Re: Pretty Good Overview Article On The Oil Crisis.
- From: FL Turbo <noemail@xxxxxxxxxx>
- Date: Sun, 27 Jul 2008 09:52:55 -0500
On Sun, 27 Jul 2008 09:15:30 -0500, Travel <nine510@xxxxxxxxx> wrote:
http://www.msnbc.msn.com/id/25867997/-----------------------------------------------------------------------
Note Bodman is protecting the Wall Street speculators by insisting the
problem is totally supply and demand. This is the left wing slant on
the issue: blame Saudi, blame America's freedom of travel. You have to
realize that Bush is a left wing sympathizer, if not out right one of
the left wing. Everything Bush has done wrong, was something the left
wing actually wanted.
-----------------------------------------------------------------------
This is probably a great time to post this excellent article.
It could just as well have been entitled "Basic Economics for
Dummies", but it isn't.
http://www.gmu.edu/departments/economics/wew/articles/08/Scapegoating%20Speculators.htm
A MINORITY VIEW
BY WALTER E. WILLIAMS
RELEASE: WEDNESDAY, JULY 9, 2008, AND THEREAFTER
Scapegoating Speculators
Despite Congress' periodic hauling of weak-kneed oil executives before
their committees to charge them with collusion and price-gouging,
subsequent federal investigations turn up no evidence to support the
charges. Right now oil company executives are getting a bit of a
respite as Congress has turned its attention to crude oil speculators,
blaming them for high oil prices and calling for tighter control over
commodity futures trading.
Let's look at the futures market and for simplicity use corn futures
discussed in my May 28th column titled "Futures Market." While corn is
different from oil, both obey the laws of supply and demand, just as
humans are very different from bricks but both obey the laws of
gravity.
Say that today's price of corn is $7 a bushel. I have a hunch that
because of Midwest flooding, higher demand due to droughts and war in
other parts of the world, that in May 2009, corn will sell for $12 a
bushel. I stand to make a lot of money by buying corn now for $7 a
bushel, holding it, and in May 2009 selling it for $12 a bushel. If
many speculators share my hunch and buy more corn now, today's price,
sometimes called the spot price, is going to rise let's say to $10 a
bushel.
Higher prices for corn, and everything made from corn, might give rise
to consumer complaints. While Congress can't stop the Midwest rain,
droughts and wars in far off places, it can scapegoat speculators.
Let's say that Congress outlaws the corn futures market, or makes
futures trading more costly. Doing so will definitely lower the spot
price of corn. The price might return to $7 a bushel, making corn
consumption once again "affordable." You might exclaim, "Isn't
Congress wonderful?" But what about May 2009?
Suppose the Midwest floods have a significant impact on corn
production; there's drought and war in far off places raising the
demand for corn exports. What do you predict will be the availability
and prices of corn in May 2009 after Congress has outlawed, or made
futures trading more difficult?
If you answer less corn and much higher prices, go to the head of the
class.
By outlawing or impeding futures trading in corn, Congress encouraged
Americans to ignore the future.
Had Congress not interfered, people would use less corn now, making
more available in May 2009. Thus, one of very valuable functions
performed by the speculator is the allocation of resources over time.
It makes sense to take the future into account when making consumption
decisions today.
The futures market, by the way, is no bed of roses. My hunch about
corn supply and demand conditions might be dead wrong. Its May 2009
price might be $3 a bushel and I would have to sell at a loss. Futures
trading is risky business.
Congressional attacks on speculation do not alter the oil market's
fundamental demand and supply conditions. What would lower the
long-term price of oil is for Congress to permit exploration for the
estimated billions upon billions of barrels of oil domestically
available, not to mention the estimated trillion-plus barrels of shale
oil in Wyoming, Colorado and Utah.
Some politicians pooh-pooh calls for drilling, saying it would take
five or 10 years to recover the oil. I guarantee you we would begin to
see a reduction in today's prices even if it took five to 10 years for
us to get the first barrel.
Put yourself in the place of an OPEC member knowing there would be a
greater supply of U.S. oil five or 10 years, hence maybe driving oil
prices lower to say $40 a barrel. What will you want to do now while
oil is $130 a barrel? You would want to sell as much oil now and
OPEC's collective efforts to do so would put downward pressures on
current oil prices.
Right now the U.S. Congress is OPEC's staunchest ally.
Walter E. Williams is a professor of economics at George Mason
University. To find out more about Walter E. Williams and read
features by other Creators Syndicate writers and cartoonists, visit
the Creators Syndicate Web page at www.creators.com.
-------------------------------------------------------------------------------
I know.
I know it's probably more detail than the average TV Scooter with the
attention span of a Chimpanzee can master, but it's worth the try.
Read it before you go spouting off about some great Conspiracy from
the Left or the Right.
.
- Follow-Ups:
- Re: Pretty Good Overview Article On The Oil Crisis.
- From: Travel
- Re: Pretty Good Overview Article On The Oil Crisis.
- From: Monty_Burns
- Re: Pretty Good Overview Article On The Oil Crisis.
- References:
- Pretty Good Overview Article On The Oil Crisis.
- From: Travel
- Pretty Good Overview Article On The Oil Crisis.
- Prev by Date: Re: RGPLeague2008 Last Longer Thread 27th July
- Next by Date: Re: OT: Bush boot-lickers say we're not losing any rights
- Previous by thread: Pretty Good Overview Article On The Oil Crisis.
- Next by thread: Re: Pretty Good Overview Article On The Oil Crisis.
- Index(es):
Relevant Pages
|
