No To Oil Prices Ruining U.S. Economy

Discussion in 'Economy' started by JimofPennsylvan, May 21, 2008.

  1. JimofPennsylvan
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    JimofPennsylvan VIP Member

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    The Congress and the President need to treat the out of control oil prices as a crisis and act. Yesterday, oil closed over $ 133.17 dollars/barrel on the NYMEX, our nation can’t take this current rate of oil increase. The record setting prices of oil are killing the Airlines Industry; hurting, many severely, businesses across the national economy that use petroleum products which number many and driving up food and motor fuel prices on American families in a crushing manner. These out of control oil prices are going to undermine the economic stimulus package the Congress and the President recently passed and the Housing Assistance bill which is expected to pass. If all this work Washington is doing to revive the U.S. economy fails because of oil prices, the country will likely go into a deep recession or depression which should be alarming to responsible Americans because first, America doesn’t have too many weapons left in its arsenal to fight an ailing U.S. economy with the Fed having lowered its key rate to two percent there isn’t much room left to move it to spur the economy and the nation’s budget situation with no money available for stimulus and secondly, everyone knows that Americans are heavily in debt whether it be credit card, home mortgages, etc. if the economy really tanks and large number of Americans start losing their jobs they won’t be able to pay these debts and the whole credit industry will collapse and the economy will be left in shambles.

    This is what the Congress and the President need to do to get things under control with the price of oil and other petroleum products:

    Require all oil produced in the territory of the United States (this includes U.S. territorial waters) to only be traded in a separate commodities market where there is a price cap on the market and the buyers of the oil can only use that oil in the U.S economy, give the Federal Reserve Board the Authority to set this cap – Congress can put in the enabling legislation something like the “next month” future contracts cannot have a price cap below $80.00 dollars/barrel to show good will toward oil producers. The plan wouldn’t be to ruin the profitability of oil producers business it would be to just bring it into the realm of reasonableness, what was oil trading at in the last eighteen months in the high $50 dollar a barrel range at some point and look at the price now. Keep in mind that the sovereign government of a country has certain powers that stem from that sovereignty and one of those powers should be considered to be that the natural resources that come from that country should first be used to do right by the citizens of that country. In the instant case, running U.S. produced oil through the world energy markets where it becomes priced at U.S. economy breaking prices isn’t doing right by the American people. Moreover, America would only need this separate “U.S. produced oil” market for five to ten years (then things could go back to what exists today) because in five to ten years America is going to be heavily into plug-in electric hybrid cars, cellulosic ethanol (Dupont has already committed to building a significant sized commercial plant), biofuels, etc. in effect by that time America will have cut its demand on oil and won’t be so vulnerable to high oil prices. Many states in America for many years regulated the price of electricity and they only stopped that regulation when their was market systems in place to insure fairness to the American consumers in their state – this idea likewise only looks for partial oil price regulation until there will exist a market system in place that won’t bring an unfair result on the American consumer. The American government has to start being like other governments and protect their citizens when it comes to commodities; other governments have blocked the export sale of commodities, produced in their nation; other governments have stopped the trading of commodity markets in their country, possibly it was India that was the country that did this in the last two months in their oil trading market. The current oil commodity markets aren’t really giving the American people an option here; many oil commodity experts are talking about $200.00 dollar/ barrel of oil in the near future from the markets – the American people can’t in all fairness afford the current price of a barrel of oil let alone $200.00 dollars. Also, the current oil pricing system in place in this country is egregiously unfair from the standpoint that quite a bit of the oil produced in this country comes from public lands in the continental U.S. or off-shore which means this oil is originally owned by the American people. The current system takes this “American people” owned oil from the American people and then sells it back to them at an unaffordable rates – this situation makes it clear the system is broken. When a market system is broken it is the President and the Congress’s job to fix it.

    The media is reporting that Congress’s reaction to the skyrocketing oil prices is to try to pass legislation which will bring the U.S. Department of Justice to pursue OPEC countries for Anti-trust violations, unfair trade practices and the like. This is just utter foolishness. First, the only OPEC country that has real excess production capacity is Saudi Arabia which probably has around one million barrels per day of additional production capacity which if that was brought on line there would be no consensus amongst experts that such would even lower or stablilize oil prices; the drop in the U.S. dollar has a lot to do with high oil prices as well as speculation or market manipulation to be more descriptively accurate besides oil supply volumes. Secondly, Saudi Arabia has been carrying the world on their back for decades from the standpoint of being the major supplier in the world for oil (even today they probably pump 8 plus million barrels of oil/day) and in doing that great service for the world they have significantly permanently depleted their oil fields, today they have to pump enormous amounts of water into their fields and conduct non-traditional drilling techniques to extract the oil they sell. If Saudi Arabia wants to hold off in fully tapping all their oil producing capacity and in so doing preserve their natural resources for future generations of Saudis “our” government shouldn’t say a word absolutely not a word about it especially in light of the fact that the American economy has been using 20 plus percent of the worlds oil production for years and years and the American people have only been around five percent of the worlds population. For those U.S. legislators that want to really get into it, if they are to be fair and knowledgeable the Saudis have been great friends of America through the years and we owe them an immeasurable amount of gratitude because the Saudis could have buried the American economy numerous times over the last twenty years cutting oil production and thus driving up oil prices over the years but they always resisted (many times, in fact, being America’s champion against other OPEC countries that wanted to take full advantage of America’s dependence on oil). This anti-trust idea is utter stupidity.

    Congress, it has been reported, is considering doing away with the Enron exception in oil commodity trading. This is an excellent idea which will put some foreign oil futures trading under the auspices of federal regulators which will stop some of the market manipulation which goes on. Nevertheless, this initiative will likely not significantly reduce the price of oil nor reliably stabilize the price of oil. Political instability in oil producing nations, lack of investment in oil infrastructure in many oil producing nations, growing oil demand from China and India, the drop in the dollar, etc. are significant forces driving the price of oil which this Congressional initiative will not affect.

    America imports roughly sixty percent of the oil it uses so if America insured forty percent of the oil it used was priced at reasonable rates, like this separate market idea would, it would not totally solve America’s problem, but it would significantly help. At this point, the American people need and deserve help on this oil price problem, albeit how imperfect that help. If the American government has no silver bullet here the least they can do is provide real “basic fairness” help which this “separate market” idea offers.
     
  2. JimH52
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    JimH52 Gold Member

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    Obvously, this is an Islamic plot to bring the US economy down. With Mister oil man in the White House, little is going to be done. He couldn't if he wanted to, I would expect.
     
  3. Paulie
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    Paulie Platinum Member

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    This is nothing but a bunch of drivel.

    The nation is not going to go into a depression over oil prices. I am certainly not one to rule out a depression in the foreseeable future, but it's certainly not going to go unchallenged by ME at least, if someone is going to merely blame oil prices.

    I'm not sure what you think congress OUGHT to do, besides stop the out of control spending that is requiring us to inflate the money supply so much.

    The culprit is the Dollar, and the policy the runs it. Congress is wasting time and distracting and dividing the nation by trying to scapegoat oil companies.
     
  4. Toro
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    Toro Diamond Member

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    This is a bad idea.

    Interfering with the market clearing price merely distorts capital flows into areas that are necessary to ween the country off oil. High oil prices induce investors to commit funds to alternative sources of energy, most of which are cleaner than oil.

    Let oil go to $200 a barrel. We do not have a God-given right to cheap gasoline. Maybe then we'd start dealing with our reliance in the stuff in a serious manner.
     
  5. Skull Pilot
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    Skull Pilot Platinum Member

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    it is possible to insulate our economy from the oil market. you can't deny that the price of oil does affect our economy directly. if we want that effect to be lessened, we have to take steps to make it happen.

    the funny thing about insulating ourselves from oil is that it can satisfy both the global warming crowd and environmentalists at every station on the spectrum and those who want cheap energy and economic growth but who generally oppose so called "green" solutions because they cost too much.

    there must first be incentives for the public and the market. a 100% tax credit over three years for the cost of purchase and installation of any renewable energy system be it geothermal, solar or wind implemented in any private home or business. that coupled with tax breaks for new start up businesses that deal in the design, sale and installation of renewable energy will not only create tens of thousands of new jobs but we will see a huge boost on our economy as spending on oil and electricity diminishes, we will have more money to spend or invest elsewhere

    imagine that a win win situation, now let's just find some politicians with the balls to do it.
     
  6. LordBrownTrout
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    LordBrownTrout Gold Member

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    Blame Bush all you want but that's not the solution. Let's not lose sight of Clinton and the dems when they refused to drill ANWR in 96, which would be online right now. Also, the last refineries were killed by the environmentalists in the 70's, which would have been feasible at the time due to the low costs of crude. Now there's no incentive for refineries. There are solutions for the rise in crude, nuclear, more drilling offshore, Wyoming shales, while we push for new technologies. But alas, the environmentalists have a no compromise attitude which is now manifesting itself.
     
  7. Paulie
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    Paulie Platinum Member

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    This is definitely true, but I suspect with our current Dollar policy that we'd still be seeing oil over $100/bbl. I mean, christ, people were complaining when it was 60-70. There's no satisfying some people. We need to stop the out of control spending, and the debasement of the dollar.

    If there were alternate currencies allowed in this country, oil would not cost this much. Oil is pegged to the dollar like an electromagnet. When the dollar drops, oil goes up. When the dollar goes up, oil drops. It's a given.

    I agree that opening up some of our reserves would minimize the pain, but as long as we keep treating the dollar like this, oil is going to continue going up. Maybe just not as fast.
     
  8. Paulie
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    Paulie Platinum Member

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    In the meantime, if the price bothers you so much and it's actually hurting your budget, invest in it.

    If you have a couple thousand in a savings account earning you next to nothing, buy 20 or so shares of crude. The way it's trending upwards, you will earn returns that will offest your costs at the pump. If oil goes DOWN down, you save at the pump and move your money back out of it.

    A win-win situation.
     
  9. LordBrownTrout
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    LordBrownTrout Gold Member

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    You hit the mark, Paulitics.
     
  10. BrianH
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    BrianH Senior Member

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    NO matter who's fault it is <----it won't help us fix the problem. We're in for some deep shit if this trend continues. What is oil now??? 120-130 a barrel??? and still rising?? I saw some projections earlier on TV that put the dollar a barrel between 200-500 within 6 months to 4 years.........
    THe American people cannot afford this. If this trend continues, we will put ourselves into a depression. Most of us, who can't afford 8.00 a gallon gas, will be back in the stone age. Many who commute to very important jobs (that pay little) will have to stay home, and live from there. Grown their own food, and just live off what they can provide for themselves. I really fear the affect that these prices will have on our nation. We're in for something big I think, if something doesn't turn around. Can you imagine a complete economic collapse because of oil prices????? I feel we may have seen these effects before in history???:eusa_think: You're border patrol stops, the airline industry is already suffering, police can no longer patrol in cars... I'm not trying to start a conspiracy, but this is what I feel will happen if things do not change.
     

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