price of retail gasoline would fall by half, to around $2 a gallon, within 30 days of passage of a law to limit speculation in energy futures markets, four energy analysts told Congress on Monday.

Testifying to the House Energy and Commerce Committee, Michael Masters of Masters Capital Management said the price of crude oil would quickly drop closer to its marginal cost of around $65 to $75 a barrel, about half the current $135.

Fadel Gheit of Oppenheimer & Co., Edward Krapels of Energy Security Analysis and Roger Diwan of PFC Energy Consultants agreed with Masters' assessment at a hearing on proposed legislation to limit speculation in futures markets.

Krapels said it wouldn't even take 30 days to drive prices lower, as fund managers quickly liquidated their positions in futures markets.

"Energy speculation has become a growth industry and it is time for the government to intervene," said Rep. John Dingell, D-Mich., chairman of the full committee. "We need to consider a full range of options to counter this rapacious speculation."

The committee will likely consider legislation that would rein in speculation by imposing higher margin requirements, setting position limits for speculators, requiring more disclosure of positions, and preventing pension funds and investment banks from owning commodities.

If speculation is limited, commodities prices should drop and the stock markets should rise.

Meanwhile, Northwest CEO Glenn Tilton indicated that U.S. airlines to spend $61.2B on fuel in 2008, and the industry is likely to contract if fuel prices remain high.

 

[mheslep]

Gas could fall to $2 if Congress acts, analysts say
Limiting speculation would push prices to fundamental level, lawmakers told


If speculation is limited, commodities prices should drop and the stock markets should rise.

I fail to see how any such action by Congress will do anything other than put the Merc out of business as all its trading volume would simply pack bags and move to ICE and other exchanges.

 

[edward]

I fail to see how any such action by Congress will do anything other than put the Merc out of business as all its trading volume would simply pack bags and move to ICE and other exchanges.

ICE is a big part of the problem.

Intercontinental Exchange may be forced to limit the size of U.S. oil trades on its London energy market, U.S. Commodity Futures Trading Commissioner Bart Chilton said Friday.

Intercontinental, known as ICE, controls about one-fourth of the trading of U.S. West Texas Intermediate oil futures, with the New York Mercantile Exchange handling the remainder. ICE's London market operates without trading limits and is allowed to offer U.S. investors access to its U.K. exchange under a no-action letter from the CFTC. The letter may be revised to have ICE adopt trade limits imposed by Nymex, Chilton said.

"The issue is manipulation of oil prices," Chilton said. "It's critical we have as comprehensive as possible a view of all trading position in WTI."

The energy exchange's regulator, the U.K.'s Financial Services Authority, does not set limits on contracts held by investors on its London exchange, meaning those traders can build larger trades in U.S. oil than rivals on the Nymex, which sets limits. The position limits are aimed at reducing the ability of traders to influence prices near the expiration of futures contracts.

http://www.chron.com/disp/story.mpl/business/energy/5837165.html

 

[Astronuc]

I fail to see how any such action by Congress will do anything other than put the Merc out of business as all its trading volume would simply pack bags and move to ICE and other exchanges.

That certainly would be a concern. I heard a few weeks ago that an exchange (bourse) in one of the Gulf States, IIRC Dubai, is looking to start trading commodities including oil.

The issue really is price manipulation. Some argue that supply is falling behind demand, and that would certainly put upward pressure on oil. But in some cases where demand had dropped and the supply is steady, the price of oil continued to increase.

 

[DrClapeyron]

Sellers set limits on contracts. Government saying you can trade more contracts than sellers are willing to sell is nonsense. Who would honor these nonsense contracts or buy them in the first place?

 

[B. Elliott]

Just saw this while checking me Yahoo e-mail...


House panel told curbing speculation could cut prices

Near-record oil prices could quickly fall by half if Congress were to rein in speculators, according to testimony Monday from a hedge fund manager and oil company adviser on Capitol Hill.

Michael Masters, of Masters Capital Management, told a subcommittee of the House Energy and Commerce Committee that - with greater regulation - oil prices could drop to $65 or $70 a barrel within about 30 days.

"That's half of where prices are today, and gas prices would reflect that," he said.

"If it is a bubble, then where is the evidence in the actual physical market?" asked Kevin Norrish, a commodities analyst with Barclays Capital in London. "There is an endless list of reasons why this argument is a very, very poor one - it will only make things worse."

http://biz.yahoo.com/cnnm/080623/062308_energy_speculation.html?.v=4

 

[Astronuc]

From businessmen outside of the commodities trading sector -

Leaders from the trucking, airlines and heating industries testified before the panel that speculation in the oil market has harmed their bottom lines.

ref: yahoo article cited in previous post.

The problem is one of assessing/quantifying the portion of the cost which is actually based upon speculation.

 

[wildman]

The US is, now. Are you familiar with the sums of money being spent on renewable energy installation and research in the US?.[/I]

Yes and they are not nearly high enough. Fusion for instance is just barely limping a long. Given that 9/11 was basically a energy driven thing, I think we should be spending more.

I think the chief beneficiaries of that import tariff would be oil companies with domestic reserves and leases.[/I]

They wouldn't be the only ones, but considering that 40,000,000 acres of federal leases have not been developed because of fear of Arab price uncutting, so what?

The problem with most of the "renewables" people is that is all they want to do. They don't want to drill, they don't want to explore for more reserves, they don't want to do anything but research, research, research.

I guess that is a general fault of humans, no? However, look up peak oil. Exploring for more oil doesn't do any good after a point. My point is that after the Gulf shelf there ain't a whole lot more. The US and the World has been explored out. Yea there is a little field here and there but nothing like the Saudis or even West Texas (except maybe in Iraq).

 

[mheslep]

Yes and they are not nearly high enough.

You did not answer my question. How much do you think should be spent and why that number?
Something to keep in mind before committing to an all renewables energy program with a Man-on-the-Moon, no money limit program: Israel imports every drop of oil and gas, has an advanced technical capability, and has far more incentives that the US to become independent. They can't do it. Similarly, Japan imports all of its oil and gas, has in some areas a more advanced technical capability than the US. They can't do it.

Fusion for instance is just barely limping a long.

Fusion has been funded for 50 years. NIF is still fully funded.

Given that 9/11 was basically a energy driven thing, I think we should be spending more.

I'd say 9/11 was basically a fanatical religion driven thing. Still, everyone likes the idea of depriving Middle East autocracies of funds; I am certainly for it. But before taking extreme steps consider two data points:
1. I read, 911 report I believe, that the entire attack cost AQ $500k, flight training and all.
2. Now in 2008, if the US stopped importing any oil whatsoever, the Middle East oil states would still export vast amounts to the rest of the world; the Sheiks would not go begging.

They wouldn't be the only ones, but considering that 40,000,000 acres of federal leases have not been developed because of fear of Arab price uncutting, so what?

Says who? The leases may not contain any oil at all - they are mostly unproven; what they are is promising. They are leased because some geologist thinks the area is worth exploration, and they are being explored as far as I can tell. They are listed as non-producing until they start producing.

I guess that is a general fault of humans, no? However, look up peak oil. Exploring for more oil doesn't do any good after a point.

And that point might well be 70 years from now, use liquified coal and its maybe twice that.

My point is that after the Gulf shelf there ain't a whole lot more.

There has been no source presented in this thread even loosely demonstrating that there "ain't a whole lot more".
Recent finds:
20 trillion ft^3 gas in Louisiana near Shreve Port, probably.
http://uk.reuters.com/article/reutersComService_3_MOLT/idUKN1933908420080620
Tupi field of Brazil, expected output 500k bbl/day, 5B to 8B bbls w/ high confidence, possibly 70B bbls. Also note this discovery was in 7500ft water, total depth 29k feet. Most 'peak oil' analysis says there can't be any retrievable oil at these depths, so this find invalidates peak oil.
http://www.reuters.com/article/rbssEnergyNews/idUSN1231462720080612

 

[mheslep]

Bryce v Zurbin debate

Here's an interesting debate between two energy authors, that nicely encapsulate some of the opposing camps on energy:
Robert Subrin, author Energy Victory. (Aerospace engineer, PhD Nuclear Eng w/ noted plans for manned Mars missions)
Robert Bryce, author Gusher of Lies, The Dangerous Delusions of Energy Independence
Audio Debate
http://www.thenewatlantis.com/publications/energy-debate-zubrin-vs-bryce
I'm more familiar with Bryce's arguments: 'energy independence', a silly cliche according to him, is impossible; the world is far to interconnected. Zubrin's big pitch is mandated flex fuel cars. I havnt thought that through, but it appeals to me far more than mandated CAFE standards. Other Zubin comments: "hydrogen, the fake solution for energy that can not possibly work"

 

[Gokul43201]

Are you familiar with the sums of money being spent on renewable energy installation and research in the US?

Greatly increase it to what? $500B/yr? $1T/yr?

Wildman was talking about government spending on Renewable Energy Research, which is not particularly close to those numbers.

The FY 2007 budget for the DOE Office of Science was $3.8 billion. Out of that, Energy Science and Fusion Research got about $1.6 billion. In comparison, about $15 billion remains unaccounted for in Iraq spending that same year. http://www.aip.org/fyi/2007/121.html
http://afp.google.com/article/ALeqM5ieRhHYX-NosV0VEguc06fs15a4Jg

 

[mheslep]

Wildman was talking about government spending on Renewable Energy Research, which is not particularly close to those numbers.

He doesn't say government, he says only the 'energy sector'. And to consider only government R&D would be myopic. Industrial and private investment are quite large; venture capital is readily available for renewable energy companies.
-In house, for instance: General Electric's R&D budget was $5.7B in 2006, surely a significant part of that going to make better wind turbines, more efficient generators, gas and hydro turbines, etc.
http://www.ethicalshopper.com/electronics/appliances/ge-ups-green-r-d-budget.html
- VC dollars: "The overall numbers are up, though the mix is shifting. VC money pouring into clean tech rose to $2.2 billion in 2007, from $1.5 billion in 2006. The big winner? Solar power, which took $600 million. The big loser? Biofuels—VC funding dropped to $291 million last year from $462 million the year before."
http://blogs.wsj.com/environmentalcapital/category/alternative-energy/clean-tech/venture-capital/

The FY 2007 budget for the DOE Office of Science was $3.8 billion. Out of that, Energy Science and Fusion Research got about $1.6 billion.

Well the entire DoE budget is ~$22B which includes other indirect research on issues like nuclear waste disposal. I am also fairly sure the NIF is not funded out of the Science office - the weapons modeling and test angle. Then there's the other government agencies, esp DoD:
-Navy alone, for instance, funded a multi-billion R&D project on batteries a few years ago for quieter subs.
-USDA R&D $2.3B with "increases funding for high priority bioenergy research aimed at improving the efficiency of converting cellulose to biofuels."
http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?contentidonly=true&contentid=2008/02/0030.xml
-DARPA

In a move that galvanized biofuels entrepreneurs, the federal Defense Advanced Research Projects Agency (DARPA) in November launched a major research program to enable the cost-competitive production of military jet fuel from both cellulosic and algal feedstocks. The director of the program, Douglas Kirkpatrick, says he thinks major questions about algal fuels' technical feasibility will be answered in "the next three to five years."

http://www.biodieselnow.com/forums/t/20938.aspx
-And though its not direct R&D, let's not forget the colossal subsidies going into Corn and Ethanol.

In comparison, about $15 billion remains unaccounted for in Iraq spending that same year.

However unfortunate and wasteful, note that is a one time loss, not a yearly budgeted item unlike these examples above. Its also good reason to be weary of crash government programs, which is basically what the Iraq reconstruction project amounted to.

 

[Gokul43201]

He doesn't say government, he says only the 'energy sector'.

Here's a more complete quote:

Then greatly increase spending for research and development in the energy sector. This can come out of some of the money we are spending for defense right now.

Sounds like he meant Government spending. Besides, we can't really tell the Private Sector what they ought to be spending money on.

The $24 billion DOE budget is split up roughly as follows:

Renewable Energy, Nuclear Power, Fossil Fuels & Energy Efficiency = $3 billion
Military budget = $9 billion
Environment & Radioactive Waste = $7 billion
Science = $4 billion
Corporate Management = $1 billion

 

[mheslep]

Here's a more complete quote: Sounds like he meant Government spending. Besides, we can't really tell the Private Sector what they ought to be spending money on.

Sure we do. When the government pours $B into ethanol subsidies, wind and solar tax breaks, a great deal of private R&D capital breaks lose to create businesses that can profit from those markets. And that is just R&D. Land and other assets are committed in a larger way. Further, one could argue that we can't really tell the Government exactly how to spend either, especially for the esoteric goal of 'cheaper, greener, more independent energy'. Many examples - the Congressional DoE cuts of the administration's budget for one; in sum much of the process is controlled by some Congressman out to get money for his district and the result is a drastic distortion of original intent.

 

[Gokul43201]

Finally! Iraq's oil fields open to bidders. And I was beginning to worry that the war may not be worth it after all, what with the lazy Iraqi legislature unwilling to pass an energy bill that satisfies all parties. Go Maliki! Go Shahrastani!

BAGHDAD, Iraq (CNN) -- Iraq's oil minister Monday opened international bidding on six oil fields that could increase the country's oil production by 1.5 million barrels per day.

But the oil ministry continues to negotiate short-term no-bid contracts with several U.S. and European oil companies -- a step recently criticized by two U.S. lawmakers.
...
Last week, Sen. Charles Schumer, D-New York, and Sen. John Kerry, D-Massachusetts, sent a letter to Secretary of State Condoleezza Rice expressing concerns about those no-bid contracts.

The senators, who released the letter, said they are worried that unfair distribution of oil revenue could inflame the violence between the warring religious and political groups of Iraq.

"We urge you to persuade the (government of Iraq) to refrain from signing contracts with multinational oil companies until a hydrocarbon law is in effect in Iraq," read the letter from Schumer and Kerry.

"At this time, the (government of Iraq) currently does not have in place a revenue-sharing law that could fairly allocate any revenue gained from Iraq's lucrative hydrocarbon fields between the three major ethnic groups in Iraq," read the letter. "We fear that any such agreements signed by Iraq's Hydrocarbon Ministry without an equitable revenue-sharing agreement in place would simply add more fuel to Iraq's civil war."

Boo Kerry! Boo Schumer!

An extra 1.5 million barrels a day, in 5 years or less - that's twice as much as ANWR would give, and 4 times sooner! Surely this will drive down oil prices, as Rep. Don Young promises.

Oil prices pushed back above $142 a barrel Tuesday on worries about tight supply and possible armed conflict between Iran and Israel. In the U.S., gasoline edged to a new record high.

Okay, obviously the silly speculators aren't reading the right news yet. It's just a matter of time...we'll soon be down to double-digit prices again.

 

[DrClapeyron]

You don't think this could have any adverse affetcs do you? The Iraq has not been under heavy scrutiny in the media because I think US has done a good job having tribes sign contracts to take certain concessions under their "jurisdiction". It would be an entirely different thing to have this new 1.5 million bbl/day flowing and creating cash money for tribes who have otherwise not been...the friendliest to American troops.

Of course, they had to fight for all this, so I have no doubt they will continue to fight if some kind of elected official is not brought in. Some tribes may be more powerful than others, but no one is bigger than the others combined, that's why Maliki must rule with an iron fist.