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Was Wall Street to blame for high oil prices?

Brad Plume, Washington Post
Back in 2008, when the price of oil was zooming up to $140 per barrel, there was a lot of chatter about whether Wall Street deserved the blame. And that debate hasn’t vanished. Last month, Sen. Bernie Sanders (I-Vt.) cited a report from the Commodity Futures Trading Commission as proof that “Wall Street speculators dominated the oil futures market.” Economists like Paul Krugman, meanwhile, have argued that supply and demand were the chief culprits. Oil was getting pricier because China, India and Brazil kept using more and more of it, and production couldn’t keep up. So who was right?

new paper from the St. Louis Fed finds that both camps were, in a way. The authors, Luciana Juvenal and Ivan Petrella, combed through a wealth of economic and oil data to tease out various factors affecting the price of crude. Their conclusion? The sharp rise in price from 2004 to 2008 was primarily driven by supply and demand. Asia’s thirst for oil was growing, and the ability of countries like Saudi Arabia to keep up was declining. But a decent portion of the price increase, about 15 percent, could be chalked up to “financial speculative demand shocks.”
(7 October 2011)

The perils, prizes and pitfalls of the post-Gaddafi era of oil

Daniel Yergin, Financial Times
… It took 42 years for Col Gaddafi’s reign to end; but, with a certain symmetry, that moment has come at a time when the oil industry is again facing a new era of change. This is being shaped both by the “globalisation of energy demand” as the Middle East looks more to Asia as its growth market, and by technological advance. But it will also be an era in which oil’s suzerainty over global transport can no longer be taken for granted.

The most significant shift between these eras is the increasing dominance in consumption of the emerging markets, led by China, India and the Middle East itself. As late as 2000, almost two-thirds of world petroleum consumption was in the developed countries; soon it will be less than half. Surging demand from the emerging markets, along with supply disruptions, gave impetus to the dramatic price increases that began in 2004.

A central challenge for the oil industry will be to meet this rising demand as incomes increase in these countries and their populations take to the road.

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For several years there was much discussion about “peak oil”. It turns out that the developed world – the US, western Europe and Japan – has reached “peak oil” but it is in terms of “peak demand” – not peak supply. Ageing populations, the saturation of car ownership, hybrids and the increasing efficiency of internal combustion engines are all chipping away at demand in the developed world. Consumption in these regions will at best be flat, or will decline.
(4 October 2011)

U.S. and Saudi Relations on Oil

Alexander Cockburn,
Pose a threat to the stability of Saudi Arabia, as the Shiite upsurges are now doing in Qatif and al-Awamiyah in the country’s oil-rich Eastern Province, and you’re brandishing a scalpel over the very heart of the long-term U.S. policy in the Middle East. The fall of America’s ally, the Shah of Iran, in 1979 only magnified the strategic importance of Saudi Arabia.

In 1945, the chief of the State Department’s Division of Near Eastern Affairs wrote in a memo that the oil resources of Saudi Arabia are a “stupendous source of strategic power and one of the greatest material prizes in world history.”

… These days, the U.S. consumes about 19 million barrels of oil every 24 hours, about half of them imported. At 25 percent, Canada is the lead oil supplier. Second comes Saudi Arabia at 12 percent. But the supply of crude oil to the U.S. is only half the story. Saudi Arabia controls the Organization of Petroleum Exporting Countries’ oil price and adjusts it carefully with U.S. priorities in the front of their minds.

… The American Empire has effectively lost Iran and Iraq. What of Saudi Arabia? Suppose, fissures continue to open up in the Kingdom itself? I doubt, at such a juncture, that we would hear too much talk from Washington about “democracy” or orderly transitions. The Empire would send in the 101st Airborne.
Alexander Cockburn is co-editor with Jeffrey St. Clair of the muckraking newsletter CounterPunch.
(7 October 2011)

The Cronyism Behind a Pipeline for Crude

Bill McKibben, New York Times
LATE last month, the Obama administration unveiled a new tool that lets anyone send a petition to the White House; get 5,000 signatures in 30 days and you’re guaranteed some kind of answer. My prediction: it’s not going to stop people from trying to occupy Wall Street. After the past few years, we’re increasingly unwilling to believe that political reform can be accomplished by going through the “normal channels” of democracy.

It’s easy to understand why. In the first few months of the Bush administration, the vice president’s staff held a series of secret meetings with energy company executives to come up with a new energy policy that, essentially, gave big oil everything it asked for. When journalists learned about the secret sessions, they became a scandal — environmental groups complained long and loud, right up to the Supreme Court, and rightly so. Important decisions should be made in the open, not behind closed doors by cronies scratching one another’s backs.

In 2008, Barack Obama promised to turn things around with new ethics guidelines and promises of transparency. But if two batches of e-mails released via the Freedom of Information Act — the first last month and the second on Monday — are any indication, he’s not delivering on that promise.

The e-mails, made available by the environmental group Friends of the Earth, show something just as tawdry as Dick Cheney’s backroom dealing
(3 October 2011)