There was a refreshing moment of truthful clarity last week from Saudi Prince Al-Waleed bin Talal during an interview on “CNN’s Fareed Zakaria GPS.” Prince Talal admitted that the Saudis want to lower oil prices to avoid moves toward other energy sources and away from oil. It is the same principle upon which drug dealers offer cut-rate narcotics to keep the addiction going for their customers.
Talal, the grandson of the founder of Saudi Arabia, wants oil down to $70 and $80 a barrel. Why? “We don’t want the West to go and find alternatives, because, clearly, the higher the price of oil goes, the more they have incentives to go and find alternatives.”
Once again, Congress appears to be helping out by reducing support for renewable energy sources and continuing the mantra of “drill baby drill.” President Obama has joined the chorus and opened up pristine areas for oil development– a move that not only brings great environmental risks but guarantees to keep our addiction to oil going strong.
Source: CNN
Lotta,
after being out of commission most of the day after a few hours in the dentist chair, I got a kick out of your much “much-tuted” comment! I like it better than the correction!
The Oil companies and the speculators are doing the American thing. They are pushing up the price of their product and then selling it at an astronomical profit and paying little or no taxes on that profit! I guess Greed is still good.
SB above: “much-touted”
Just an updat on a still much-tuted alternative to oil:
http://www.globalresearch.ca/index.php?context=va&aid=25064
speculation\ˌspe-kyə-ˈlā-shən\, n.,
: an act or instance of speculating: as a : assumption of unusual business risk in hopes of obtaining commensurate gain b : a transaction involving such speculation
gamble \ˈgam-bəl\, v.,
1a : to play a game for money or property b : to bet on an uncertain outcome
2: to stake something on a contingency : take a chance
rig \rig\, v., vt.,
1: to manipulate or control usually by deceptive or dishonest means
2: to fix in advance for a desired result
fraud \ˈfrȯd\, n.,
1a : deceit, trickery; specifically : intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right b : an act of deceiving or misrepresenting
criminal
adj \ˈkri-mə-nəl, ˈkrim-nəl\, adj.,
1: relating to, involving, or being a crime
2: relating to crime or to the prosecution of suspects in a crime
3: guilty of crime; also : of or befitting a criminal
Any questions?
Wikileaks: Speculators Helped Cause Oil Bubble
By Matt Taibbi
http://www.rollingstone.com/politics/blogs/taibblog/wikileaks-cables-show-speculators-behind-oil-bubble-20110526
Excerpt:
When oil prices surged to a ridiculous $147 a barrel in the summer of 2008, conventional wisdom held that normal supply and demand issues were the cause. Both the Bush administration (in the form of the Commodity Futures Trading Commission) and most of Wall Street (through both media figures and market analysts) blamed such factors as increases in oil demand from the Chinese industrial machine, and the failure of Americans to conserve, for the surge in crude prices.
Goldman Sachs, while outrageously predicting a “super spike” that might cause oil to reach as high as $200 a barrel, blamed piggish American consumers and preached conservation as a bulwark against oil supply disruptions. The bank’s “Oracle of Oil,” Arjun Murti, even broadcast the fact that he owned two hybrid cars.
Well, thanks to Wikileaks, we now know that when the Bush administration reached out to the Saudis in the summer of ’08 to ask them to increase oil production to lower prices, the Saudis responded by saying they were having a hard time finding buyers for their oil as it was, and instead asked the Bush administration to rein in Wall Street speculators.
According to the McClatchy report, the Wiki cables show that Saudi ministers repeatedly told Bush administration officials that increasing production might
**********
WikiLeaks: Saudis often warned U.S. about oil speculators
By Kevin G. Hall | McClatchy Newspapers
http://www.mcclatchydc.com/2011/05/25/114759/wikileaks-saudis-often-warned.html
Excerpt:
What role Wall Street investors play in the high cost of oil is a hotly debated topic in Washington. Despite weak demand, the price of a barrel of crude oil surged more than 25 percent in the past year, reaching a peak of $113 May 2 before falling back to a range of $95 to $100 a barrel.
The Obama administration, the Bush administration before it and Congress have been slow to take steps to rein in speculators. On Tuesday, the Commodity Futures Trading Commission, a U.S. regulatory agency, charged a group of financial firms with manipulating the price of oil in 2008. But the commission hasn’t enacted a proposal to limit the percentage of oil contracts a financial company can hold, while Congress remains focused primarily on big oil companies, threatening in hearings last week to eliminate their tax breaks because of the $38 billion in first-quarter profits the top six U.S. companies earned.
The Saudis, however, have struck a steady theme for years that something should be done to curb the influence of banks and hedge funds that are speculating on the price of oil, according to diplomatic cables made available to McClatchy by the WikiLeaks website.
The cables show that the subject of speculation has been raised in working group meetings between U.S. and Saudi officials, in one-on-one meetings with American diplomats and at least once with President George W. Bush himself.
The Saudi concerns about speculation have a particular sheen of credibility. Saudi Arabia is the world’s largest exporter of oil, serving dozens of clients in addition to the United States. As such, it carefully tracks the trends that drive oil prices, which send it billions of additional dollars with every increase.
But in the cables, Saudi officials explain that they have two primary concerns about artificially high crude prices: that they’ll dampen the long-term demand for oil and that the wide price swings typical of commodity speculation make it difficult for them to plan future oil field development. After that $147 a barrel peak in 2008, for example, prices plunged to $33 a barrel as the global financial crisis rocked the world. That was a stunning change in less than half a year.
One cable recounts how Dr. Majid al Moneef, Saudi Arabia’s OPEC governor, explained what he thought was the full impact of speculation to U.S. Rep. Alan Grayson, D-Fla., who in July 2009 was in Saudi Arabia for the first time.
According to the cable, Moneef said Saudi Arabia suspected that “speculation represented approximately $40 of the overall oil price when it was at its height.”
Asked how to curb such speculation, Moneef suggested “improving transparency” — a reference to the fact that most oil trading is conducted outside regulated markets — and better communication among the world’s commodity markets so that oil speculators can’t hide the full extent of their trading positions.
Moneef also suggested that the U.S. consider “position limits” — restrictions on how much of the oil market a company can control — something the CFTC is considering. But the proposal to prevent any single trader from accumulating more than 10 percent of the oil contracts being traded hasn’t received final approval, and the CFTC also has yet to define what it considers excessive speculation.
Roco
1, May 31, 2011 at 6:12 pm
speculation is part of the process of keeping oil supplies stable. It is part of the market.
[snip]
Speculators are “betting” on the future price of a barrel of oil.
——————————————–
Roco’s right that some degree of pure “speculation” is probably for the best in a commodity market. But overall, he seems to be making an argument from a High School Sophomore Econ class level. In this case, the accusation is that the “speculators” aren’t simply making small futures bets. Currently, “speculators” make up more of the oil trading market than “end users,” so at very least, the tail is wagging the dog. Also, at the very least, these “ungrounded” speculators create a much more volatile marketplace than end users, that volatility creates uncertainty for everyone in the market, and as the old saw goes, markets hate uncertainty.
But more than that, there is concern that the “speculators” are not merely holed up in duck blinds, but that they are actively manipulating the market. That argument is more complex, and necessarily speculative. I’ll let others who understand the issues better try to explain some of what may be going on.
Whether the fact that the oil market is dominated not by end users buy by speculators, or if the speculators are actively manipulating the market, the best approach is probably not to either turn a blind eye or to entirely eliminate speculation, but rather to impose more constraints on speculation, to limit the extent to which such actions can influence the price, which in turn can damage the rest of the world economy.
On a more partisan aside: First off, the Republicans have nothing to gain by having the US economy recover quickly over the next year or two – quite the opposite – a “double dip” recession would be a gift from God for them in 2012. They also have a great deal of ties with both the oil industry and “Wall Street” (not that Democrats don’t suckle at Wall Street’s droopy old-man-nipples, too…). So, isn’t it in the mid-term best interests of the Republican party to keep oil prices high and economic growth low? What evidence would support or refute the hypothesis that the Republicans are actively trying to impair the recovery and/or keep oil prices high?
Gyges, there is a lot he does not know, but insists on bloviating about it anyway. Reminds me of the comment attributed to Mark Twain: “Better to keep your mouth shut and be thought a fool, than to open it and remove all doubt.”
And of course the Saudis want to discourage alternative energy.
Without oil, they have nothing but an oppressed populace and no income with which to oppress them or excess capital to use in funding international terrorism. No oil = a likely ugly end to the “royal” family. Screw ’em. I can’t wait for the day when the Saudi people rise up and eat their royals since that is apparently the only way any justice will ever be had for the Saudi involvement in 9/11.
if this news surprises you then you haven’t been paying attention
Gyges,
I’m going to guess because it’s obvious by the insipid nature of that statement.
“Maybe we could say speculators are the feedback mechanism which keeps the system stable?”
You know how I know you don’t know how feedback works?
speculation is part of the process of keeping oil supplies stable. It is part of the market.
I think inflation has quite a good deal to do with the price of oil. Gold has more than doubled in cost since 2006, from 600-700 per ounce to over 1500 per ounce.
It may seem like a good idea but I think it would have a negative impact on the price of oil. Initially it might go down but over time it would rise because of incomplete signals/information to producers. I believe this would cause a shortage at some point in the future with a higher cost per barrel than we now have.
Speculators are “betting” on the future price of a barrel of oil. Some are betting on $130 some on $150. If something happens that would impact the future price, say offshore drilling, then some of that $130 and $150 per barrel oil will be released now because the price in the future will be less. Extra supply in the present should decrease price.
Maybe we could say speculators are the feedback mechanism which keeps the system stable?
Wait, you mean people in the market will do what benefits them the most, versus what will benefit everyone the most? But if everyone does this, and not everyone’s actions have equal weight, that means that the market won’t work out what’s best for everyone, but what’s best for those who have the most influence.
Huh.
Yes it does.
“The GOP admits speculation is helping boost oil prices, moves to gut speculation watchdog anyway.”
The headline says it all.
tomdarch, “I have long wondered how much the oil industry is consciously aware of the issue that the Prince brings up?”
—
This is a predictable cycle. I have seen this many times. The wild card this time is the speculation angle and it doesn’t look like the government is interested in restraining the speculators in oil or food. The oil speculation is under the purview of the The Commodity Futures Trading Commission (CFTC) and they are well aware of the problem but have done nothing to enforce the Dodd-Frank bill and republican/conservative members of Congress are doing everything possible to prevent any future implementation.
http://thinkprogress.org/romm/2011/03/19/207724/speculation-oil-prices-watchdog/
“The Commodity Futures Trading Commission (CFTC) “” which is charged with policing the country’s futures markets “” said last week that speculation on energy futures, including oil, is at an all-time high. The Dodd-Frank financial reform law gave the CFTC the ability to issue limits on oil speculation, but agency missed the deadline for implementing the new rules, partly due to reluctance from conservative members of the CFTC board (which is a problem President Obama can address in June). … “
The Moar You Know
1, May 31, 2011 at 12:10 pm
[snip]
This will not, indeed, it cannot happen, because of both Western and international speculators who are making trillions of dollars a year off the backs of both the original producers and Western consumers by rhythmically inflating and deflating the oil commodity bubble. Seems the good prince needs a lesson in speculative commodities markets.
——————————————
But… Markets exist within governmental regulatory constructs. Those governmental regulatory constructs are largely the product of the legislators and regulators withing governments like the US. The legislators and regulators in the US and other countries largely respond to the influence of lobbyists and opportunities for “revolving door” jobs. (aka “regulatory capture”)
So, the question is: are the speculators as well organized in terms of lobbying and offering future jobs to the legislators and regulators as the oil industry clearly is?
I have long wondered how much the oil industry is consciously aware of the issue that the Prince brings up? So, it seems at least a few in the industry see the problem. The question is whether BP, Haliburton and the rest pick up the phones, authorize their lobbyists to make “donations” and start telling their “captured” legislators and regulators to clamp down on the speculation.
“Talal, the grandson of the founder of Saudi Arabia, wants oil down to $70 and $80 a barrel.”
Which is right about what the cost of production is, plus a few bucks piled on for profit. How simplistic. This will not, indeed, it cannot happen, because of both Western and international speculators who are making trillions of dollars a year off the backs of both the original producers and Western consumers by rhythmically inflating and deflating the oil commodity bubble. Seems the good prince needs a lesson in speculative commodities markets.
He and his brethren, the folks actually producing and selling the oil, have no more control over the price per barrel than I do.
Who is behind the curtain….
Gee, WHAT a surprise! If you look at who is behind the climate change denier industry, who is behind the “clean coal” or the natural gas alternative you will find the money all comes from, the petroleum masters, coal operators and T. Boone Pickens (who just LOVES him some fracking but uses wind as a trojan horse).
These guys don’t want us to break our addiction because that would mean an end to their dictating to our country.