Redstate

Posted at 9:49am on Jul. 10, 2008 Airline Industry CEOs Hoping You’re As Ignorant About Economics As Everyone Thinks You Are

Um, Guys? Speculators Aren’t Your Problem

By blackhedd

I’m going to avoid linking to this because you can find it yourself, and because I don’t know who the original authoritative source is. But you’ve certainly heard that a dozen CEOs of major US airlines, including all the big names, have put out a letter urging you, their customer, to agitate for more regulation of the commodities-futures markets.

Unfortunately time is too short to fully consider the issues raised in this carefully-written letter. The basic idea is something you’ve heard me discuss several times now: speculation in crude-oil futures and derivatives is raising the price.

That’s true enough, as I’ve said before. It’s also true that the airline industry is under as much pressure from high oil prices as anyone else (more on that in a moment).

What’s not true is that speculative pressure (or more precisely, buying pressure originating ultimately from institutional investors) is a permanent support for the price of oil. Thus, the conclusions reached by the airline CEOs are wrong, but they’re wrong in ways you wouldn’t expect from experienced business people.

Read on…

Posted in Airlines | CEOs | Economy | Oil Prices | regulation | speculation — Comments (19)/ Email this page » / Read More »

Posted at 10:03am on Jun. 25, 2008 I don't suppose that I could prevail upon the Obama campaign to stop pissing off Canada?

This kind of arrogant, unilateral thinking does nothing for our foreign relations.

By Moe Lane

(Via Instapundit) It is sometimes startling to see just how unthinkingly indifferent the Obama campaign is towards the sensibilities of our major trading partners:

Obama's fight against 'dirty oil' could hurt oil sands

WASHINGTON -- Barack Obama on Tuesday vowed he would break America's addiction to "dirty, dwindling, and dangerously expensive" oil if he is elected U.S. president -- and one of his first targets might well be Canada's oil sands.

A senior adviser to Mr. Obama's campaign told reporters it's an "open question" whether oil produced from northern Alberta's oilsands fits with the Democratic candidate's plan to shift the U.S. sharply away from consumption of carbon-intensive fossil fuels.

Said campaign is touting this as being all about "greenhouse gasses," which I admit sounds better than "the ethanol industry expects a return on its investment in Barack Obama." Hey, complain to the New York Times: some of you folks are happy enough to believe them when they're telling you juicy anti-administration stories from anonymous sources, so there's no logical reason for you to change your mind about their accuracy now*...

But I digress.

Read on.

Posted in 2008 | Bad Energy Policy | Canada | Obamafiles | Oil Prices — Comments (11)/ Email this page » / Read More »

Posted at 12:51am on Jun. 25, 2008 Speculating About Speculators

By Pejman Yousefzadeh

There has been a lot of talk concerning the influence of speculative activity on the price of oil. All of the sudden, we are hearing that "speculators" are responsible for oil prices going up and for the fact that we have to pay more at the pump. Of course, this all fits in with the need of certain portions of the political class to find a narrative that identifies and excoriates certain human villains for the increase in the price of oil--thus making us feel better about having found and excoriated those villains and causing us to believe that if only we punish the villains, we will be able to solve the problem of high oil prices at the same time, or at least be well on the way towards solving the problem of high oil prices.

Well, it just ain't so. Read the whole thing, but here's the key passage:

. . . there's nothing about futures or options that makes it any more attractive to bet that commodity prices will go up than to bet they'll go down. Guess wrong on the direction, and you lose money.

And that's basically all you need to know about speculation. When you speculate on the price of a commodity, what you are doing is betting on whether that price will rise or whether it will fall. Not whether you wish it would rise or fall. Not whether you hope it would rise or fall. And your money will do nothing to cause the price of oil to rise or fall. It will do so based on--wait for it!--the laws of supply and demand.

Right now, we don't have that much in terms of supply. We have huge demand--especially from the Chinese and the Indians. We have precious little refining capacity as well. This raises the price of oil and causes us to pay more at the pump. Speculators understand this and that is why they are currently betting that the price of oil will go up. But their bets don't cause the price of oil to go up and if any speculator bet on oil prices to go up during the 1980s--back when oil prices were actually crashing through the floor--that speculator would have lost his or her shirt.

It's amazing how much you begin to understand about economics when you realize that economic forces are significantly beyond the control of human beings to influence and that they are significantly more under the influence of the laws of supply and demand. Once that knowledge becomes widespread, we won't waste our time blaming people like speculators for the fluctuations in the price of oil.

Posted in Economic Ignorance | Economy | Oil Prices | speculation — Comments (26)/ Email this page » / Read More »

Posted at 12:35am on Jun. 19, 2008 If Only We Had Cars That Ran on Magic

By Ben Domenech

I had the pleasure of participating in a BBC debate this afternoon on the World Newshour show with Daniel Weiss of the Center for American Progress. We had an extensive discussion with the host on the President's announcement today in support of offshore drilling and other energy initiatives. Feel free to listen, and then a few points after:

Ben Domenech on BBC Radio (6:00 Minute Mark)

Posted in ANWR | Biofuels | Energy | ocs | oil | Oil Prices — Comments (17) / Email this page » / Read More »

Posted at 2:18am on Jun. 12, 2008 Dodging An Economic Bullet

By Pejman Yousefzadeh

So the majority party in the Senate believes that the best way to bring down gas prices is to impose a "windfall profits tax" on oil companies--this despite the fact that the tax will eventually be passed on to consumers. It also wants to legislate against "price-gouging," whatever that is. Good thing this feel-good/do-nothing bill went down to defeat. The reasons why that defeat was deserved can be found here. This is an old article, but as it turns out, it is still applicable.

Incidentally, when will we have a "windfall profits tax" imposed on farmers? It makes just as much sense as imposing such a tax on oil companies.

Posted in Economic Ignorance | Economy | Gas Prices | Oil Prices | Windfall Profits Tax — Comments (7)/ Email this page » / Read More »

Posted at 6:10am on Jun. 9, 2008 Let’s Keep an Important Thing In Mind About the Price of Crude Oil

Energy usage per unit of production

By blackhedd

As I write this morning, the price of crude oil is below $137/barrel, down from its historic, near-10% surge on Friday to an intraday high over $139. And South Korea is the latest government to announce policy measures to contain the impact of high crude prices on its local economy.

China has been slowly increasing its controlled prices for key fuels like diesel. (In China, the large oil companies are mostly state-owned, and the government has been forcing them to eat the difference between the high crude price and what the people would prefer to pay for fuel. It’s Maxine Waters' fondest dream.)

Other countries have announced that they would abandon price controls. (Reminds me of when the Bank of England, under sustained attack from George Soros and other currency speculators about 15 years ago, threw in the towel and announced that they would no longer defend the pound sterling.)

Keep Reading...

Posted in Economy | Oil Prices — Comments (37)/ Email this page » / Read More »

Posted at 10:50am on May 29, 2008 REDSTATE ROUNDTABLE #11: High Oil Prices

In Which Blackhedd Takes On The American Motorist

By Dan McLaughlin

What follows started as a regular email thread but spiralled into something we felt should be posted as a roundtable on the site - a discussion of the future of gasoline-powered automobiles in America.

Hunter Baker: This interview is profoundly disturbing with regard to the oil situation. Can anyone help me feel better about it?

The rest of the roundtable follows...

Posted in Energy | Oil Prices | Redstate Roundtable — Comments (158)/ Email this page » / Read More »

Posted at 1:09am on May 4, 2008 Bad News For Price Control Advocates, Windfall Profits Tax Fans And Price Gouging Conspiracy-Mongers

By Pejman Yousefzadeh

All found here. The free market has an amusing tendency to get in the way of the formulation of shoddy economic policy, doesn't it?

Posted at 12:57pm on Mar. 10, 2008 April Oil Futures at $107.75 midday

By Vladimir

...up $2.60 per barrel on the session.

Link.

Posted at 4:20pm on Jan. 2, 2008 Oil Futures Trade Above $100; WTI-1C Problem* Averted.

By Vladimir

The contracts for February 2008 delivery of crude oil traded above $100 today, marking the first time that a barrel of oil has traded above $100 on a public exchange.

^* - The WTI-1C Problem is the oil traders' analog to the Y2K Problem. It has been widely feared by some that the extra digit on the price of a barrel of oil would cause confusion and calamity in the electronic systems that manage oil trading, causing great peril to our economy and our entire way of life.

So far, the systems seem to be handling the extra digit quite nicely.

Posted in Energy | Oil Prices — Comments (4) / Email this page » / Read More »

Posted at 1:24pm on Nov. 25, 2007 Oh for Pete's Sake!

By blackhedd

Here's the latest in a recent cascade of stories about fuel shortages, gas lines, and related violence in China. This one is all about how the Chicom regime hopes to mitigate shortages by trying to convince local authorities to monitor fuel supplies, and raise the flag when they run low. C'mon, guys! There's a perfectly simple and easy way to eliminate fuel shortages overnight: stop controlling prices. Oh wait, this is China, isn't it? Well, forget I said anything.