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Page added on July 27, 2014

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‘NYT’ Op-Ed Militates for Higher Oil Prices and Fewer American Jobs

Public Policy

The NYTimes Op-Ed Militates For Higher Oil Prices and Fewer American Jobs in Thursday’s NYTimes Op-Ed “Let Our Oil and Gas Go”

Mr. Steven Rattner demonstrates that he lives in an oil industry induced fantasy whose preachments have seduced the public, our government, our press in the misguided belief that the price we are paying for oil through such oil based commodities as gasoline, diesel, heating oil and on, is a market derived price reflective of actual supply and demand. Nothing could be further from the truth and Mr. Rattner’s musings go far enough to earn him an honorary membership in the American Petroleum Institute or a seat of honor at the next convening of the Organization of Petroleum Exporting Countries(OPEC) or a seat on the board of one of our Commodity Exchanges or one of their kindred institutions. Absent from Mr. Rattners Op-ed is the realization that oil is no longer primarily a commodity but rather has become a financial instrument. Some 30 contracts are traded on the exchanges for each barrel of oil produced, not in measure by oil producers nor oil consumers hedging their needs but rather in massive measure by speculators, and seemingly in many cases by manipulators who have the wherewithal to move the markets in directions that maximizes profits and political ends.

Unquestionably exporting oil and subjecting it to the machinations of world market prices would punish the American consumer to a greater degree than is presently the case. As Mr. Rattner reports, we are still importing some 6 million barrels a day, enough to make our market responsive to world oil prices and therefore responsive to levels manipulated by the OPEC cartel and prices formed on world commodity exchanges operating without a modicum of meaningful visibility.

In turn the price we are paying for natural gas is a price untouched by world markets in that we neither import nor export natural gas, we are fully self sufficient and therefore our gas prices are under the clear auspices of our anti trust laws and in turn under the vigilant eye of our Justice Department and Federal Trade Commission.

The result is staggering in comparison. Our price for natural gas is currently quoted at less than $4.00 mmbtu which compares to gas being sold in world markets as in Europe by the likes of Gazprom of circa $15 mmbtu. That enormous differential is motivating European chemical companies to move manufacturing facilities and jobs to the U.S. and making our chemical industry among the most cost effective in the world. Not least our natural gas bounty is reducing pollution on massive scale by replacing natural gas for coal in power plants throughout the country.

By the way, giving you but one example of how much we are overpaying for oil, know that the power generated by 6 mmbtu units of natural gas is the equivalent to the energy generated by one barrel of oil. In other words six mmbt units of natural gas at $4.00 would deliver at $24 (6 x $4.00 per mmbtu) as much energy as one barrel of oil currently priced at $101/bbl.

Is someone in our government taking cognizance?

HuffPost



6 Comments on "‘NYT’ Op-Ed Militates for Higher Oil Prices and Fewer American Jobs"

  1. penury on Sun, 27th Jul 2014 9:57 am 

    All I can say is “HuffPost”

  2. Kenz300 on Sun, 27th Jul 2014 11:04 am 

    Competition is the best way to lower prices………..

    The more we diversify our energy resources and types the better off we are………..

    Add more wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste to the energy mix………

    End the fossil fuel monopoly………..bring in the competition.

    Oil has a practical monopoly on transportation fuels…..
    The more electric, flex fuel, biofuel, CNG and LNG vehicles on the road the better. Like they say do not put all your eggs in one basket. It is good to diversify and have options.

    —————–

    Renewables Provide 56 Percent of New US Electrical Generating Capacity in First Half of 2014

    http://www.renewableenergyworld.com/rea/news/article/2014/07/renewables-provide-56-percent-of-new-us-electrical-generating-capacity-in-first-half-of-2014

  3. rockman on Sun, 27th Jul 2014 1:19 pm 

    “…the price we are paying for natural gas is a price untouched by world markets in that we neither import nor export natural gas”. Them damn facts keep getting in the way of a good story: the US is not self sufficient in NG: we consume more than we produce. Not as big a deficit as with oil but the US is a net NG importer none the less.

    And more ignorance or just willful propaganda IMHO: “Unquestionably exporting oil and subjecting it to the machinations of world market prices would punish the American consumer to a greater degree than is presently the case.” The American consumer does not compete with the global market for oil…our refiners do. Anti-trust laws have no authority over neither the price of imported NG nor the price of imported oil. And the world should be more pissed with us then vice versa: the US currently imports (and thus adds competition) almost 3 million bopd that we don’t consume. Our refiners are cracking it and exporting the products overseas. Since they are getting a nice profit margin they can outbid foreign refineries. And since the foreign refiners aren’t getting all the oil thy need their customers have to buy from US refiners who make even more profit. I wonder if many here and around the world realize how much impact the US has on global prices of products. In essence we’re doing a pretty good job of screwing those foreign consumers IMHO.

    More importantly while the American consumers don’t buy oil they do buy a hell of a lot of refined products. Refined products that can be sold to the highest bidder whether domestic or foreign. For instance México spends 25% of the revenue it gets from exporting oil to the US on refined products it buys from our Gulf Coast refiners. IOW drivers in Houston compete directly with Mexican diesel buyers. If they can pay more for the fuel it will either be shipped to México (or Canada et al) or the US consumer will have to at least match the offers made by foreign consumers.

    Again the “exporting US oil debate” is just one more giant Red Herring perpetrated on a gullible American public IMHO.

  4. nemteck on Sun, 27th Jul 2014 3:10 pm 

    Last paragraph: “By the way, giving you but one example of how much we are overpaying for oil,…..” is complete garbage. At $24 per barrel no one would extract oil in the US. The $100 per barrel is needed for most of the unconventional plays in the US to get some revenues.

  5. Joe Clarkson on Sun, 27th Jul 2014 6:06 pm 

    If author Raymond J. Learsy thinks the price of oil is too high, he can just stop buying it and purchase natural gas instead.

    And if he thinks “some 30 contracts are traded on the exchanges for each barrel of oil produced…”, he is sorely mistaken. The NYMEX trades about 850,000 options and futures contracts for WTI every day, far less than the number of barrels of oil. Perhaps he meant contract barrels; if so, it shows how careless he is with numbers.

  6. Makati1 on Sun, 27th Jul 2014 8:33 pm 

    rocman, as you said, “… a gullible American public.” This will have millions asking why oil is over $100 a barrel when it should be $24.

    I like the author’s last line: “Is someone in our government taking cognizance?”

    It should read: “Is anyone at HuffPost cognizant, i.e. fully informed: conscious?”

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