Posted on 06/15/2008 8:12:08 AM PDT by kellynla
Considering how much untapped oil is known to exist, not just in the United States, but worldwide, one would think that its current price was some kind of anomaly and it is. It is more the result of speculation than anything else.
The most fundamental fact about oil worldwide is that there is lots of it. Though frequently overlooked, the ability to refine crude oil plays an essential role in the supply and demand equation. More refining capacity is needed worldwide. Finally, there’s the fact that, in general, oil is very expensive to get at and often found in the most inhospitable places on Earth.
For sheer insanity, however, consider a nation that has an estimated 31 billion barrels of oil offshore of its coasts and 117 billion barrels of oil under land owned or managed by the government, plus 139 billion barrels beneath privately held land.
In just one area, a desolate place designated a wildlife refuge, there’s an estimated 7.7 billion barrels untapped. The nation with this abundance of oil is, of course, the United States of America. Most of the areas where oil is known to exist have been ruled off-limits to any exploration or extraction by the government.
In the areas where it is accessible, drilling for it is hugely encumbered and often denied by the National Environmental Policy Act, the Clean Water Act, the Endangered Species Act, and the National Historic Preservation Act.
If, however, you connect the dots, you will have noticed by now that America’s energy problems, namely the price of a gallon of gasoline or heating oil, is making everyone miserable thanks in great part to environmental legislation designed to make it impossible to access oil on both public and privately held lands. Then, just to make matters worse, the government requires that every gallon of gasoline include the additive, ethanol, which reduces its mileage and increases its cost.
Further, we’re told that Sen. Barack Obama, if elected, intends to seize “windfall profits.” This is sufficient reason for American oil companies to decide to drill anywhere else. The last time a windfall profits tax was implemented was at the end of President Carter’s term. It had such a negative impact on U.S. oil companies that drilling for oil domestically dropped dramatically. It has stayed that way since the 1980s. Their actual profits are now less than pharmaceutical, high tech, and other elements of the economy. Imagine how thrilled they were to hear Rep. Maxine Waters’ threat to nationalize them.
No profits. No exploration. No drilling. And no domestic oil with which to correct our dependence on foreign oil and thus provide a measure of security to a nation that runs on oil.
If you wanted to bring the United States to ruin, you could not have designed and implemented a more perfect scheme. Along with too many members of Congress, environmentalists are America’s Fifth Column.
As my friend, Seldon B. Graham, a veteran petroleum engineer and oil industry attorney, and a graduate of West Point says of oil, says “If it is worth dying for in the Near East, it is worth drilling for in the United States.”
As to the claim that the Earth is running out of oil, that can be easily dismissed simply by reading information available in respected publications such as Business Week. Its June 9 edition reported the Saudis “already plan to increase production by 300,000 barrels a day in June for a total of 9.45 barrels to meet customer demand. Unlike the U.S., “The Saudis have embarked on an ambitious expansion program that should see more than 2 million barrels of new production capacity come onstream by the middle of next year.”
Those of us who follow energy trends read the Energy Tribune because it has some of the best information available on what is really occurring. In its May edition, Matt Pickard wrote about the expansion worldwide of offshore drilling, noting that today’s prices are being driven by increased demand from rapidly developing nations such as China and India. This demand is going to increase over the next two or three decades.
Unless the United States begins to free up its own oil and natural gas reserves, Americans are going to be paying more at the pump and in their homes for a very long time to come.
The good news is that the offshore oil and gas industry, despite the huge risks and costs involved and despite an aging, understaffed workforce, is making strides to meet demand. Whether it’s in the Gulf of Mexico or the North Sea, the icy waters of the Barents Sea or offshore of Brazil and Africa, massive new reserves of oil are being found.
“Large discoveries offshore Brazil, the continued progress in every region’s major projects, and the ongoing push for Arctic exploration and production point to the industry’s potential for growth over the next 20 to 30 years,” wrote Pickard. Brazil is poised to become a major producer. In its Tupi field, “Petrobas announced an aggressive development plan, with an early production system possible within two or three years,” reports Pickard. The nearby Jupiter field has gas reserves to rival Tupi.
None of this is a secret! Both privately owned U.S. and foreign national oil companies are going to find more oil and gas.
Neither candidate for President is telling the truth these days because both believe global warming is real and both keep blathering on about “alternative” energy. The big problem for the rest of us is that you can’t pour wind or solar energy into a gas tank.
The U.S. mandate for ethanol as a gasoline additive has already significantly put the world’s food supply in jeopardy, but most Americans are blissfully unaware that it requires 1.5 gallons of ethanol to produce the same energy as a gallon of gasoline. It actually emits more carbon dioxide than gasoline. It is an environmental hoax.
The world is afloat an ocean of oil. Meanwhile, the United States continues to rule 85% of its offshore oil off-limits to exploration and extraction. This is occurring while the Chinese prepare to pump oil just offshore of Cuba, a merely 90 miles from Florida. It is occurring while the Russians are looking to plant their flag on potential reserves of subterranean oil in the Arctic.
The next time you hear a politician say we need to be “energy independent”, ask him or her why Americans cannot have access to the oil reserves known to exist in California, in Alaska, and in many of our other States or off the coastlines of Florida and elsewhere.
Ask them why the fate of the condors and little known species is more important than the family budget of Americans forced to make choices between more food and more gasoline.
Ask them why they continue to claim that global warming is a threat when the entire Earth is now in a decade-old cooling cycle.
Ask them why they insist on blaming investor-owned oil companies whose own reserves are barely four percent of the all the oil that exists worldwide? Ask them how they expect these oil companies to compete in the global marketplace when they threaten to seize their profits.
Energy is the master resource. It determines which nations thrive and which lag behind. For now, America is being ill-served by a Congress that refuses to permit access our own energy resources.
Ask yourself how we have arrived at a point in time when both candidates for President believe in a non-existent global warming and whose proposals offer no practical solution to our current and future energy needs.
Are you speaking of an EFS transaction?
Need a bit of help here.
BTW, you might be amused by the NYMEX' treatment of EFS trxes. Here's their rule:
========
200.20A Exchange of Futures for, or in Connection with, Swap Transactions
(A) An exchange of futures for, or in connection with, a swap (EFS) consists of two discrete, but related, transactions; a swap transaction and a futures transaction. At the time such transaction is effected, the buyer and seller of the futures must be the seller and buyer of a quantity of the swap. The swap component shall involve the commodity underlying the futures contract (or any derivative, by-product or related product). The swap component of an EFS transaction must comply with the applicable CFTC swap regulatory requirements.
(B) Except as provided below, an EFS must take place during the hours of futures trading for the Light Sweet Crude Oil futures contract. An EFS is permitted at any time before 2:00 p.m. of the first business day following termination of trading in an expired futures contract, provided, however, that an EFS which establishes a futures position for both the buyer and the seller shall not be permitted on the first business day following the expired contract.
(C) Any Exchange of Futures for, or in Connection with, Swap (EFS) shall be governed by the provisions of Rule 6.21A.
(D) Each buyer and seller must satisfy the Exchange, at its request, that the transaction is a legitimate EFS transaction. All documentary evidence relating to the EFS, including a master swap agreement and any supplements thereto, shall be obtained by the Clearing Members from the buyer or seller and made available by the Clearing Members for examination by the Exchange upon request. Additionally, if the buyer or seller is a Member/Member Firm, the Exchange may obtain the information directly from such persons.
I don’t know what I’m talking about either. Just trying to quote something from the NYMEX web site and pretend I know what it means.
Is the swap only when you change to a related product like from WTI to RBOB?
exchange of futures for or in connection with the product
and
exchange of futures for, or in connection with, a swap
http://www.nymex.com/rule_main.aspx?pg=32#200.20
Swaps are just about completely ''roll-your-own''. There are a number of things NYMEX won't let a swapper do, but this -- trust me -- is just not very hard to get around, as long as one knows a good cash broker. Might cost a bit more than one would like, but virtually any physical swap (as opposed to a paper swap) can find a way to get done.
I'll bet you that Eric in the Ozarks knows all about swaps -- might ask him for more details.
Back in my cash broker days, just about all we did were ''immediates'', no noticeable time lag involved. So, I have to ask you why a contango mkt is so easy to trade, and, would you be kind enough to throw in an example?
The price of oil is set by the buyer not the seller or the speculator.
If all the speculators went away, the price of oil would be set by the buyer still.
In fact, to quote you: "Over 95% of all crude contracts are NOT settled by delivery..."
Indeed, 95% of contracts are canceled before the delivery date, and are sold back into the market before delivery date. Why? Because the bottom line is at each month end, someone actually takes delivery of oil thereby setting the price.
We have to fight this issue with all we have left in our bones not by enjoying our knoledge of the markets and speaking market geek, but by reducing the truth to street language so that the average guy in the street knows what this "Federal Market Regulation" is really all about, his retirement being feed to the political pork machine.
The primary reason the American Stock Exchange is the best in the world is we provide a tax haven for overseas investors. If we let the Demoncratic or RepublicRat rulers control the market, all the foreign cash will flow out of the market like Niagra Falls flows from Canada. Our economy will crash like Nagasaki. The Politicians won't care, they will be extracting a percentage of the flow into their own pockets. In the end, they will all be like Al Gore, preaching Prosperity to Paupers and riding gold plated BMW's...
''Go 'way, little boy, ya baahhhther me.''
The price of anything, you bloody moron, is set by a willing buyer and a willing seller when they agree on a price.
If specs went away from some mkt, entirely, what would happen is that the bid/ask spread in that mkt would widen out considerably, everyone's costs would go up, and there would be considerably fewer transactions in that mkt.
By the time ANYBODY in crude gets delivery, the price is absolutely guaranteed to have changed from both their entry price and the price at contract expiration. There's a lag of 15-45 days between contract expiration and delivery, therefore NEITHER the person making delivery nor the person taking delivery ''sets'' any sort of price whatever.
Take your economically illiterate gradeschool garbage out somewhere and bury it. Don't bother getting a life; get a clue about the operation of mkts somewhere.
Hey, maybe you can buy a clue, and ''set the price''. Jay-zus!
So, you are saying that a speculator cannot set the price? That is the point I was hoping to make. Perhaps you said it better.
You know, you really don't have to be such an asshole to someone to hold a conversation... That clue is free by the way.
The price of anything, you bloody moron, is set by a willing buyer and a willing seller when they agree on a price.
...therefore NEITHER the person making delivery nor the person taking delivery ''sets'' any sort of price whatever.
No comment.
ping
I concur with that.
My company had a 3D seismic survey done over minerals it was considering selling for $10 an acre.
We leased the land to another company and this little 200 acre Yegua field is generating checks to us in excess of $1 million per month today.
This tired old land position which everyone had discounted as virtually worthless, is generating nearly a quarter of a billion dollars in 2007. It will be higher this year.
NO speculator, or group of same, can ''set'' a price, period. They can, however, over time influence price disproportionately when they are allowed to by current rule, and for MUCH longer than a month at a crack...and so they have done for the past 1.5 years, in energies particularly, and now in grains to a larger than usual extent.
After 36 years of trading these markets, and after 20 years of writing about them, and after seeing -- as I put it in a fairly recent book -- the growing presence of ''moonshiners, mythologists, and morons''. my patience with willfully and provably false statements has declined almost to nil.
You're looking for a villain in bidding up mkts to unjustifiable levels? You've no further to look than the Regress, who, by provisions of the 1986 Tax Reform Act, the Gramm-Whoozis Act of 1999 which effectively repealed Glass-Steagall, and the Commodity Modernization Act of 2001 -- among other legislative bungles -- have allowed what we now call ''index specs'' to prosper at the expense of the entire economy, and every citizen of the US.
''No comment'' is the single most intelligent thing you've written during our conversation. Nicely done!
I have noticed as of late, a lot of discussions around and about oil price crisis. Thats it! Discussions, no concrete proposals as to how we force the Congress to open up the continental US for drilling and/or shale oil recovery., etc,etc.
We need a grass roots movement of regular Joe's to knock the Environmental wackos agenda and force the Congress to LISTEN to the people for a change, not the special interest.
I am not good at this kind of job, PR is not my forte, but I think if we get together and unite under a common cause we can achieve it. Why can we not sue the Environmental Wackos for interfering with "Promote the general Welfare" as stated in the Constitution?
Let's not be just keyboard cowboys/cowgirls and start something that it will make a difference.
FR is a very large forum, with a little perseverance and organization me thinks we can pull it off! It is just a matter of willingness and desire!
WE are better than Kos, DU, Huffington's etc.They are getting away with murder, while we the almighty principled conservatives are taking the high road an do...nothing.
We are getting railroaded day in and day out and what we do?...nothing..."If we WANT to win anything in this race, we should drop this cavalier, "holier than thou" attitude towards politics, take off the gloves and start punching hard!period!
NWO PING to some selected friends from one of my lists.
Please read at least a percentage of the color highlighted quotes at post # 76.
Quotes of political leaders since 1900 re globalism and global government.
TREASONOUS, ALL.
Sen. Barack Obama, if elected, intends to seize "windfall profits." This is sufficient reason for American oil companies to decide to drill anywhere else. The last time a windfall profits tax was implemented was at the end of President Carter’s term. It had such a negative impact on U.S. oil companies that drilling for oil domestically dropped dramatically. It has stayed that way since the 1980s... No profits. No exploration. No drilling. And no domestic oil with which to correct our dependence on foreign oil and thus provide a measure of security to a nation that runs on oil.Thanks Quix.
Doesn’t surprise me.
I felt that was their strategy from the beginning of the movement.
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