No critical commodity moves as much on rhetoric rather than supply and demand fundamentals, as does crude oil. Over the years few news services, perceived as being disinterested purveyors of news and information, have lent their imprimatur more to the upward distortion of oil prices than the New York Times.
In keeping with what now has become a sorry tradition, the New York Times on Thursday gave the oil patch and its allied interests good reason to pop champagne corks two days early in celebration of the New Year. Assuming a mantle of authority, conveying to us as received wisdom from on high, the New York Times presented to is readership, packaged in the babble of well honed oil industry mantra, illuminations, the likes of which a well oiled oil industry flack would have been embarrassed to disseminate. We were to be instructed by the good scribes of the Times, in their lead story in the Business Section, that "Oil Prices Predicted to Stay Above $100 a Barrel Through Next Year."
The article ends "Consumers have this belief that prices will either go up or they will remain at elevated levels." The reportage fills three quarters of a New York Times page in regaling us with reasons that at the very least "elevated levels" will remain, with the subtext that we should celebrate such an outcome, as prices might very well go higher. It was the kind of reporting that had the oil gang cheering, having recently reported bottom line record earnings with those oil prices at "current" levels (while the rest of the country is still in a deep funk).
The article also made us feel better by pointing out that "The United States economy managed to cope this year despite triple digit prices for barrels of oil." Such is the information we are fed by the New York Times' scribes, seemingly safe at their business desk sinecures, frighteningly oblivious of a near nine percent unemployment rate throughout the land, the millions out of work not to speak of the millions evicted from their foreclosed homes, and not coping in the least.
Other than references to foreign policy issues being played out, such as Iran's threat to blockade the Strait of Hormuz and all that would entail, the Times hastens to instruct us that oil prices have an innate right to hover at their current astronomical heights. This by citing that "Many governments in the Middle East spent heavily on social assistance programs in response to the unrest of the Arab Spring and are depending on higher prices to meet their budgets." Now, does that make you feel warmer up there in Maine?
And when it comes to higher prices no mention is made of the breakdown of our oversight agencies such as the Commodity Futures Trading Commission (CFTC) and its failure to rein in excessive speculation in oil prices. (Please see "Time to Dismiss The CFTC Chairman And His Commissioners" 12.27.10). It is not just my layman's opinion, but much more significantly that of Rex Tillerson, CEO of the world's largest oil giant, ExxonMobil, who to his great credit, in testimony before the Senate Finance Committee in May 2011 expressed his exasperation that the then current price of oil at $100/bbl incorporated some thirty to forty dollars in its price resulting from speculation (Please see "Are Our Leaders Hearing ExxonMobil CEO Rex Tillerson" 05.17.11)
Nor did the article make any reference to that fundamental game changer, the vast deposits being discovered of low cost natural gas. Through new drilling techniques such as environmentally aware fracking, enormous reservoirs of shale gas have been identified in dimensions barely understood just a few years ago- enough to meet domestic needs for the next 150 years. The potential is so large, a consensus is building that it will lead to American energy independence.
In years past, oil and natural gas prices moved up and down in near lockstep. Such was the case when oil prices peaked at $147/bbl in the summer of 2008 (helping to bring on the housing crisis and the financial meltdown in September of that year). The price of natural gas at that time was near $15 mmbtu. Today, while the price of oil rests near $100/bbl, as quoted on the New York Mercantile Exchange for West Texas Intermediate (WTI), the price of natural has dropped to under $3 per mmbtu. At that price for natural gas the comparable energy quotient in a barrel of oil would bring its price down to less than $20 a barrel. Clearly, with a differential of this magnitude, and natural gas being environmentally friendlier than oil based commodities such as gasoline, some substitution will begin to weigh on the consumption of oil, whether in home heating or starting with the conversion of trucks to being powered by natural gas rather than gasoline/diesel. It is a trend only beginning now, that will have major impact on the need for, and consumption of crude oil in the years ahead.
Yet here again, instead of reporting clearly on this development and its enormous potential, the New York Times engaged in reportage bordering on yellow journalism (Please see "New York Times Flays Natural Gas..."06.28.11) with two articles filled with conjecture bordering on disinformation: "Insiders Sound an Alarm Amid a Natural Gas Rush" 06.25.11, and "Behind Veneer, Doubt on Future of Natural Gas" 06.26.11 placing the entire shale gas revolution into question, interjecting terminology such as 'Ponzi Scheme' 'Dot-Com Bubble' and on. This in the face of billions of dollars investment into the shale gas and shale oil plays by such 'doubters' as ExxonMobil, Shell, Chevron, the Norwegian national oil company Statoil, the Chinese government owned CNOOC, and Total, the French oil behemoth. The list goes on. But the Times instructed us otherwise, thereby helping to keep oil prices on the ascent by vesting us with the ignorance needed to accept high and manipulated oil prices unquestioningly.
It has been a tradition of distortion or misinformation dating back years whether sweeping the manipulations of OPEC under the rug, or heralding the pronouncements of that oil price manipulator par excellence and OPEC's premier protagonist Saudi Arabia, without a questioning eye. (Please see "The New York Times Continues Its Fawning Coverage of Saudi Oil Policies" 03.22.10)
Sadly, the New York Times, on the issue of how oil prices are determined has become a leading apologist of industry excess, government connivance, seemingly oblivious to the distortion of pricing instigated by OPEC, the commodity exchanges with their nurturing of excess speculation, Wall Street and its feckless proprietary trading financed in large measure through beneficent government programs.
Given its standing and the thrust of its coverage, the Times has become an important contributor to the public's baleful acceptance of having its pockets picked by the oil interests the world over.