Is Bush behind the rising price of oil?
Shane June 18th, 2008
Image via WikipediaEndless, endless speculation on what is causing the price of oil to increase so much. Everyone has an opinion. Speculators, or supply shortages?
Having read quite a bit about Peak Oil I have been on the side of supply shortages. Lately though, I am not so sure.
Take this article for instance. The author is F. William Engdahl who is “active as a consulting geopolitical risk economist.” Seems reliable. What is interesting is that George Soros, a famous rich dude in the financial markets, recently claimed that oil prices were due to speculation, but then added that he doesn’t pay too much attention to oil. Yet on many sites, his quote was used as ‘proof’ that oil prices were not due to oil supply problems.
The author of the article I linked above is an economist and “has written on issues of political economy, geopolitics, energy, agriculture, WTO, IMF, politics and economics for more than 30 years, beginning with the first oil shock and world grain crisis in the early 1970s.” He is the author of “A Century of War: Anglo-American Oil Politics and the New World Order.”
I point this out because what he says is controversial.
He claims that Bush and Co. have deliberately caused this problem. Here are some key pieces from his article (which is long and detailed, and sometimes hard to follow)
- today’s oil prices are really determined is done by a process so opaque only a handful of major oil trading banks, such as Goldman Sachs or Morgan Stanley, have any idea who is buying and who is selling oil futures or derivative contracts that set physical oil prices in this strange new world of “paper oil”.
- Since the advent of oil futures trading and the two major London and New York oil futures contracts, control of oil prices has left the Organization of the Petroleum Exporting Countries (OPEC) and gone to Wall Street
- a gaping loophole in US government regulation of oil derivatives trading so huge a herd of elephants could walk through it
- (A US Senate Permanent Subcommittee on Investigations report states:) Until recently, US energy futures were traded exclusively on regulated exchanges within the United States, like the NYMEX, which are subject to extensive oversight by the CFTC, including ongoing monitoring to detect and prevent price manipulation or fraud. In recent years, however, there has been a tremendous growth in the trading of contracts that look and are structured just like futures contracts, but which are traded on unregulated OTC [over the counter] electronic markets. Because of their similarity to futures contracts they are often called “futures look-alikes”.
- He also states the “Commodity Futures Trading Commission, a financial futures regulator” is not doing its job - limiting trades to keep important commodities stable.
- Then, apparently to make sure the way was opened really wide to potential market oil price manipulation, in January 2006, the George W Bush administration’s CFTC permitted the ICE, the leading operator of electronic energy exchanges, to use its trading terminals in the United States for the trading of US crude oil futures on the ICE futures exchange in London - called “ICE Futures”.
- in January 2006, ICE Futures in London began trading a futures contract for WTI crude oil, a type of crude oil that is produced and delivered in the United States
Loopholes, seemingly minor changes, inaction by the CFTC, and finally Bush hammering the nail in the coffin. And the result is, according to Engdahl:
Is that not elegant? The US government energy futures regulator, CFTC, opened the way to the present unregulated and highly opaque oil futures speculation.
(Emphasis is mine)
And here is the real rub. Ready?
Lets move to this article from - amazingly - an environmental website. This site proposes that we do not need to drill in environmentally protected areas, because US oil and gas companies hold perpetual leases on Federal lands that they are not developing. It cites this House Natural Resources Staff Committee Report. The highlights of this report?
If we extrapolate from today’s production rates on federal land and waters, we can estimate that the 68 million acres of leased but currently inactive federal land and waters could produce an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas each day.
That would nearly double total U.S. oil production, and increase natural gas production by 75%. It would also cut U.S. oil imports by more than a third, and be more than six times the estimated peak production from the Arctic National Wildlife Refuge (ANWR).
To me, this is explosive. The oil and gas they are talking about is on Federal land already leased to the oil and gas companies - NOT wildlife preserves or other environmentally protected areas. Yet why does Bush and the rest of the Republican parrots (sorry, I voted for Ron Paul, but most Republicans just parrots. *Squawk* Environmenalists are keeping us from ANWR *Squawk* Nuclear power will save us *Squawk*)
Anyway, why is ANWR all over the news, yet this report gets no press? Unfortunately, I do not think many people know. What is funny is that even the ANWR.org page pushes for more oil exploration! This made me chuckle: “there is a 95% chance that a ’super field’ with 500 million barrels would be discovered. DOI also estimates that there exists a mean of 3.5 billion barrels, and a 5% chance that a large Prudhoe Bay type discovery would be made.”
The US uses 21 million barrels of oil a day. 500 million barrels would last us… 24 days. 3.5 Billion would last us less than 6 months. The phrase ’super field’ sounds impressive though, doesn’t it?
Something is afoot. Why is everyone pushing to get into ANWR when there is six times the resources available right on land already set aside for gas prices? Why are these lands not developed if oil prices are supposedly due to lack of supply?
I don’t have the answer, but the results seem to benefit a Republican Oil Man, which Bush definitely is. The public is starting to push to drill in an environmentally protected area, Democrats are looking like the reason gas prices continue to rise (”Why won’t the democrats just let us drill in ANWR, Glenn Beck said it would solve the problem!!!”), and oil companies are reaping record breaking profits.
I doubt few people know now, or will ever know, the whole truth, but my month is on speculation causing the price increases. Too bad this won’t help me pay my heating bill this winter…
- Politics
- Comments(18)
The price of oil is one concern, but the falling value of the dollar is even more concerning! Of course, the two issues team up to delivery quite a punch to the average consumer. What can be done? I wish some of Ron Paul’s sensibilities were to rub off on a few of the presidential candidates. There is a real crisis at hand. Great empires fall from within.
In every bad news people thought that Bush is behind that.This thing is become very simple.
I saw the hearing on C-Span with George Soros, Michael Greenberger (the former head of the CFTC) and some others chiming in on what they thought was the reason for the oil prices. I heard everythig from speculation to politicians ignoring the real issue to our Middle East compadres out-witting us. Just recently, I was told that when Clinton was in office he signed a bill “for” the special interest environmentalists that prohibits us, the U.S., from drilling for oil on U.S. soil for so many years. I dont know. Do prior signed bills remain in effect after a new President takes office? If so, I am inclined to believe this; but if bills can be changed when presidents are changed…this becomes just another rumor to me.
Maybe and maybe not. With so many speculations and theories circulating, it’s very hard to focus on what’s really the root cause of inflating prices of the black gold.
For me, it’s plainly the law of supply and demand in action.
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This whole steep price increase could have been planned years ago when Cheney gathered all of his oil industry friends to create the still secret U.S. energy policy. For me, it would not be a huge reach to tie Bush’s desire to drill in the Arctic regions to the manipulation of gas prices to make the drilling more acceptable to the general public. Even if Bush and Cheney got their way and were allowed to lease land in the Arctic to their oil industry friends, this would have no effect on the current gas and oil price gouging and excessive profit taking. It would take years to develop that area and what guarantee is there that the oil companies would build the refineries necessary to process the oil (an issue that has mysteriously disappeared from the discussion)? From what I’ve read in the past, that could be another cause of the gas “shortage.” Also, I just saw an article today that stated that even if they did develop additional coastal oil fields, there is an inadequate fleet of ships necessary to service any additional production. So, one must ask what is the sense of allowing the development of oil fields in ecologically sensitive areas when the infrastructure is not in place and may never be in place because of the unwillingness of the oil executive to spend money (they spend money on infrastructure they may have decrease the cash flow into their own pockets).
The rise of the oil prices is not a reason but a result. I am afraid we are pretty much downhill and we can only blame ourselves. We made pretty much bad decisions with all of the Middle East politics and neglecting the warnings. The solution could be a big inner liberation and a huge turn in world politics, as a much more bigger participation in charity, especially in Africa. Not especially because of our reputation, but the US needs new markets, and what would be greater then to help Africa to escape the terrible situation, help millions of people, and to benefit economically at the same time?
cmon now… people say that bush went to war with iraq for oil. and no oil prices have risen and people say bush is behind it? it doesnt make sense that he would be behind both o_o
-Jason
I don’t think we can cite a lone reason for the problem. It’s a combination of issues, and naturally, each camp is going to point the finger at the opposing camp. Blaming the other person/party is as American as apple pie!
Good points from everyone. There are probably too many factors to figure it out as an ‘armchair reporter’ like myself
@Jason - you should google for ‘petrodollar’ ‘peak oil’ and ‘the iraqi oil law’.
Why are you so concerned about the price? Surely the most important concern is how long it’s going to be before reserves drop so low that there isn’t any usable oil left in the ground?
One day that will happen, it’s only a matter of when.
I say pull the plug now, switch nearly everything over to electric motors and solar power ASAP. The incredibly high energy density of petroleum products makes them uniquely suited for only a handful of applications. Cars could (and have) run on just about anything. The quicker we completely stop using oil for ground transport the longer we’ll be able to fly aircraft.
Let the prices rise.
almost every website will write about this…a politician behind price hike…while this is happening in every part of the world…
why cant a couple of websites talk about tips to decrease the gas usage??
Firstly, its worth saying that speculation is a symptom, not a cause. Speculators are in it for the money, pure and simple. Unless the traders were confident that oil supplies were going to be tight for the forseeable future, they would never be prepared to pay so much for it.
There are two main reasons why prices are so high :-
1) The ‘peak oil’ situation - Demand is still rising rapidly, output is highly unlikely to keep pace and will probably begin to fall sometime in the next few years.
2) The threat of further war in the Middle East - If the US or Israel were to attack Iran or Syria, then oil prices would go sky-high. Every new threat against Iran seems to result in a fresh price-hike, the worrying thing is that the speculators are taking the threats seriously, and you can be sure that they are very well-connected.
Worrying about the price of oil is just worrying about the inevitable. Whether it’s this year, next year or at some other time, one way or the other oil is going to go stratospheric and little people like us are going to be hurting. Best thing now is to spend some time trying to organise your life to be less oil dependent.
Things are going to only get worse, and who knows if and when it will get better. We as consumers tend to take things for granted. We need to start using are resources more carefully, and stop taking things for granted. Think of how those people who don’t have much money are going to get through the harsh winters. Not everyone lives in a climate where its warm all year.
People talk about gas shortages… Hey, remember last week when you went to the gas station? How they were all out and you had to drive around to find the gas station that still had some and you waited in line for hours? Oh wait, that didn’t happen, because we have plenty. We’re just finally paying what the rest of the world has been paying… What I wonder about now is, what changed? What was holding the price down before, and what happened to it?
Look at the Ron Paul video I posted. It explains the price of gas.
China has their currency ‘pegged’ to the dollar, so as the dollar fell, so did the Yuan (?). So… stuff made in china did not go up when the dollar fell in value. Could you imagine if stuff in china went up in price as fast as gas did? Holy shit it would be chaos.
Also, many nations are diversifying their reserves now. In the past many had mostly Dollars in their reserves. Still researching why this is happening. very complex stuff.
Anyway, a bunch of natiions had dollars in their reserves and then decided to trade them in for other currencies. Then you get a surplus of Dollars on the market, so the ‘price’ or value of the dollar went down.
Has anyone considered that a high price for oil means increased cash into Iraq.
Iraq sells oil and the sale of oil in Iraq