oil

Economist James Hamilton on the Real Causes of High Oil Prices

Originally published by Oilprice.com  WTI

Nowadays the energy picture is confusing at best as the more information we are shown the more blurred our vision seems to become. Mixed messages, poor reporting and a media hungry to sensationalize anything it thinks can grab a headline have led to many wondering what the true energy situation is. We hear numerous reports on how the shale revolution will transform the energy sector, why alternatives are just around the corner, why advances in oilfield extraction techniques and new finds will help to lower oil prices. Yet no sooner have we read these rosy reports than we are bombarded with negative news on the Middle East, on why alternatives will never compete, on peak oil and declining oil production.

So where do we really stand? Is our energy future one of falling prices and plentiful supply or should we prepare for declining supply and sky high prices?

The Wall Street Surcharge On Your Gas Tank

gas signHow much are you paying to fuel Wall Street oil speculators? A new, very timely St. Louis Federal Reserve research paper, Speculation in the Oil Market finds 15% of oil price increases are due to speculation and is the second most powerful mover of prices beyond actual physical demand. Demand itself accounts for 40% of the total oil price increase.

Why are Gas Prices Skyrocketing?

Déjà vu, it's 2008 all over again. Why are gas prices soaring through the roof?

 

gas reg gal 02-2012

 

Some are revisiting oil speculation as the culprit. Commodity futures speculation always pops up in the public discourse the minute gas prices go above $3.65, yet nothing ever seems to come of it.

Our usual stupid political tricks, from tapping the strategic oil reserve to the GOP blaming Obama for gas prices, are in full swing. Isn't this all getting rather old? Wouldn't we all just like a stable price fluctuation in a key critical commodity upon which our economy and our empty pockets depend?

 

 

We know one thing, $5 gas can literally kill economic recovery. Oil shocks are correlated to recessions, as James Hamilton points out as do others. Below is a quarterly historical graph of real GDP percent change vs. the West Texas Intermediate average Oil Price. Notice the spikes in oil price and the grey recession bars.

 

No Quantitative Easing For You

money gamblingSorry speculative traders in commodities, the Fed actually did a just say no on more quantitative easing. The FOMC meeting minutes for January 24-25th were released last week and some speculative commodities traders still seem to be in denial land.

The FOMC money quote:

The Committee also stated that it is prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability. A few members observed that, in their judgment, current and prospective economic conditions--including elevated unemployment and inflation at or below the Committee's objective--could warrant the initiation of additional securities purchases before long. Other members indicated that such policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run. In contrast, one member judged that maintaining the current degree of policy accommodation beyond the near term would likely be inappropriate; that member anticipated that a preemptive tightening of monetary policy would be necessary before the end of 2014 to keep inflation close to 2 percent.

The Obligatory Economic Predictions for 2012

labrea tar pitA new year, a new day and a flurry of economic and financial predictions. Who are we to buck the trend? Yet, buck the trend we shall. While many news articles claim jobs will appear in 2012 and the economy is on the mend, uh, we don't think so. What we have is America stuck in a Labrea tar pit of bad policy and a never ending middle class head shrink.

 

Saturday Reads Around The Internets - Just Another $8.5 Billion Please

shocknews
Welcome to the weekly roundup of great articles, facts and figures. These are the weekly finds that made our eyes pop.

 

China iPhone Manufacturer Foxconn's Horrific Working Conditions

Think the iPhone is made in America? Like most things these days, manufacturing is offshore outsourced to China. Out comes another report on the terrible working conditions at the iPhone/iPad factory.

Libya, Kaddafi, and the Marketing of Dictators

By Numerian
liberatenow.png

Nobody knows, which is precisely why leadership everywhere is addled and uncertain how to respond. What they should most fear, however, is someone who connects together the riots in Greece several years ago, the demonstrations in Iceland, and the events throughout the Middle East, with the protests in Wisconsin, and who then draws a picture which makes sense and which everyone can understand.

Driving in from the airport to the center of Tripoli, as you pass Pepsi-Cola Road and approach the old city, you see one billboard after another featuring Mohammar Qaddafi. He has different guises, depending on whether he wishes to be Col. Qaddafi in military uniform, or tribal Qaddafi in flowing robes, or religious Qaddafi in the turban and cloak of an imam. Overlooking the central square is Qaddafi the modernizer of Libya, sporting brownish-yellow sunglasses that might have been stylish in 1969 when Qaddafi first came to power in a military coup, but today give him the appearance of trying too hard to be young.

Gaddafi Regime Collapses - People Hold Line Despite Brutal Attacks

By Michael Collins
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The outlook for Libya’s economy remains favorable.
International Monetary Fund, February 15, 2011

Libya is a nepotistic cult focused on Muammar al-Gaddafi, his family, and friends. The erratic and eccentric leader, known as the Guide of the Revolution, has ruled since he helped lead a military coup against King Idris in 1969. He developed his own style of Arab revolution outlined in The Green Book. Of interest, the title of the first section is, The Solution of the Problem of Democracy: 'The Authority of the People'. (Click here for updates on Google Maps)

Gaddafi has felt the heat of that authority since February 17 when large protests began all over Libya.. Despite a ruthless security apparatus, Libyans had simply had enough. Reports now have the anti regime forces in control of the nation's second largest city, Benghazi.

Update 2/23, 2:35 pm EDT - IMF Changes Stand on Dictators

World Bank Warns It Could Happen Again

Just when you are lulled into sleep, thinking the financial crisis is over, here comes the World Bank with different ideas. While they start with how the world has economically recovered and all is well, later in the report are some not so swell numbers for the U.S. as well as warnings that the Globe could return to the financial crisis of 2008. Below is the World Bank's latest GDP growth projections for 2011 and 2012.

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