Krugthulhu rises from the Keynesian depths to devour the soul of Drill Baby Drill.
The irony here is that these claims come just as events are confirming what everyone who did the math already knew, namely, that U.S. energy policy has very little effect either on oil prices or on overall U.S. employment. For the truth is that we’re already having a hydrocarbon boom, with U.S. oil and gas production rising and U.S. fuel imports dropping. If there were any truth to drill-here-drill-now, this boom should have yielded substantially lower gasoline prices and lots of new jobs. Predictably, however, it has done neither.
Why the hydrocarbon boom? It’s all about the fracking. The combination of horizontal drilling with hydraulic fracturing of shale and other low-permeability rocks has opened up large reserves of oil and natural gas to production. As a result, U.S. oil production has risen significantly over the past three years, reversing a decline over decades, while natural gas production has exploded.
Given this expansion, it’s hard to claim that excessive regulation has crippled energy production. Indeed, reporting in The Times makes it clear that U.S. policy has been seriously negligent — that the environmental costs of fracking have been underplayed and ignored. But, in a way, that’s the point. The reality is that far from being hobbled by eco-freaks, the energy industry has been given a largely free hand to expand domestic oil and gas production, never mind the environment.
Strange to say, however, while natural gas prices have dropped, rising oil production and a sharp fall in import dependence haven’t stopped gasoline prices from rising toward $4 a gallon. Nor has the oil and gas boom given a noticeable boost to an economic recovery that, despite better news lately, has been very disappointing on the jobs front.
As I said, this was totally predictable.
Imagine that. We’re producing more oil and gas under President Obama. We’re drilling, baby, drilling…and fracking for that matter. But gasoline prices are nearing the $4 mark in friggin’ March. Once again the evidence is abundantly clear that gas prices don’t seem to have anything to do with supply and demand, at least as far as supply is up and demand is down, prices are skyrocketing.
Sabre rattling with Iran, commodities speculation, refinery issues, and good ol’ corporate greed on the other hand…
If there were any truth to drill-here-drill-now, this boom should have yielded substantially lower gasoline prices and lots of new jobs. Predictably, however, it has done neither.
This is easy to handle, if you’re a Redoublechin demagogue – insist that the increased production isn’t actually happening.
KO played the clip of Bill O’Liely saying that no politician could affect gas prices, and they were lying if they said otherwise. Of course this clip was from 2008, when gas prices were even higher and the Dim Son was still POTUS.
Krugman is shrill! Also, too, noted energy expert and allaround cheerful guy Krauthammer begs to diffah. No, really, just listen up.
Well, I’m certainly convinced.
A full-scale war with a Middle-Eastern nation should clear this all up.
gas prices have everything to do with supply and demand. just supply and demand in the world crude export market.
Huh? How did you get to that conclusion? It is a world market, even if demand is down in the US that says nothing about the world.
The thing I hate most about conservatives (after the bigotry and misogyny, I suppose) is that they talk about economics the same way they talk about the Constitution and the Bible. They never seem to have any real understanding of the words they use. They just toss terms like “free market,” “original intent” and “Judeo-Christian values” around like a tribal shaman would wave a fetish bone to ward off evil liberal spirits. Of course, gasoline prices will continue to go up, no matter how much we increase production, so long as emerging economies in China, India and Latin America are willing to pay more than we are for a limited resource. That’s how an unrestrained free market works! And the only way to change that is through overtly socialistic actions like price controls or export tariffs. But god, how the Teatards would squeal if Obama proposed either of those.
Indeed it will, and the first shots will be fired this weekend: “Iran’s banks to be blocked from global banking system”. I’m sure that it’s just a co-inky-dink that this is occurring just days before Iran opens its oil bourse, which will trade oil in currencies other than the dollar.
Ain’t the other hand, son. It’s the only hand.
The obvious move for Democrats here is clear.
Start a whisper campaign alleging that oil company executives are jacking up gas prices in order to thwart Obama’s re-election.
This theory, though entirely made up by me and most likely bogus, has the twin advantages of (1) being eminently believable, and (2) drilling into the heads of voters (no pun intended) who really has the power to control gas prices. (Hint: it’s not the guy in the Oval Office.)
c u n d gulag
Karl Rove will say that the rise in production is the result of BS Obamian Math.
He’s got the “real” math!
But he won’t show it to anyone but FOX, because they’re the only trustworthy source for “news.”
All others are part of the Liberal, Lame-stream media, don’t you know…
Isn’t the point that gas prices have everything to do with supply and demand, but even increasing US production significantly won’t affect the global supply very much?
There’s your trouble.
I read once that if the US drilled everywhere possible as soon as practicable it would only equal 1% of what the US uses alone.
Global oil supply is stalling.
February oil production went down by 200k barrels per day as a modest 300k rise in OPEC was swamped by a 500k decline in non-OPEC supply.
US production is 200k barrels per day up on its pre-Katrina peak of 5.4mbpd, and more than 40% down on its 1971 peak of more than 10mpbd.
Global oil production has to run faster and faster just to stay still as established oil fields decline ever quicker. See what happens to North American oil production when Cantarell EOR stops being effective and decline shoots back up to 12%/yr as in 2005.
Also, see the shale gas bubble burst very soon. Nat Gas price has to be $7bcf for the average shale fracker to break even. It’s currently below $2.
We are in a world of declining energy resources and I would really love for it not to be helping Republicans at the moment, and electing Republicans would only aggravate the problem as they utterly refuse to face the predicament of limits to growth. But that’s just reality, and nothing is going to change it.
The answer here seems pretty simple, although Wall St. won’t like it, so it doesn’t have a snowball’s chance in hell…
Entities that do not actually consume a certain commodity, should not be allowed to trade in the markets for those commodities.
There can still be commodities brokers that perform the actual buying and selling of the contracts. But, those brokers must represent a client, that is a direct consumer of that commodity, and must only make trades on behalf of that client.
In other words, in order to trade commodities contracts, you must have skin in the game.
If they want to trade in derivatives based on the prices of the commodities, fine. But no one, whose business does not rely on the processing a commodity for sale, should be allowed to trade in the market for it, and therefore affect the real price of that commodity.
Until all the non-consuming speculators are out of the commodities markets, there will never any way of truly judging the prices of any commodity.
@Napoleon: Dur, the US trumps the worlds. You act as if there’s other places on planet America.
One quick thought which strikes me as strange.
The GOP LOVES any new oil drilling projects and any jobs associated with it, no matter how negligible the effect on the economy as a whole. The only reason such new operations are even feasible is because they’re profitable. The only reason they’re profitable is because the price of oil is so high.
In short, all those drillings and jobs they love are due entirely to high oil prices. Yet, what do they do? Complain endlessly about high oil prices.
Do they think there’d still be an oil boom in N. Dakota, or that the Canadians would be destroying Alberta to get to the tar sands if oil was only $30 a barrel again?
I’ve never really seen them confront this apparent contradiction. All the things that are happening that they do like are entirely reliant on the high prices that they don’t like.
I’m sure the Republican candidates already know this, but what else are they going to run on? The continued war on contraception? Newt knows gas will never be $2.50 a gallon, but hey, if it gets you into the White House, why not?
Uh, can you identify a single person in a single industry in this country that does not use crude oil or its derivative products?
That’s what turned Saddam from “Our Bastard” into just a “Bastard”.
I’d reconsider if I were the mullahs in Iran before they find themselves being pulled out of a hiding pit.
heh. a buddy posted kthug’s article to FB and the immediate pivot was to “krugman’s rhetoric is tearing this country apart”. meanwhile, the indentation on my desk keeps getting deeper and the knot on my forehead keeps getting larger.
i’d better knot get off the boat again.
Are you consciously, or just generally dense?
The consumer of a derivative of crude oil, is not a consumer of the crude oil commodity, that’s why it’s called a derivative. The entities that actually consume unrefined crude oil, are quite clear.
Right, but the price of crude oil strongly affects the price of gasoline, heating oil, etc., does it not?
Everyone has skin in this game.
[ETA: RareSanity, didja notice how I just ignored the name-calling? Might be a strategy you want to consider next time someone insults you on the internet.]
The Keystone pipeline’s destination is Port Arthur Foreign Trade Zone. In other words the oil it would transport is intended for international markets. Good for South America, irrelevant for Americans.
FTFY. Obviously, we need to gut even more environmental regulations and give the oil companies bigger tax breaks. Clap louder!
@chopper: A bit more in the spot market with greater opportunities for speculative trading than in the long-term forward contracts.
c u n d gulag
Clap even louder?
But poor Tinkerbell already died from all of the over-clapping!
Amish crafted furniture.
Oh heavens, that’s too many steps for their lizard brains. The poor fools can’t handle anything much more complex than Drill, Baby, Drill.
Making it so everyone without a hard hat and an oil processing plant has to stay out of the trade in oil is stupid. If we left it up to those folks, we’d only be using coal after Pennsylvania was sucked dry of the easy stuff.
The problem isn’t the speculators alone. The problem is that the oil that’s coming online now is harder to produce into the stuff we put in our cars. And that’s never going to change. Never. New discoveries are hard to get to, hard to produce, and hard on the environment. This isn’t a conspiracy. It’s math.
Villago Delenda Est
I might add that, due to non-existent environmental regulation, they’re allowed to externalize the damage they do to the commons flagrantly.
After all, the executives of these outfits never have to live with the consequences of tap water that is inflammable.
No, everyone doesn’t.
Everyone has interests in the game, and is affected by the game, not everyone has skin in the game. There are are very few entities, that actually write checks on an executed contract for crude oil.
When I saw a posting of this article, the immediate response was “Krugman is a liar because he didn’t talk about peak oil!”.
It is amazing how easily people will change the topic of discussion.
But what do they stain it with? Hmmmm?
I think what RareSanity means is that entities that don’t directly consume a commodity should be kept from speculating on that commodity. That is, private individuals don’t consume crude oil directly (it’s not what they put in their gas tanks, right?), nor do industries that consume energy or petroleum-based products, or commodity traders acting on their own behalf. They don’t take delivery of the stuff. They want to sell it on and close out their position, long or short, for a profit. Which activity doesn’t add value to the commodity, or make it more easiliy available to anyone who dies use it directly. And I think that, on the face of it at least, there is indeed a case for keeping non-endusers out of the commodity markets.
Maybe not the best metaphor for this situation…
It’s good to see that your entire philosophy changed on this matter, from yesterday, when you hurled this little gem at me:
Don’t lecture me, you pompous ass…
Tractarian knew exactly the point I was making.
Sounds like an opportunity for some covert trading/Barter. How ironic.
‘Arms for Oil’ (the new worldwide hostage)
@RareSanity: Yes, indeed, all speculators should be out of the commodities market. I’ve been mumbling that to myself for a while, and you’ve put it very well.
Of course I am joking, and actually to make the original point Tractarian was making many of the Amish, I have observed (there is a large community of them 20 miles east of me), will accept rides to jobs they hold (you see them by the van load) and many of them have refrigirators that run off of natural gas, not electricity.
They don’t work by kerosene lamps?
Warm their callused fingers over a propane heater?
No, actually, yesterday I was hurling insults, today I’m ignoring insults hurled at me. No inconsistency there.
And, given the strong link between crude oil prices and gasoline prices, I fail to see the difference between (1) crude oil trading being done only by companies that consume crude oil and (2) crude oil trading being done by companies that consume crude oil or its derivatives (i.e., everyone).
(By the way, you probably shouldn’t link to yesterday’s thread. It was a little… how shall I put it …. embarrassing for you.)
@Napoleon: Joking is no longer allowed in the BJ Humor Free Zone.
Snark will be punished by immediate pile on of humorless fucks.
Thanks for your cooperation.
@c u n d gulag:
Tinkerbell died of the clap? No one told us!
There isn’t a “strong link” between gasoline prices and oil prices…there is a direct link. That’s my point. You have people trading the market for crude, that have no intention of taking delivery of any crude oil, that are just rooting for the price rise, so they can book a profit on a trade.
What exactly is it that you don’t undertand about that?
How about you let me worry about me, and you worry about you?
When do I get to see the celebrity deathmatch between KThug and little Timmy Geithner?
aka Bambi vs Godzilla, the remake. With luck they’ll release a 3-D version.
@gaz: i want a tag team of kthug and delong (both with one hand tied behind their backs) and cowen/blenderella (mcarglebargle). may need to handicap the kthug delong team more to make it fair.
Yuck. Leave DeLong off the team. Guy was a major suck-up to Greenspan for quite a long time.
@Citizen Alan: Righto. And perhaps Charles Bloody Krauthammer could find this stuff out if he liked used this thing called the internet. Oh, right, I forgot he just does not care. Why is oil going up?
Well, first there is this: “The number of registered cars, buses, vans, and trucks on the road in China reached 62 million in 2009, and is expected to exceed 200 million by 2020. The consultancy McKinsey & Company estimates that China’s car market will grow tenfold between 2005 and 2030.” http://en.wikipedia.org/wiki/Automotive_industry_in_the_People's_Republic_of_China
And then there is this:
“As of 2010, India is home to 40 million passenger vehicles. More than 3.7 million automotive vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second fastest growing automobile market in the world. According to the Society of Indian Automobile Manufacturers, annual vehicle sales are projected to increase to 5 million by 2015 and more than 9 million by 2020. By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation’s roads. http://en.wikipedia.org/wiki/Automotive_industry_in_India
While demand in China, India, etc. is sky rocketing. Production has plateaued.
“World oil production growth trends were flat from 2005 to 2008. According to a January 2007 International Energy Agency report, global supply (which includes biofuels, non-crude sources of petroleum, and use of strategic oil reserves, in addition to crude production) averaged 85.24 million barrels per day (13.552×10^6 m3/d) in 2006, up 0.76 million barrels per day (121×10^3 m3/d) (0.9%), from 2005. Average yearly gains in global supply from 1987 to 2005 were 1.2 million barrels per day (190×10^3 m3/d) (1.7%). In 2008, the IEA drastically increased its prediction of production decline from 3.7% a year to 6.7% a year, based largely on better accounting methods, including actual research of individual oil field production throughout the world.
This is also why speculators are taking the “long bet” that the secular trend of oil prices will be up, up, and away. Prices are probably higher than they should be with slowing demand in China and India, flat demand in the U.S., and recession in Europe, but once the growth engine starts up again, so will the pressure on oil prices. They might get burn from time to time (say the autumn of 2008), but if the supply of cheap, easy oil is limited and/or declining, then there is ultimately a one way street for prices.
No, this is not true. I have it on authority from MY BROTHER and some WINGNUT FRIENDS (that’s how they talk, not me) that Obummer is deliberately raising the price of oil to FORCE US to be like the EUROPEANS and make us all drive VOLTS! ! ! ZOMG ! ! !
The fact that this makes no sense makes it even more believable, apparently.
I thought we collectively agreed that since Zandar has roughly the same knowledge of basic economics as a termite does of quantum physics that we weren’t going to rise to his ZOMG SPECULATORZ troll threads.
I mean this is al least the third obvious troll/attention cry thread he’s posted this week.
Ignore him and he’ll stop posting.
U.S. oil production don’t effect prices here because it goes directly into the much larger world market. Exxon/Mobil etc. are not American companies but rather international corporations. They don’t give a shit about us. If we want it otherwise, we would have to nationalize the oil and gas industry like Chavez, heh. Suck on that commie bitches.
If war breaks out with Iran, we’ll be glad those speculators only tried to make $4/gallon gasoline profitable. Speculation is largely going to drive prices up, no doubt about it. The more something is traded, the more cuts are taken (which is the number one reason you don’t want your Social Security in the stock market.) Still, it’s been argued that the current price of natural gas is lower than it would be without speculators. We complain to the Moon if prices go up, but we don’t think of markets when they go down.
There are some anti-gouging laws already in existence that haven’t been put into effect, but politics keeps them from going anywhere. I’m agnostic as to whether they’d have much effect, since producers and refiners and markets have enough ways to get a cut that we’ll never see prices dip to what a few years ago was “correct”.
In the end, the answer remains that we should all get scooters and bicycles or ride buses and trains. That end is near.
Of course Zander is going to keep posting at BJ. Do you think he wants to go back to getting 5 or less comments per post at other places?
No matter what poutrage he throws up here, it will get 50+ posts before it’s over.
Democratic Nihilist, Keeper Of Party Purity
@RareSanity: Let’s say Congress passes such a law. And on first reading, it seems like a really good idea – why should some rich jerk get to make a buck off my 90 dollar fillups?
How will you stop the rest of the world from speculating in oil?
Next idea, please.
Oh, c’mon, I’m sure Newticles will reduce regulations, and Exxon will happily forgo $100+/barrel prices to sell to the US market for $30. America Fuck Yeah!
@Democratic Nihilist, Keeper Of Party Purity:
In a sane world RareSanity would be correct. There should be no speculative trading on commodities. By their very nature they are things that everyone(OK most everyone in the “civilized” world) has to use some of, gasoline, diesel fuel, heating oil, electricity, wheat, rice, beef, etc, etc. So everyone has skin in the game, want to or not.
But of course that’s not how the game is played. In the modern world many people gamble with OPM and OPL to make money. They don’t produce anything other than paper, well maybe credits in a bank somewhere. And what I’m sure of is they do it for lots and lots of that, at what can be a pretty high price for the world.
Maybe it would be better if there was some way to a least even out the highs and lows so that more people can participate rather than barely survive.
This may help. Wingnuts! Be the first to mark it down as another Obama foreign policy failure!
This is one @Montysano:
This is one of those times when it’s hard not to think to myself, “We are so fucked!”
Damn you, Krugman! Who can withstand his awesome power?
Once again, there is Mr. Krugman with his FACTS! Don’t we know by now that the loons out there don’t care about FACTS.
@Hypnos: Also, see the shale gas bubble burst very soon. Yes, please, FSM. While we still have an unpolluted aquafer left.
We’re gonna look pretty stupid trying to water our crops with fracking water.
And google tar sands spill in Kalamazoo River. Two years and still not clean. Guess it’s jobs, though.
@Hal: I think Newt is actually helping Obama make his case with his ludicrous claims of $2.50 gas.
The tragedy is that we could have better used this period of economic slack to transition to renewables if Republicans had been able to keep their sanity. Now, it’s gonna be much more painful.