Paul Krugman and the New York Times' Pious Pontifications at the Pump
On May 12, upon reading Paul Krugman's bizarre Op-Ed "The So-Called Oil Bubble," they must have been popping champagne corks at the American Petroleum Institute. The New York Times, consistently off-base when reporting on oil markets and their construct (please see "The New York Times' Hidden Hand on Oil's Agenda", 04.25 08) permitted their resident economic guru to hit one out of the "Alice in Wonderland" ballpark.
In an extraordinary piece of jejune analysis Mr. Krugman instructs us that the rise in oil prices isn't the result of runaway speculation but rather "of fundamental factors," and then repeats the standard oil patch saws citing growing needs of emerging economies, difficulty in finding oil, etc. Therefore "there's no good evidence that prices have gotten out of line." There, words coming from the hallowed pages of the New York Times. An oil flack's dream come true!
The nonsense continues. Speculation in oil markets is dismissed. According to Krugman, higher prices due to excessive speculation would result in a situation "in which supply exceeded demand. This excess supply would, in turn, drive prices back down." So according to Krugman, in that this hasn't happened, the vertiginously high oil prices as we now know them are a legitimate reflection of market forces. Simple as that. Economics 101. Oh, for the good old days.
That trading markets can be successfully manipulated is dismissed. Think Enron and California utilities. Think CFTC investigation of BP's alleged manipulation in crude oil trading. Look at India suspending futures trading in foodstuffs markets because of the distortions that have resulted. Think of the fire power inherent in Middle East sovereign wealth funds, giving the capability to move oil and energy markets if they chose to do so (are they, aren't they? an open question).
Then Mr. Kugman continues as though he had landed on this planet from some outer celestial body made of blue cheese. Not a single mention, not one, of the oil cartel, the Organization of Petroleum Exporting Countries who control 40 percent of the world's oil supply and willfully and collusively keep millions of barrels of supply off the market each day- and no comment on what that has done to distort oil markets.
In repeating the oil industry mantra about the "difficulty in finding oil" comes no coherent examination whatsoever of the veracity nor accuracy of that statement considering the development and exploration work being done around the world from offshore Brazil, to the South China Sea and on.
He goes on to piously inform us that "France consumes only half as
much oil per capita as America" and voila, the last time he turned his gaze toward, "Paris wasn't a howling wasteland." What our good instructor overlooked
in his lesson is that in France, over 80 percent of its power grid is
sourced by nuclear energy. Ah details, and the good editors of the Times
dare not contest the anointed wisdom of their economics professor.
Then finally, and most dangerously, a baleful whitewash of high oil prices.
High oil prices are OK because "energy conservation becomes increasingly
important, in which many people may even -- gasp -- take public
transportation." That is the extent of discomfiture to the nation's citizenry
cited by Mr. Krugman. Certainly no heads-up from Krugman that the issue
here is not energy conservation, which is essential and must be acted upon
with or without high prices. The issue here is the price of oil and his
whitewash of a corrupted market (our OPEC friends, were they American or
chargeable under American law, would all be sitting in jail as massive
violators of anti-trust laws). What Krugman has done is
given legitimacy to a massive heist of billions out of our pocketbooks
into the voracious treasuries of the oil industry and the transfer of our
nation's wealth to malign regimes who are a danger to our values and future.
Mr. Krugman, you should be ashamed of yourself.
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AP 5/22/08
'Many investors believe the dollar's protracted decline over the past year has been the most significant factor behind oil's rise from about $66 a barrel a year ago.'
It's way past time for windfall profits taxes!
The Bush government says, "April wholesale gasoline prices fell 4.6% in seasonally adjusted terms."
There is nothing that can added to this report.
Big Oil has been working feverishly to prevent America getting off of its oil addiction.
The recent attempt by Congressional Democrats to take away tax breaks and subsidies for Big Oil and use them to promote alternative energy development was defeated, with the help of Big Oil's friends in the Senate. The measure fell one vote short of success, thanks to McCain's refusal to vote against Big Oil and with the Democrats.
Last year's attempt in California to develop alternative energy through the inititiative process was defeated by Chevron, who spent more to defeat this initiative than was ever spent before in our nation's history on any initiative.
In the mid 20th century, Big Oil and General Motors bought up over 50 light rail mass transit systems across the U.S. and shut them down. Did they do it to throw their stockholders' money away on useless investments, or to increase the demand for oil and cars?
Most of us have suddenly become concerned about the price of gasoline. Big Oil has been concerned about the price of oil for a hundred years, but not in a way that benefits consumers.
If a good initiative is defeated all it shows is that the voters are stupid, not that the companies behind the defeat are particularly evil. That is a very inconvenient truth, of course. So you can't ever mention it in public.
Big Oil only owns 7% of the worlds oil production. America still uses the same amount of fuel as in the 1970's. hmm go figure that one out?
We need a manhattan project style commitment to energy independance.
We need to drill for oil wherever we can and build refinaries to process that oil. We need to build next generation nuclear power plants and bring them online as fast as possible.
At the same time we need to be reducing our energy needs. We need to raise CAFE standards in our automobiles. We need to provide tax credits for replacing inefficient HVAC systems and installing geo-thermic and solar energy sources.
Forget the drilling for oil part. That is absolutely counterproductive. The nuclear power plants suffer from NIMBY and won't pull it off, either. Geo-thermal energy is a surefire loser. The total geothermal energy flux to the surface is 0.045W/m^2
Conservation is by far the cheapest and most effective way to mitigate this problem in the short term. In the long term solar energy is the one and only way to go.
This, from one who spouts the benefits from $200.00 a barrel and $8 to $15.00 a gallon gas at the pump!? All efforts, conservation, new sources of energy and PRICE REDUCTION on the part of OPEC, Oil Companies and indictments of Halliburton, Cheney and Bush, must be considered.
The havoc being played now by the most immediate problem--the Oil Cartel--and the Banks must be fearlessly addressed!
Wherever there is a "hot spot" on the Earth's surface, or even volcanic or tectonic activity, there is tremendous potential for geothermal energy.
For instance, the country of Iceland sits above a "hot spot", and depends on petroleum for only about 1 (one) percent of its electrical generation needs.
The Bay Area in California gets a signifigant percentage of its power needs from geothermal energy.
I can't help wondering why geo-thermal is not more widely used in places like Hawaii.
If demand is oupacing supply in the oil market, why would it be counterproductive to drill for oil?
Look back at my sentance about geo-thermal. I wasn't advocating it as a cure. I was advocating tax credits for those that make improvements to make their homes more fuel efficient.
Nuclear is a great option. Zero emmisions, almost limitless supply.
One good thing about high gas prices will bring back rural bus service to Americans.
If the price of oil skyrockets and yet consumption stays about the same, then it seems more likely that oil was previously undervalued than it is currently overpriced. What we're experiencing now is not a precipitous departure from supply and demand, but rather the precipitous return to supply and demand after many years of predatory pricing.
What OPEC did was cruel. They artificially suppressed market forces that would lead to investments in alternative fuels by selling oil for much less than consumers would be willing to pay. Now that the market is finally beginning to move beyond oil, OPEC will take every penny we're willing to pay.
We're paying for Bush's "addicted to oil" rhetoric, which unfortunately didn't come along with any actions that would expedite the transition away from this suddenly much more expensive substance. OPEC would have continued to give us cheap oil as long as we steadfastly ignored alternatives, but we broke our end of the bargain. Now our only option is to sever our ties as quickly as possible.
OPEN did exactly nothing. The price is set at the pump, not in some smoke filled room of OPEC headquarters. No president since Jimmy Carter had the right policy and Americans still can't get themselves to admit that Carter was right.
Stop blaming your presidents. You brought this mess onto yourselves by ignoring all the evidence of rising energy prices and driving the stupidest cars on earth.
Don't listen to this guy!
The price is set by OPEC and the Cartel. The cars, in the US market, are set by the Car companies. Isn't is strange that during the past 8 years of price at the pump increases to records unimaginable, and people yearning to buy more fuel efficient cars and they are not being produced at all! Not in any size! And governments are not building for mass transit and on the West Coast, throwing a bus or two more on the lots. People, blame them all and lets start holding our "Corp. markets" accountable.
dzoner says that they ARE PUMPING ALL THEY CAN. Both Iran and Saudi Arabia say they are not, numbers 1 and 2 in the cartel. They can pump more but won't because they say it will just increase inventory. Do you believe dzoner or the top two OPEC oil producers?
Oil industry experts have plenty of data to show that neither country can pump MUCH more. But adding a million barrels a day to the current oil market, won't make any difference. I would not believe OPEC oil producers. They have political and economic interest to claim large oil reserves and possible expansions of their production. If they admit that they have little cheap oil left, nobody will invest in them and politically they will become sidelined.
Killthemessenger says oil industry experts say they can't can pump MUCH more. Dzoner says they're PUMPING ALL THEY CAN.
Saudi Arabia and Iran say they can produce more, but won't. Since Saudi Arabia and Iran are the two leading OPEC producers, I'll reluctantly go with them instead of the overwhelming arguments of dzoner and killthemessenger.
Where are you getting this drivel? Who are you Kill?
Why are so many intelligent people (see Krugman) describing the oil price increase in free market terms of supply and demand.
I believe Cartels, are Monopolies, controlled markets. What gives?
O clueless one, maybe worldwide oil production has been flat for three years because everyone is PUMPING ALL THEY CAN.
And maybe the price keeps going up because demand is skyrocketing while supply has peaked.
The poor are getting priced out oft he market.
That will soon enough include us.
And what are those production numbers? Why did Saudi Arabia say they would not increase production, 'PUMPING ALL THEY CAN' when they surely can? What are your numbers for Iraq?
You seem to be without facts, dzoner.
Up to 60% of the RECENT rise in price is due to speculation and oligopoly.
http://glo
Only if humanity (include the US) continues its wasteful pillage of the world''s natural resources will the long-term self-destructive Malthusian economic effects become immediately predominate.
For oil prices, right now, the "bubble" is due to speculation and oligoply control.
Demand is flat. Show me the figures. China is getting ready to pump its own fields. Show me the figures.
What gives? Your beliefs are wrong, of course.
Not so, it's you who are all wet. Grow up.
What gives? His beliefs are right just not brave enough to follow them all the way down.
You are correct. The typical supply/demand argument is distorted because of the power of the cartel to restrict supply.
Are 'free market' principles so ambiguous that they apply to controlled markets, cartels?
The free market principle at work here says that YOU are free NOT to buy at any price.
There is no free market sir! There is supply side economics and governments that work for the benefit of that controled market. You do not know what you are talking about but like all bulldozers, you loud and think, well if I say it loud and act like it is true, maybe it is?!?
Krugman is in the tank for the corporate oil honchos and Clinton.
its not the temperature of the water in the bowl with the frog. its how fast the temperature changes.
when the temperature (stresses/gas prices) triple in six years, the froggies (us) suffer.
this is the third time the changes in oil costs have been swift and irreversible. also we have competition for our consumption--namely the developing world.
if we were smart, we would have taxed the hell out of gas since the 70's, the first gas crisis. we would have encouraged conservation and alternative energy. we would have had the money for r&d and the control over producers.
instead we drove our future away in hummers.
deficits----tax relief for millionaires, abolish estate taxes
scenerio--911, answer--go shopping, then invade a sovereign non-threatening nation
economy tanks----tax rebates
whats our next mistake?
d
Some interesting comments from the senate:
http://www
I worked as an analyst at a commodities firm (a registered CTA), and I am a strong admirer of Paul Krugman. In complaining about Krugman''s superficial column, you fell into the same trap and delivered a puff piece of your own - riddled with suggestions of conspiracy but no proof. How about some substantive analysis instead? Look at long versus short positions of speculative traders, or open interest on oil contracts and whether traders in the futures market are simply hedging or not.
Don't bother asking the man for proof. His mind is made up. He needs no proof.
Funny how everyone says it's demand, but the US dollar is near historic lows, and Bush is determined to keep it there, and Bush's crazy middle east policy is scaring the hell out of everyone. Not to mention Bush screwing up the commodities markets with his ethanol scam. All of that has got to be worth about $50 a barrel. Everyone's in oil and gold because the GOP has everything so screwed up with their deals and scams.
It's also very suspicious how Goldman Sacs keeps pushing the price up by their "estimates". Remember Goldman Sacs was the firm that was pushing those junk AAA rated mortgage securities at the same time other Goldman Sacs traders were shorting those same securities. I wouldn't be surprised if those crooks were playing both sides of oil too. They're saying oil will go up forever,
How's about substantial analysis is right. Show me Krugman's fact and figures especially whose paying his checks.
As you mentioned, it is the "transfer of our nation's wealth" that we seem not bothered by. The direction of our wealth is outbound, so we either borrow or sell assets to keep "in the chips". NOT a good trend. We are now seeing how fiscal constraints will require we belt-tighten---not a habit American's seem comfortable with or adept at!
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