Those Damnable High Oil Prices: Blame it on the Energy Hogs Up in Maine!

Metaphorically speaking that is what The New York Times has done. Blamed high oil prices on those consumers in Maine who will be near bankruptcy paying their fuel bills this winter, and all the rest of us, you, me, and everyone else out there both here and abroad.

In a totally bizarre article appearing in last Friday's New York Times "Rapidly Rising Global Demand For Oil Is Provoking New Energy Crisis," it is we, the consumers of energy who are solely to blame for what the New York Times is defining as "the world headed toward its third energy shock in a generation." The producers and refiners of crude oil, the oil industry, a compliant government are all innocent as lambs in this New York Times propaganda piece that could have been written (was it?) by the PR departments of the best and brightest of the oil companies, the American Petroleum Institute, or OPEC flaks.

High price of oil? Well, let's not mention the supply side, because it could be embarrassing, especially with OPEC keeping literally millions of barrels of oil off the market in order create artificially induced inventory draw downs pushing prices ever higher. No mention of the manipulation of the commodity markets, especially the ongoing investigations by the CFTC and the congressional hearings scheduled "to examine the role of speculation in recent record oil prices" by Senator Carl Levin's permanent sub-committee on investigations.

Then the nonsense continues. We are told that oil prices are up 56 percent this year. Really? In mid-January the price of crude touched $49.90 a barrel. The march to the recent $98/barrel brings the increase to nearly 100 percent in less than a year's time, an incredible jump for such a core commodity. But then the article goes on to inform us incorrectly hat the price of crude oil has jumped 365 percent in the last decade. Wrong again! The price of oil some 10 years ago was under $11 a barrel (yes, let me spell it out, that's eleven!) which comes to an increase this past decade not of 365 percent, but over 900 percent!! Perhaps they have no calculators at the New York Times, only dictionaries.

And while oil was marching to these stratospheric levels, the article makes no mention of the International Energy Agencies recent biting condemnation of the ongoing manipulation of the supply side of the oil price equation. Referring to the oil exporters from OPEC to Russia, "It is clear, the greater the increase in the call of oil and gas the more likely it will be that they will seek a higher rent from their exports and to impose higher prices by deferring investment and constraining production".

To back up its argumentation the article quotes extensively the wizened observations of the Energy Policy Research Foundation of Washington, an organization largely funded by the oil industry and always at the ready to give malleable reporters sound bites (as in "This is the world's first demand-led oil shock") supportive of the oil patch pitch. So much for objective reporting.

But that's not all. Not to be outdone the article introduces two observations that have become the hackneyed saws of the oil industry and their comrades in arms.

First, feeling our pain the article assuages us by informing us that the price of oil has not yet reached the inflation adjusted peak touched during the Iranian Revolution in 1980 of $101.70/bbl. Hey up there in Maine, everyone feel better now? This point of reference has become a staple of New York Times reporting on oil prices. That the argumentation is ludicrous is clear when one compares the price of oil to that other bellwether of economic activity and inflation, namely gold. At he same time, 1980, the price of gold touched $860 an ounce. Today, the price is slightly over $800 an ounce. Were the same parameters applicable to gold, its price today it would be quoted at $2,000 an ounce. All of which simply underlines that the oil patch and their friends will propagandize anything that gives the appearance of absolution but is basically meaningless.

And then, quite unbelievably for a paper of purported seriousness the article trots out that tired line, that even at today's prices, oil is cheaper than imported bottled water. As though the economy of the nation would come to a screeching halt without access to Evian, Perrier or Pellegrino. Perhaps not known to the editors of The New York Times, but the rest of us do have access to free tap water which is supplied by our municipalities at costs to them not very different from those of ten years ago. Perhaps there is a lesson here, when it comes to pumping oil from the nation's public lands.

But wait, its not over yet. While predicting significant increases in oil demand by 2030, and in lockstep with the industry's major concern, the growth of alternative fuels, the article has ominous words of warning. To each of us, to policy makers, to investors thinking of making commitments to solar power, wind power, bio-fuels, thermal power, hydro power, tidal power, nuclear power, coal conversion, flex fuel vehicles, electric powered cars, rail and mass transportation investment the message is stop, stop, stop! The New York Times is telling us by innuendo, don't you understand the danger, and the risk to the investments you are making? The article continues, "Economic slowdowns in China and the United States...would probably send prices tumbling...it happened a mere decade ago after the Asian financial crisis ... global oil prices fell to $10." So now that you understand the risk, put those plans away, because if you don't the oil industry may not reach that wondrous state of nirvana predicted for them by 2030.

The Gray Lady should be ashamed of herself, or at the very least help pay for the fuel bills in Maine this winter.

Raymond J. Learsy is the author of the updated version, "Over a Barrel: Breaking Oil's Grip On Our Future."

Comments

[mrcontinental]

E=mc squared.

We could have long ago solved any energy problems but have been foiled at every turn by big oil and have instead created instruments of war and destruction from one of the greatest discovers in the history of mankind.

What pathetic creatures we humans truly are.

[Camarosc35]

Thank you for this informative piece, it was alarming when Alan Greespan claimed that the war in Iraq was driven, in large measure, for oil. I imagine the same could be said for our plans for Iran. If our government acted seriously following the last oil crisis in the 1970's we no doubt would have been primarily relying on alternative fuels by now. The New York Times does not serve either its journalistic ethic or public purpose by spewing such propaganda.

[givemycountryback]

I don't believe anything I see on the MSM anymore or coming out of this corrupt, evil, administration. I personally don't think there is an oil crisis, I think it is being created so we can be gouged at the pump, pure and simple. Did you forget the oil companies insane profits, it is criminal. Why is it going up because the cold months are coming? They know we have to heat our houses, so they jump on the band wagon to make higher profits. I guess we could convert our furnaces to wood and then there would be a wood shortage, not to mention a lot of house fires. I dont want my state, that has a lot of forest, to be raped because of these greedy crooks. If China and India need more oil, too bad. We gave them our jobs, now we have to give them our fuel also.

[Ratbert]

"The Gray Lady should be ashamed of herself, or at the very least help pay for the fuel bills in Maine this winter."

Both the author and the New York times need to learn addition. Add up all the oil they think is available, then compare that with how much we use. If you can come up with some figures that show a surplus of oil, by all means show them to us. Let's move from broad brush accusations to facts.

[CharlesMac]

The most pathetic thing about all of this is... we have already had this discussion 30 years ago. The details were different, but the outrage and conclusions were the same.

We had 30 years to develop technologies. 30 years to come up with alternatives we all could live with. In 15 years we enabled the entire world with computers, the internet, and wireless. I'm sure we could have come up with something for energy.

So we are being held hostage again.

And more bad news.

Last time, our conserving did put a dent in their plans. This time we can conserve all we want, but the speculators and Sovereign Funds will keep the price painfully within reach.

Last time, OPEC (read the Arabs) really did have to worry about the stability of the dollar. Well, with all of that cheap debt, government policies, and other Fed manipulations, we have already trashed the dollar ourselves. Intentionally. OPEC doesn't need our consumption at optimum levels, nor our currency this time.

We are just a mile or two away from becoming a firesale for foreign buyers. All they have to do is destroy the rest of the "common wealth" of America which the middle class has spent a couple of generations building.

$110 a barrel for 5 years, sell off our debt, convert half of their trillions to Euros... should be just about right.

We are owned.

Fool us once, shame on them. Fool us twice...

[Ratbert]

The belief that there is plenty of oil out there and that prices are rising for reasons other than supply and demand is a faith-based belief. It is still going string but will peter out over the next decade as faith is forced to be replaced by the facts.

[Cobia]

To all the posters here who have been mentioning 'peak oil' and how the Saudis, et. al, are on the downside of their reserves:
Mr Learsy just wrote another article here at HuffPo that rebutted these claims.
I will quote from his article
(url here- http://www.huffingtonpost.com/raymond-j-learsy/as-oil-approaches-100-i_b_71698.html :

"Yet in degree, this is the current status of our resource relationship with the Saudis. Consider the following. On March 5, 2007 in a first page article "Oil Innovations Pump New Life Into Old Wells", the New York Times reported that Nansen G. Saleri, the head of reservoir management at the state owned Saudi Aramco reported that Saudi Arabia's total reserves were almost three times higher than the kingdom's officially published figure of 260 billion barrels. He estimated the kingdom's resources at 716 billion barrels. Mr. Saleri continued that he wouldn't be surprised if ultimate reserves of Saudi Arabia reached a trillion, (1,000,000,000,000) barrels!"

Sounds like the OPEC/oilco types are running the world's biggest scam. Aided and abetted by the bush/cheney regimes' too convenient destabilization of the ME region (not that it ever has been real stable).
Convince people that "9/11 changed everything" (read: scare the livin sh** out of enough sheeple) and proceed to manipulate a vital resource market to wring maximum profits from it via 'artificially enhanced' tactics.

So, what might it take to whack the price down to $20 a barrel?

[Mark701]

With all the discussion centered around oil it's clear that it's being used as a financial, political and PR hammer. Are we running out of oil? Yes, of course we are, it's a non renuable resource. Have we hit peak oil? Yes, Saudi Arabia stated 2 years ago that they wouldn't be able to keep up with demand in 15 years. Is the price of oil being maniupulate? Absolutely. There is so much craziness with regard to oil that they have latched onto the frenzy and are riding it for all it's worth.
The fact is, despite it's outward appearance the oil industry is dying AND the oil companies know it. Think about it. Our need for foreign oil is now considered a threat to national security. Hybrids are catching on, industry is becoming more efficient, alternative energy technologies are being seriously discussed and implemented. Global warming is related to petroleum use. Everywhere you turn the message is 'conserve' and develope alternate energy resources. It's only a matter of time before demand for oil sinks and takes the whole rotten industry with it. What we are witnessing in the oil markets is the bulb burning brightly right before it burns out. Good riddance.

[balance]

In supply and demand economics, when a resource is critical, it completely throws off the equation.

If customers basically cannot live without something, that puts huge power in the hands of the limited number of suppliers. In addition that means that suppliers can charge almost anything for it, until customers find a way to live without it.

Oil is not a "widget" that consumers can just ignore if it gets too expensive. The need for Oil is more similar to economics of drug dependency. Suppliers can squeeze alot out of the users, and gain power as it gets even more scarce. The business school ideology of regarding everything in the economy as a optional consumer widget does not apply.

Oil is a limited resource where the few suppliers can make more money by selling less of it. If they can make billions of dollars more by hyping and manipulating the markets, why wouldn't they? And who would catch them? What safeguards are there to keep them honest?

It is absolutely naive and foolish to insist that we shouldn't be alert about that possibility. Remember ENRON, and the California energy crisis of 2000 & 2001. Such a market manipulation conspiracy happened then also. (Who was in charge and stonewalled investigations into that? hmm? To whom did Ken Lay contribute huge amounts political dollars and lend his personal jet to in 2000?)

With power should come distrust -- that is natural, and with Oil, -- that is due. Mr. Learsy is on the right track to keep the suppliers honest.

It does not matter if Oil is really running out or not. It is expensive. It is polluting and it cannot be sustained. It is urgently necessary to find clean alternatives. It is also necessary not to be fools, as well, by being skeptical about being gouged at the same time.

[Joeseo]

I agree Mr. Learsy, the Gray Lady
just can't help pandering Oil myths. She simply must support Israel. Corporate American Oil therefore gets a pat on the back for that support. Aramco plays both sides in the middle-east.

The Lady will continue the myths and play the American public for the fool. Not hard to do that.

[LaFilleEnRose]

At the Dem debate on MSNBC, didn't some of them mention that at least 30% of the price of oil is due to jitters in the market because of saber rattling with Iran, etc. Some of that rattling is ours. Some is Russia's. But it's clear some of it's deliberate. the Repugs don't raise "taxes" but they help make sure the few dollars that we're getting a reprieve from is overwhelmed by what we pay big business in subsidies etc. Our pockets are being picked by big business and their cohorts in Washington -- yes some of the Dem's, too -- and we do nothing about it. but are thrilled when we get a measley little tax break. In the bible I think the quote is: straining at gnats while swallowing camels.

You know what. Maybe that's what Edwards has been trying to tell us but just hasn't been direct enough. Sure he's rich, but he's made his money by taking these people to court on behalf of the helpless all his life. Hummmm. Have I been looking at the wrong candidate...Obama? Is it Edwards who really gets it? If so, I hope he can articulate it better.

[SallyLee]

Oil has intrinsic value. Since the value of the dollar is decreasing the price of oil in dollars must go up. The price of oil in Euros is not going up as fast. Therefore a large part of the problem is the devaluation of the dollar.

[neutrino74]

The oil companies control a relatively small amount of the oil supply. The producing countries have taken back control. If there was an abundance of oil available then someone would have started pumping more oil to take advantage of the higher prices.

The North Sea is in decline. England used to export oil and now imports. Mexico (our second largest supplier of oil) is currently in decline and within two or three years will go from an oil exporter to an oil importer. It is now thought that Saudi Arabia's largest oil field is going into decline.

It is as if you started finding gold nuggets in the back yard and you treated it as an income stream instead of a one time boon. Oil is fantastic stuff. It has a greater energy density than anything except nuclear fuel, you transport it and store it in a bucket, you get the energy simply by lighting a match to it. We have built a world that relies on a steady stream of this fantastic stuff at a low price.

I agree with the NYT that oil is still cheap. Heck, I think oil would be cheap at $500 a barrel. For $3.50 I can buy a gallon of gas that can push my car at 60mph for one hour (Prius). Show me where I can pay anyone do that for me for that price.

For thousands of years we got by with walking and travel by water. When the oil is depleted we'll go back to walking and travel by water.

[johannesrolf]

apropos the cheap dollar. it is a great advantage for the US to pay its debts with ever cheaper money. conversely, our debtors are more than inconvenienced by this arrangement.

[realitytrumpsbull]

I think there's more than a little artifice in
the whole oil story, some science-fiction,
but even if we're not running out of oil,
the provision and stewardship of such resources
has now become so costly both in dollars and
in terms of our national future as such that
it's definitely time to open up the floor to
the scientific community to start pushing
viable alternative concepts to the forefront.
The racketeers that control this resource(and
apparently also our national energy policy)
have no intention of relinquishing their
profit streams, the only real way to take
issue with it all is to have something that
people can buy that in no way relies on
supplies of petroleum, especially and specifically imported petroleum products of
any kind. I'd like to see things like Toyota
engine refits for older cars, pellet stoves
that burn compressed sawdust and leaves and
whatnot in an efficient way, things that'll
help extend and preserve and ultimately also
lower the costs associated with our energy
supplies. Sunlight is still free, the Mob
hasn't figured out how to charge you for that
yet, and it's clean and non-polluting. It's
also the best disinfectant.