The Crude Oil Crisis

I just turned to CNBC to see what the market is doing today. Why was I not astounded to see the price of crude oil up $2.21 to over $119 a barrel?

Over the past several years, I have closely followed numerous oil stocks and traded in them on occasion. One thing that I have noticed is that crude oil prices fluctuate wildly based on “news” … whether it be Nigerian rebels in Africa or the threat of hurricanes in the gulf. Weekly U.S. stockpile reports of crude oil and distillates add a predictable weekly gamble to investing in these stocks and any stocks which have been indexed by the investing public to the price of crude oil such as Fluor.

Appreciating the intricacies of how the investing public perceives the effects of how each news item will impact a particular stock in a subsector of the energy sector is essential to successful investing.

The simple fact that emerging and developing nations such as China and India are demanding more oil and competing with our economy for these resources will ensure that crude oil prices will never return to previous lows but it doesn’t mean that oil prices don’t have the potential for being much lower in the short term.

As I said previously, crude oil prices react to news. It’s apparent that recently there has been no news to drive the price of oil down to more realistic levels.

The U.S. Congress could provide the news and incentive to drive the price of oil down dramatically and drastically … if it had the political will. Unfortunately, we are in the midst of an election year and the possibility or probability of Congress doing anything productive and beneficial for the American economy and the American public other than self serving political posturing is simply nil.

First of all, Congress could pass legislation to provide incentives and tax credits for people to use alternative energy sources such as wind and solar power. In addition they need to force the individual states to do likewise. Many states including the one that I live in simply don’t have any incentives for people to invest in these alternate sources. The federal government is good at threatening to withhold funds from states to achieve expressed agendas such as lowering speed limits and legal alcohol levels. It could do the same regarding alternate energy sources which are now available.

Congress could also provide incentives for power companies to build nuclear power plants. It’s ridiculous that think that France can have an accident free nuclear power program for more than 50 years and we can’t.

Congress should also override the roadblocks presented by special interest groups or individuals such as Senator Ted Kennedy to expedite the development of wind and solar farms wherever they may be the most efficient. The needs of the many should outweigh the selfishness of the few. Senator Kennedy should be able to look out from his Cape Cod home at a wind farm in Nantucket Sound and feel proud that he is doing something for his state and nation … but it simply isn’t in his nature.

I saw an episode on television recently where a person was developing and installing wind turbines at airports, using the backwash of jet airplanes taking off to generate electricity. What a simple idea. Embracing innovation is critical.

Drilling for oil in all offshore locations where practical and where oil is available should be approved. Simply approving the drilling of oil would probably have a dramatic and long term effect on crude oil prices. This was temporarily exemplified by the discovery of oil in deep areas of the Gulf last year.

Roadblocks to increasing our oil refining capacity need to be removed. There is no rational reason for this country to import refined products such as gasoline.

Environmentalists and other special interest groups need to make short term concessions to achieve long term goals of energy independence and moving our country away from such a great dependency on fossil fuels.

Using grains as biofuels is not the answer. The pending world food crisis is in part a result of the increased price of grains both as a primary source of human nutrition and as the feedstock for livestock. Using carbon based substrates from the forestry industry makes more sense since our cars will be competing with pine beetles and termites and not other humans or ourselves. I, for one, vote for eating over driving down the road.

This country has, for at least the past 50 years, been dismantling its mass transportation infrastructure while spending billions of dollars to accommodate the luxury of individual transportation. For nearly 100 years, roads, bridges, urban, suburban and commercial development has been geared toward the wasteful and inefficient use of automobiles and costly domestic air travel while rail and more efficient means of urban transportation have, for the most part, been neglected.

Urban and suburban planning needs to be regeared to be more friendly to pedestrian travel and access as well as mass transportation. The “old time concept” of neighborhood access to shopping and services needs to seriously be reconsidered. Mass transportation to jobs needs to go further than “carpools”. Walking or cycling to the nearby grocery store or pharmacy without the fear of being run over needs to be a realistic expectation.

Global warming is a long term reality … a historical fact. I’m not convinced that a human produced greenhouse gas crisis is a reality, though. There’s too much conflicting data and a fat ex-politician demagogue ridiculing people who question him doesn’t make it so. Buying “carbon credits” is a cop out for business as usual.

The crisis being created by the price of oil and food grains is real and palpable. It’s immediate and calls for immediate action.

Creating “news” and eliminating subsidies for producing biofuels could go a long way toward alleviating the immediate crises. Then some immediate steps toward serious and productive long term planning are essential.

If our government wants to decrease or eliminate our dependency on foreign oil and markedly reduce our dependency on fossil fuels specifically, it isn’t a unrealistic goal and doesn’t necessarily have to diminish our quality of life. In fact, it would most likely greatly increase our quality of life as well as our health.

It won’t happen overnight, but positive steps can be taken immediately if the will and courage exists. Unfortunately, we’re in an election year. And, nothing productive is going to happen other than politicians fulfilling self serving agendas with a lot of rhetoric and no action.

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One Response

  1. […] Earl says … wrote an interesting post today on The Crude Oil CrisisHere’s a quick excerptFirst of all, Congress could pass legislation to provide incentives and tax credits for people to use alternative energy sources such as wind and solar power…. […]

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