10 Encourage Mini-nuclear power plants which can be built in year or two.
9. Encourage sugar ethanol which costs 1/2 of price of corn ethanol and rebuild the Gulf coast.
8. Encourage trash to steam with proper health and safety precautions.
7. Encourage the car companies to make more flex fuel or alternative power vehicles. Just the existence of them in a wide spread fashion will dampen speculation.
6. Half of the excess oil price is speculation and almost half is the weak dollar. Oil could legitimately sale based on supply and demand for 60 to 73 dollars a barrel according to the Saudis. Triple the margin requirement for the oil futures and reverse the 2005 deregulation. Since then the speculative money has increased almost 20 fold. It takes only a 7% margin so people move in for the day and out again and give wild swings. It is also bidding up the future’s price based upon an artificial demand curve. Put it back to 20%.
5. Publicly flog speculators. We still have whipping posts in the basement of an historic building, don’t we? I am just kidding on that one, but why are we persecuting the oil companies who actually produce something and let the speculators who don’t off the hook? Is it because the hedge fund guys give 3 to 1 to the Democrats in Congress? How much has Joe Biden received from speculator/ hedge fund guys Christine? Hint.
4. Encourage Windpower. Onshore, offshore, we sure hope to find some. Just do it.
3. Drill here. Drill now. A lot of the speculative bubble is because they believe we won’t increase are supply. Put more reserves into play and the bubble pops.
2. Strengthen the dollar. A half of point increase in rates will actually help the economy now that we bypassed a recession. It will raise the value of the dollar and puncture the speculative bubble. We can depend a little more on fiscal policy and stop printing so much money. Stagflation is the worst of both worlds.
1. Launch a concerted effort to develop new technology to break our dependence on oil.
Offer 100 million dollar rewards for 100 mile to a gallon vehicles, vehicles which don’t use fossil fuels or electricity, and to build a better battery to store wind, hydro, and solar power. Offer a 100 million dollar reward for cold fusion. Give grants to fund basic research again. Encourage enterprise zone incentives to set up production of alternative energy. Reopen closed factories with tax credits to companies who build alternative energy products here in America. Act like we did when we were fighting World War 2. We found alternatives to a lot of commodities because we had to. We have far greater technology and can even turn trash to oil. Let’s realize we are in war and stop saying shop and live normally. Let’s act like Americans on a mission.
A lot of good ideas here David. We need appropriate leadership to put policies in place to implement the best of these ideas with ‘putting a man on the moon’ type of urgency, as we are in very serious trouble as we write, very serious indeed!!!
Hmmm…I suggested a while back that whoever buys these contracts without taking delivery of the crude must pay a tax on the gains and get no credit on a loss. Not a debilitating tax, but enough to make them stop and determine if there is a gain to be had. I was told how important the speculator is and to keep government out. Interesting.
That’s true, people did say that to you. I agreed that the speculator is important, but you may remember that I — I said you brought up an important issue. Don’t lump me with the group. I just didn’t agree with the particular solution because buying and selling is important. We need to keep the market liquid. All I am proposing is that we take out the bubble by putting the rules back to where they were just 3 years ago. The change didn’t work.
I don’t want radical change, but I do want real change. We know what the result would be of these changes. That is an advantage.
Personally, I liked how you thought out of the box. Keep it up.
The “get out of government” part was by Rick (the abbreviated Rick, not “Rick90210″). I didn’t mean to lump you in like that. Apologies.
Encourage Mini-nuclear power plants which can be built in year or two….
The problem is permitting, which can take many years and massive public opposition. Some of the other issues, like waste, safety and terrorism still exist. Rather than add more plants, what we are seeing is current plants expanding and increasing efficiency.
Encourage trash to steam with proper health and safety precautions.
Proper health and safety precautions is the problem. The idea is less stuff in the air. The process itself precludes that from being the case.
5,6,7 are right on.
Strengthen the dollar. A half of point increase in rates will actually help the economy now that we bypassed a recession. It will raise the value of the dollar and puncture the speculative bubble. We can depend a little more on fiscal policy and stop printing so much money. Stagflation is the worst of both worlds.
The dollar is being weakened so it costs less to pay off our debt. That’s what happens when you have republicans in control of the WH and Congress. DEBT!!! (See history)
Love the conclusion. But remember. The coal and oil industries will fight you. Just look at pepco and DP$L crying over being cut out of the energy production market with the wind farm. Boo-hoo.
I have been suggesting this kind of thing for a long time becuase we are in a real fix now. And guys before it gets better it is going to get much worse. Again I was going over the commodity fundementals and everytime I do that, I am amazed more Americans are not moibilized and on a mission to get us energy independent in every way….
Not to ruin your thread….
Supreme Court backs Guantanamo detainees
http://www.msnbc.msn.com/id/25117953/
Today the liberals on the bench protected the constitution and its original intent. The conservatives on the bench used fear tactics to try and suspend constitutional law.
Scalia said the nation is “at war with radical Islamists” and that the court’s decision “will make the war harder on us. It will almost certainly cause more Americans to be killed.”
Whether that is true or not is irrelevant. Such fear-mongering and interpretation is not part of Constitutional law. Funny how conservatives are allowed to rewrite the constitution when they agree with its ideology and end result. So much for strict construction.
Justice Anthony Kennedy, writing for the court, said, “The laws and Constitution are designed to survive, and remain in force, in extraordinary times.”
Whether you like it or not. Sometimes, freedom, and showing the world what freedom and LAW are really about takes GUTS. Republicans love to talk about freedom and guts and the constitution and stuff like that, but rarely exhibit it – or hold it in high regard – when it counts. What are they afraid of? The constitution?
Great feedback all. Sometimes when we post these we sound as if we have all of the answers, but in reality we are mobilizing discussion. This process wouldn’t work as well without you. It would just be some guys pontificating to themselves. Thanks for the input. I am glad you all basically agree.
Now that I said that, I better hold on.
I agree that some ideas are easier than others. I think the biggest immediate bang for the buck would come from 5 through 7. I don’t want to kill speculation. I just think that we made the same mistake in the commodities market by reducing the margin in this type of environment that we made in the 1920′s in the stock market. Then we reduced the margin to 10% this was taken down to 7% in today’s commodity market.. A person can tie up huge amount of a commodity with little of their own money. Some hedge fund could literally control billions of barrels on a whim with no purpose but to cause a market spike. As Smitty said, it is getting to the point where real people are hurting and in the third world lives are being lost. That is where I draw the line.
I admire the market almost religiously, but I will not sacrifice innocent children to that faith. We have been through this before. Let’s not panic, but learn the lessons of history.
Speculating on oil is no different than speculating on land, homes, cars, boats, lumber, stocks, companies, or whatever gadgets you think are undervalued today and will be worth more tomorrow.
You’re buying something today because you think it’s undervalued for reason X, and at some point in the future it will be worth more than x + inflation.
If you want to bring prices down, bring supply up and you wont have to regulate more crap using cumbersome and heavy-handed government intervention with it’s ever-present law of unintended consequences.
Before the communists jump in there, I should add that I do not own oil, or shares in any commodity related ETF.
I do probably own some oil through a mutual fund in my 401k… as do most of you.
Read history esp. economic history of the 1830′s, 1890′s, and 1920′s then come back and tell me that. Just read Greenspan’s book for a start. He will explain the speculative bubble fueled by debt.
As I said before, I have no problem with speculation. I sometimes have engaged in highly informed speculation profitably, I might add (I paid for my vacations with short sale or option plays if I lose I didn’t vacation, big deal), but it is different when you allow these highly leveraged short term deals. My concern is not with people speculating with their own money. It is with people speculating with other people’s money who don’t have a say in the matter. People who’s money is managed by a brokerage for instance. That money is insured now days. Imagine if we have a 400 billion dollar collapse after food an fuel riots break out all over the world. Who do you think is going to be on the hook to bail it all out? The investor? No, this 7% system will break many of them and the rest of the problem will fall on guess who.
That is why we made reforms which stem from the Depression era lessons. Call me a conservative, but I think we need to be careful before we make drastic changes in a system that has saved us from the drastic boom and bust cycles. A lot of things we did, I am not a big fan of, but solidifying up our financial system was smart. I think we need to update the rules to reflect new realities, but not to go back to what almost ruined us. I heard a lot of stories from my parents and grand parents about the Depression so I studied it. I studied its causes and the aftermath. I am no expert, but I found it quite enlightening and I spoke with people who were experts. I would love to do a post on what worked and what actually prolonged the Depression, but it may be too historic.
You say unintended consequences, that is what we have now. We changed the regulations in 2005 in spite of the advise of some wise people like Greenspan. It didn’t work. Let’s change it back before we have a massive collapse and end up bailing out everybody.
I don’t want radical change, just abandoning failed change. I don’t want some demogogues destroying big oil when that has nothing to do with the problem. The real problems are all government related either the foreign governments of OPEC or our own government with the changes in the commodity regulation, weakened dollar, and anti-energy production policies. Global demand is an issue with the prices, but I don’t see that as a problem. That is just a reality and to that I say stop complaining and live your life. This other stuff is self inflicted. That we can stop tomorrow.
David, what is the 2005 deregulation you are talking about?
I think building mini nuclear plants would be a great idea, if you could only find enough “mini me’s” to staff them…
Perhaps we could borrow “Oompa Loompa’s” from Charlie…….
Being quite small, we could adequately store their mini waste deep inside the concrete pads of mini marts around the country.
Minnie Mouse could be the spokesperson for this mini concept.
Miniature trains could then carry the waste to a mini depository.
The ideal plant would be two feet by two feet, and maybe one and a half feet tall…and supply enough electricity over one day to power a lithium battery….
Families could spend quality time building them together….
…………………………..
Give it a rest. Nuclear Fission Power Plants are dead until the waste is converted into energy yielding no radioactive residue….
Now Fusion, ….that is a “big” idea, behind which I could get ..
After all, the world needs more helium.
In 2005 the administration deregulated the commodities market and lowered the margin requirements. Margin requirements are the ratio between your own money and money automatically loaned you by your broker for a purchase with your stock, option, or commodity future serving as collateral.
Give you an example if I want to buy a stock, I can put only half (sometimes just 30%) of the money down on the deal and leverage the other half. The new regulations moved it down to just 7% on the futures market. This means that I can speculate with little of my own money and if I have a hedge fund who knows who’s money because I don’t have to disclose it. When the requirement was changed, instead of for instance the oil market being 13.5 billion in purchases from future’s contracts at a given time, it exploded to well over 200 billion. The money chasing the contracts exceeded the number of contracts. The result is that the demand for the contracts exceeded the demand for oil. The futures price went through the roof. The same is happening in food. That is over simplifying but you can figure it out from there.
Gas is purchased in advance and utilities lock in oil at contract prices using the futures market so they can plan. When the futures’ price went up. Our prices soon followed.
We don’t need to make radical change, but if you just rolled it back to 20% then we would still have liquidity in the market and No additional government interference with investors. What it would do is temper this silly bubble created artificially. The reason the houses are loaning is because they don’t have to worry about it. They are insured. If the insurance company can’t handle it, then as we have seen the Fed will keep it afloat. If we don’t start slowly letting the air out of this bubble, it will explode and we ain’t seen nothing yet. The mortgage fiasco and the tech bubble won’t even be close.
They are far from dead. They are surging world wide. The question is will we be following or leading. We will end up buying from other countries when we invented the technology. I would rather trust Americans with that than someone else. Wouldn’t you?
I am all for fusion. I can’t wait until cold fusion gets up and working. For those who don’t follow this issue; The problem with hot fusion right now is that it cannot be controlled. It lasts for the slightest moment and is gone. We can’t capture a lot of the energy and end up expending 3 times what we get back. It is like trying to start and sustain your own mini-sun. We may as well set up a matter/ anti-matter reactor and get warp drive. That is about how close we seem on that option. It may be the future, but it looks like the distant future.
I think we should put a few billion dollars into developing new compounds to make solar panels a lot more efficient and to build a better energy storage system. It would be a lot more likely to
payoff. I would rather spend the money there than in corn ethanol.
Ha. Its one of those days where fun comes before adventure……
All your other ideas are good except for (2) and (3), Drilling is throwing good money after bad as every new hole becomes more costly and the chance of a “hit” becomes more rare.
As for strengthening the dollar, the only reason that we currently suffer that problem in the first place is because of Phil Gramm, McCain’s financial adviser. ….. Currently no one will buy our dollar if they think it will lose money….. Until Republican economics are deeply buried under a landslide Obama victory, no worldly smart man is going to throw his money away in America. It would be totally inane to do so. One can’t “strengthen” the dollar. It will take care of itself when good economic policies are put back into place, and investing in America is no longer a world joke, again all because of Phil Gramm.
But not surprisingly, my friend, you forgot the number ONE way to effectively fix our energy crises.
NEVER AGAIN ELECT TWO OIL MEN TO RUN (ruin) OUR COUNTRY…..
Dude: Thanks for comment 13. On that we agree, Believe it or not, you have hit upon the central plank of Obama’s economic platform.
We don’t need to make radical change, but if you just rolled it back to 20% then we would still have liquidity in the market and No additional government interference with investors.
Which is why Obama has captured the endorsement of all but the most partisan economists.
If the government REALLY wanted to do something about reducing our dependence on foreign oil, they would allow commercial truckers to run their diesel vehicles with used french fry oil. According to the state police’s truck enforcement unit, you’re not allowed to run your commercial truck on fryolator oil in Delaware, because you’re not paying fuel tax on it.
I’m not naive enough to think that there’s enough cooking grease to power the country’s truck commerce, but right now, a lot of it is being recycling into biodiesel (and we all know how great biodiesel is, what with the cost of corn shooting up and the not-burning-any-cleaner). I gotta believe there’s enough french fry oil in this country to make SOME difference.
…but then where would DelDOT get cash to solve its billion-dollar budgeting problem?
Agreed Patrick. We are still stuck in stupid gear with the Minner Administration. What can I say?
BTW K can you give me a link to Senator O’s position on this margin issue. No one is talking about it, yet it is one of the most important issues economically. Handling it will have a more profound impact on Americans then even the tax policy changes the candidates are proposing.
“Read history esp. economic history of the 1830’s, 1890’s, and 1920’s then come back and tell me that.”
You forgot about the 1792 bubble.
I have read about them, and you know what? The financial world did not come to an end. Free market capitalism will always prevail and raise everyone’s standard of livign if it is simply left unhindered by the government trying to “help” people.
If you want to bring prices down, bring supply up and you wont have to regulate more crap using cumbersome and heavy-handed government intervention with it’s ever-present law of unintended consequences.
Christian…so when we have documented incidents a couple times in the last couple of months of when there have been surprise increases in gasoline inventories, only to be followed by sharp increases in their contract prices, we can credit supply amounts for that? Don’t you see what we’re talking about here? The price has become detached from supply-demand principles. That’s not your supply-demand capitalism that you just tried to school us on. It’s the unfortunate and perverted side of manipulating capitalism that happens thanks to debt-inducing speculators.
After our so-called spectacular administration helped us devalue the hell out of our dollar, one would expect commodities to rise in price. Fine. It was the margin-frothing hounds of speculators that further perverted the crap out of it. Supply and demand? In oil and gas, that concept was pushed out of the driver’s seat a while ago.
Goldman Sachs TWICE now has issued a “low supply” PR immediately following the “surprise supply gains” report and the market shoots up in price. What’s is in control here? Supply-and-demand or speculation? This isn’t theoretical capitalism, it’s the perverted version which only a select few control…not participate, but control.
Thanks for saving me the trouble Smitty. That was very well said.
1792 helped us get the First Bank of the United States. Even the founders saw some value in controlling the money supply. That is what is at issue. We are allowing the Houses (Brokerage) to create money out of thin air and send that inflation directly into commodities. They then harvest their inflated dollars and live like kings while the rest of the world suffers. If you think it is good policy, ok. I am more Hamiltonian than Jacksonian on this one.
If we had sound money this would be less of an issue. The Congress is not charged with running oil companies. It is not charged with manipulating prices. It is charged with regulating currency. That is the one thing it is not doing and we are paying through the nose because of it.
Okay, I wouldn’t call myself an economist, but I do have an MBA. If the price of oil is being driven up by speculation in the futures market, wouldn’t it follow that if Congress announced today that we will drill for our own oil, wouldn’t that have an immediate impact on the value of those futures contracts, given that they are based on an estimation of future scarcity? The oil itself might not reach the market for another 5 to 10 years, but the present value of that future product would be just as effective as OPEC increasing output into the market.
G-Rex,
Yes and they should do that immediately. As we have suggested repeatedly over at Delaware Libertarian. Also a new policy toward cooperation with Latin America would be great….Brazil, Venezuela and the Cuban shelf have a ton of untapped oil as well as the Aleutians.
We find ourselves in a vicious cycle now with high priced oil. It has forced us to use food for fuel, driving that price up precipitously as well. Moreover, alternative fuels such as coal and wood will be demanded, further polluting the global atmosphere and increasing global warming. Also, drilling for more oil, as suggested above, will become a priority, so oil and coal use will increase adding to global warming woes.
These higher energy prices will force us to conserve and to seek alternatives, like wind, like solar, like geothermal, like tidal, even nuclear for the short term, which is a good thing. These are the workings of the marketplace, driven by necessity creating demand for cheaper non-fossil fuel alternatives. But this will take investment and time. I don’t see it happening yet on a massive scale. Where is our leadership on this?
So we are in a transition period that is going to be really rough. The idea of drilling for more oil and nurturing oil relationships with our neighbors to the south is a good interim solution, as long as we sincerely assure ourselves that it is interim.
What happens if we drill and strike a huge supply on our land or offshore? Will we then be lulled into cheaper fossil fuel and have the global warming issue coming back to haunt us with more vigor than ever, finding us to be fossil fuel gluttons again, unwilling to respond with continuing a robust search for non-fossil/non-global warming alternatives?
I wonder and worry, a lot!
GRex, the answer is yes. I have made that point elsewhere but I think you highlighted it very well, and that is why opening up new resources is on the list. Just making it available will affect the future price because it will be built into the market’s future equation. That is why I hope you all fill out that petition.
McCain just said that he wants a commission to find out how much the price is due to speculation. That is a decent start. What I would do is use my ranking member privelege (if I were in his position) and hold my one day of hears that the rules entitled me to in order to end run the spectacle of the Democrats hauling the oil executives up to the Hill. Why wait? I would then offer legislation reversing the problem area of the 2005 deregulation and keep the rest. McCain would be a hero if he did it.
David:
Stuck in stupid though we may be, it would probably take a lot more than just Delaware’s government making a change to the fuel tax to make a serious difference. And, unfortunately, you still have the problem of what the fuel tax pays for (statewise, it goes straight to DelDOT for road work, etc. … federally, I don’t actually know, maintenance of the interstate highway system, unless individual states take care of that as well).
All I know is the Burger King manager said she can’t tell me exactly what size their grease tank is, “but it’s BIG.” At the risk of sounding cruel, as long as people aren’t really serious about the obesity epidemic in this country, we might as well use it to help ease the incoming fuel epidemic (well, ‘epidemic’ is too strong a word for the fuel situation right now… actually, lemme pose this: at what point DOES the rising cost of fuel pose an epidemic problem? I’ll put the over-under at $5.50.)
Re: #7 on the list… it would not surprise me if the Exxon company had the patent on a car that runs on pure water. But you’re never gonna see one until there’s no more oil left.
What is everyone’s opinion on ‘peak oil,’ by the way (the theory that the world has used up an estimated 50 percent of the oil on Earth)?
Admittedly, the article is from Rolling Stone (http://www.rollingstone.com/news/story/7203633/the_long_emergency), but there has been much more written.
If it hasn’t happened, it will. Maybe in 100 years, maybe it happened last year. The only problem is that you can’t tell until after the fact. It was predicted by Prof. Hubbard to happen in 1995. It didn’t. He has been successful at modeling different the peak for individual nations but not the world. That is why we need alternatives, we need to be proactive not reactive.
We will have oil for the foreseeable future. The problem is not that we are running out of oil globally. It is that we have found most of the easily recoverable supplies of oil. Jake2 in the Gulf of Mexico for instance has 15 billion barrels of oil, but it is 20,000 feet down. Oil shale costs a lot to extract. It also takes 3 times as much energy to refine. Sometime in the future we will use oil for the products we make out of it, but it will be to valuable to burn. If I knew when that would be, I would be a rich man.
China is adding thousands of automobile owners (and gasoline purchasers) to the mix monthly. Ditto Latin America and India. America had better wake-up, and reject green movement hysteria…..China and Cuba are exploring and drilling offshore, and we aren’t. Brilliant.