Why is Crude Oil Priced So High?

That’s the trillion dollar question … literally.

I’ve expressed my opionion several times … and listening to the talking heads on the television … at least some of them agree with what I’ve said in the past. Congress is now trying to construct legislation to regulate the speculation going on in the commodities with oil.

The price of oil has doubled since last year, probably tripled from it’s low of last year around $45 a barrel. Has the demand for oil double d or tripled in the past year? Not just no, but hell no!!

So … what’s changed?

The market was riding high until the end of October. Then it got the jitters and started heading south fast with a few slight rebounds in late November and December. This was related to the sudden realization the the financial markets might be in trouble of the housing markets … which proved to be very true.

From the beginning of November through the middle of January literally trillions of dollars made an exodus out of the stockmarket and was “sitting on the sideline”. Speculators, hedge fund manangers and managers of other funds as well as individual investors had a lot of cash sitting around not making any money.

They looked at oil, gas, gasoline and other commodities … like corn … and decided that was a good place to put their money. Betting that the U. S. government, run by the Democrats and with two Democratic candidates firmly opposed to increasing the U. S. supply of oil, and with the odds favoring a Democratic victory in the fall, they felt they had found a sure thing. The money is being placed on the bet that the Democratic controlled Congress will do nothing to relieve the pressure on the price of crude oil, gasoline or corn. To the contrary, Congress has tried to pass a bill to continue subsidies for corn as well as continue the tariff on importing ethanol from Brazil … both actions contributing to the current $7.50 or so price of a bushel of corn now and the concurrent rise in food prices.

The results of the later “action” of Congress is that the price of corn has nearly doubled since last year. You have to keep in mind that two years ago, ethanol producers were virtually loosing money with ethanol selling around $1.60 a gallon.

We are all feeling the results of Congress’ “inaction” with the price of gasoline hovering around $4 a gallon now. I’ve previously stated that “news” has a profound effect on the price of crude oil and gasoline like the nearly $10 rise in the price of crude the day after Boone Pickens said it would go to $150 a barrel. The inaction on Congress’ part continues to feed the negative news with the resulting inverse rise in the price of crude oil.

While Congress decides how to regulate the speculators, they happiily continue with their profitable feeding frenzy knowing that Congress moves slower that pond water. Billions, if not trillions, can be made while Congress debates the issue … all at our expense.

What is the Democratic line. Drilling is harmful to the environment. It won’t make any difference for ten years or, more optimistically, until 2012. It’s okay to import so much oil from the Middle East. We need to levy windfall profit taxes on the oil companies. We’ll be better off with alternative sources of energy … wind and solar. The high prices are good for us. We will consume less gasoline and oil.

While they’re preaching the evils of oil, America is being stripped of tens of billions of dollars a week. And we are consuming less oil and gasoline … as well as less meat, eggs, cheese and everything else. Their approach is destroying the U. S. economy.

We need to use hybrid cars and electric cars. Well, hybrid cars run on a mixture of ethanol and gasoline. The price of corn has doubled. Guess what? My car runs on premium unleaded gasoline. What is premium unleaded gasoline? Well, it’s the old gasohol of the 1970’s. And guess what? It’s more expensive than regular gasoline.

Well, just buy an electric car. Well, how do they think that electricity is made? It’s made primarily from burning fossil fuels That’s right … natural gas and coal … with a little nuclear power (that they’re opposed to) thrown in on the side. Honda has a hydrogen car. buy one of them. Well, where does that hydrogen come from that those cars run on. Right now, it made from hydrocarbons. You guessed it …  crude oil and coal.

The Democrats don’t want to begin drilling more for oil and they’re opposed to building new nuclear reactors. Well, nuclear reactors don’t last forever. They have a life span of about 50 years and many of them have already eaten up about 30 of those years … so, without new reactors being built, we won’t have nuclear power in another 20 or so years.

Wind and solar power can provide as much as 30% of our energy requirements by 2030 … if there aren’t any obstructions to their development. But you have special interests that Democrats cater to … including their own self interests …ergo Senator Kennedy … that will obstruct their own professed salvation to our energy crisis.

Correct me if I’m wrong … but the last time I checked it’s another 22 years until 2030. What the hell are we going to do in the mean time? Hey … 22 years … that about the time all the current nuclear reactors will have to be deactivated. Oops!!

One day this week, I actually heard a Democratic pundit actually say it wasn’t the goal of the Democratic party to drive us all back to the Stone Age … living in caves. Well, I hope not. There aren’t that many caves for us all.

Another thing … the wind doesn’t always blow and the sun doesn’t always shine. What are we going to do to have continuous uninterrupted power? Nuclear …..????

Regardless … we’re going to need oil and gas. They speak of using “renewable” sources of fuel … ethanol and biodeisel. With these providing less than 3% of our current fuel requirements, look at what their use has done to the price of food. What’s going to happen to the price of food when that percentage increases? Are we going to have to choose between eating versus going to work to try to afford the cost of the food? How is that food going to be produced … with horses and mules? Or maybe we can all start a “victory” garden to celebrate our independence from oil … and so we won’t starve.

This is absolute insanity. I suppose one way to resolve the healthcare crisis is to simply starve people to death. Those with the most expensive health issues will be the first to go. It’s also a way to resolve the purported “obesity” problem in the U. S.

All this week, I’ve heard Democrats like Bill Richardson and others talk about how the oil companies aren’t doing what they need to … simply gouging the public. One said they already had leases on 68 million acres of land … 37 million of those in the west. What they don’t tell you is that in those 37 million acres, much of it doesn’t have projected reserves and what is known to be there amounts to about a 28 day of supply of crude oil at the current consumption rate.

One thing that has been forgotten about in all of the madness is the discovery last year of a massive reserve in deep water in the southwestern gulf. Unfortunately, practically all of the deep water rigs were moved to the Persian gulf and other places prior to Hurricane Katrina. No one is talking about this so the speculators are happy.

Further exploration needs to be done on both the east and west coasts as well as the eastern Gulf of Mexico and in the Florida Straits. Why? We need to be independent from imported oil … period. That doesn’t mean that we shouldn’t conserve and use alternative forms of energy where available and practical. If we can expand our known reserves, we can ensure that the U. S. will have a domestic source of oil for hundreds of years.

Also, if we start building new nuclear reactors now, we will just have some new ones coming on line just before the ones now in operation will have to be shut down.

Last night, I saw Tyson Slocumb on the O’Reilly Factor. For an answer to one of the questions, he smuggly stated he rode the subway to work and it ran on electricity. I wonder how he thinks that electricity is made? He’s one of these “don’t drill, no nuclear” type of people. Unfortunately, probably 280 out of our 300 million people don’t have access to and “electric” subway … or any kind of subway or reasonable form of mass transit at all.  The rest of us that don’t live in Washington, DC, New York, San Francisco, Boston, Los Angeles or Chicago can just walk or ride the bus. Right?

Unfortunately, that horse I bought back in college is probably dead now. Shouldn’t have sold it, though.

Simply put, the Democrats … in some perverse and insane way … and led by Barack Obama now … are savoring the current oil crisis. It is the means for them to achieve their goals of promoting biofuels, energy conservation and development of alternative power sources such as wind and solar. They feel that the American public doesn’t have the discipline or knowledge or intelligence to make coherent decisions about their future so they’re using the current crisis to win the White House and Congress to force their agenda. It’s really that simple. They preach all of these things as available solutions now. But are they? How many electric or hybrid cars are sitting at the car dealers lots? What’s happening to the corn crop with the current weather in the Midwest? Where are all those wind farms and solar farms? How long will it take for all of these promised solutions to become a practical reality?  Well … wind and solar … 2030 … 22 years. Have they priced what it costs to put solar panels on a house? Who can afford a hybrid or electric car? It sounds good until you start asking questions.

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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.

Newsflash!!: Chicago Leads Nation in Fertilizer Production

That’s right folks!

Chicago is now the nation’s leading producer of fertilizer … both in quality as well as quantity!!!! And … we’re not talking about that granular dry inorganic stuff. We’re talking about prime, rich, high nitrogen organic fertilizer!!!

Yes!!!

Manure!!!

This Chicago manure puts your average cow manure or chicken poop to shame. Now, everyone know that chicken manure is high in nitrogen and needs to be used sparingly.

This manure is so potent that it’s rumored that it is going to resolve the pending world food crisis as well as be a boon for producing biofuels, relieving America’s dependence of foreign oil imports and its effect on money is going to markedly stimulate America’s flagging economy, ward off recession and abolish the need for the government to print or mint money.

Why … a farmer I knew back home raised chickens and sold eggs at Fort Benning. When those chickens had aged beyond good laying age, they were shipped to a nearby soup factory for “reprocessing” into Campbell’s or something like that. When the chicken houses were emptied he went in with a small tractor and pushed all that chicken poop out into a pile, loaded it on a honey cart and spread it over his fields. Combined with irrigation from a nearby river he had the highest corn yield in the county, typically from 150 to 200 bushels of corn per acre … and that was in the bad years.

Well, this Chicago manure is more potent than chicken manure. It’s more potent than horse manure. Everyone knows you have to be careful with horse manure or it will burn your crops from too much nitrogen.

This Chicago manure is more potent than either chicken or horse manure … and can be used for more things than growing crops.

Why … Barack Obama applied just a tad to that $85,000 that Tony Rezko gave him and … Poof!!! … it became $250,000. Now, that’s good manure … versatile!

Why … I even heard that Barack decided to stand in some of that fertilizer one night … and shazaaammm!! … the next day he was an expert in Foreign Affairs.

It has been rumored that Barack likes this fertilizer … manure … so much that he’s been spreading it like crazy in Pennsylvania. He’s going to give the people of Pennsylvania a portion of his manure and raise them out of poverty and despair. Go Barack!! I have heard that it even makes people willing to give up their guns, relinquish religion, love illegal immigrants and open their back doors to peddlers from all over the world. That is some manure. And it’s sweet!! It cures the “bitters”.

But … like all good things … it does have its downside. Be careful. It can make you prone to speak “out of context” … as Barack has found out.

I think I’m going to head on over to Lowe’s or Home Depot and see if I can find some of this “fertilizer”. I especially like what it does to money. I suppose, if they don’t have it yet, I might still be able to find some at the local feed and seed. It’s probably worth full retail.