Supply, Demand,, Oil Speculators & An AP Hit Piece

The left is at it again, blaming oil commodity traders for the rising price of gasoline while studiously ignoring their own refusal to allow greater production of domestic oil. If you believe them, supply of oil is not the issue, just those evil speculators.

Let's ask this, do you know what the spot price was for South Carolina Intermediate Water at the close of business on NASDQ today?

There isn't one of course. Water is not traded on NASDQ, yet it is far more important to us than oil. It is necessary to sustain life. We consume exponentially more water than we do oil or gas. But because supply of water is so abundant relative to demand, it is not traded as a commodity, it is not subject to the vicissitudes of speculation in a very tight market, the cost of water in SC does not rise or fall depending on wether Iran throws a temper tantrum, and water's cost per gallon is negligible.

The moral of the story is obvious - sufficiently increase supply relative to demand, and the cost of any commodity will fall. That is the immutable law of supply and demand.

Today, we are only drilling oil in fields estimated to provide us with 22 billion barrels of oil. But what if our government opened up to drilling fields containing ten times that amount, 220,000 billion barrels of oil starting tomorrow. That is certainly within the realm of reason. Our estimated total reserves according to Obama's Department of Energy, likely exceed 3.5 trillion barrels of oil. We could easily ramp up production to the point of eclipsing Saudi Arabia as the world's largest oil producer. Indeed, we could dwarf all of OPEC. And when the daily supply of oil on the market increases markedly, what then happens to the price? Indeed, who would be willing to speculate on increasing oil prices in a saturated market with more than enough supply to meet the world's demand.

The "evil speculators" meme coming from the left is the same one the left used during the 2008 oil price explosion, when oil reached a record of $145 a barrel. By comparison, today's price is approximately $107 a barrel. The left used the meme as a red herring to cover their refusal to drill for our domestic oil. The left's 2008 complaints caused the Commodities Futures Trading Exchange and other international agencies to launch an investigation. The ultimate finding - the cause of the price spikes was not speculators, but rather that "the world economy had expanded at its fastest pace in decades, resulting in substantial increases in the demand for oil, while the oil production grew sluggishly, compounded by production shortfalls in oil-exporting countries." Supply and demand. Go figure.

The "evil speculator" meme is also a dangerous one. Commodity trading serves the purpose of insuring both producers and commercial purchasers that they will have a guaranteed contract at a set price for future production. Over regulate that and you interfere with the market - something that always comes with bad consequences. This is particularly problematic when one realizes that it is supply relative to demand that is by far the most important component of oil cost.

Update: Since writing this, I see the AP has written possibly the most deceptive piece I have ever seen. According to the AP:

MORE U.S. DRILLING DOESN'T DROP GAS PRICES

It's the political cure-all for high gas prices: Drill here, drill now. But more U.S. drilling has not changed how deeply the gas pump drills into your wallet, math and history show.

A statistical analysis of 36 years of monthly, inflation-adjusted gasoline prices and U.S. domestic oil production by The Associated Press shows no statistical correlation between how much oil comes out of U.S. wells and the price at the pump.

If more domestic oil drilling worked as politicians say, you'd now be paying about $2 a gallon for gasoline. Instead, you're paying the highest prices ever for March.

Political rhetoric about the blame over gas prices and the power to change them — whether Republican claims now or Democrats' charges four years ago — is not supported by cold, hard figures. And that's especially true about oil drilling in the U.S. More oil production in the United States does not mean consistently lower prices at the pump. . . .

. . . American oil production is about 11 percent of the world's output, so even if the U.S. were to increase its oil production by 50 percent — that is more than drilling in the Arctic, increased public-lands and offshore drilling, and the Canadian pipeline would provide — it would at most cut gas prices by 10 percent.

What a steaming pile of bull excreta that is. As Just One Minute points out:

Oh, for heaven's sake - the quetion is, does additional US production result in lower prices than would have otherwise prevailed? If, just to seize an example, producers only ramp up US production in response to shortages and rising prices elsewhere, a simple statistical analysis such as done here will "prove" that more production is always associated with higher prices.

Actually, it goes beyond even that. U.S. production has been in decline during virtually all of the past 36 years, while world demand has been steadily rising, thus making it impossible for the AP statistical analysis to have any validity. (The following numbers are given in thousands of barrels per day.) According to U.S. Energy Information Administration figures for U.S. field oil production**:

- In 1970, we were pumping 9,637 barrels of oil per day. U.S. oil production since then has STEADILY DECREASED while world demand has STEADILY INCREASED.

- In 1980, the number of barrels per day produced by the U.S. had declined to 8,597.
World demand in 1980 was 59,901.24 barrels per day.

- By 1990 U.S production had decreased to 7,355 barrels per day.
World demand had increased to 64,273.

- By 2000, U.S. production was down to 5,822.
World demand had increased to 76,963.

- In 2011, U.S. production was 5,673.
In 2011, world oil demand hit a new record of 87,400 barrels per day.

So when, over the past 36 years, has the U.S. increased its oil production so as to impact an ever increasing world demand, thus bringing down domestic gas prices? We are producing exponentially less oil today than we were in 1970, while world demand has exploded by nearly a third.

The AP article is a ludicrous agenda driven hit piece with no discernible basis in reality. THey have waterboarded statistics to tell a wholly false narrative. Indeed, even their basic premise is false. The AP compares U.S. oil production to U.S. gas prices, but that wholly mistakes the issue. There never will be a direct correlation between U.S. production and U.S. gas prices. The correlation that exists is between global production of oil - of which the U.S. has been an ever shrinking bit player - and global demand - exploding in India and China particularly over the past decade - that have been the main driver of prices. The plain truth is that we have the capability to expand oil production on a massive scale, sufficient to effect price. And I am sorry to all the lefties out there, including Obama and the AP, but they just can't repeal supply and demand.

**Note, the way the information at EIA at presented, I am unsure whether the "field oil" numbers also include our offshore oil production numbers. The offshore production numbers, in thousands of barrels of oil per day, stood relatively stable at 1,000 from 1980 to 1990, then jumped to approximately 2,000 barrels per day in 2000, where it has more or less remained since. Those numbers would cause a bit of an uptick in oil production during the period 1990 to 2000, but would still be exponentially lower than the relative increase in world demand during that same time frame. Thus it does not alter my criticism of the AP hit piece.

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Where There's Smoke . . . (Updated w/McCain Response)

Where there's smoke, there is the New York Times, a lighter, some dried bull patties for fuel and the Republican nominee for President. The NYT has done the mother of all hit pieces on McCain, implying an extra-marital affair 8 years ago, doing special favors for lobbyists, and raising the Keating 5 scandal from 20 years ago. They end by using a quote from McCain to imply that he is a "hypocrite."








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Update: Don't miss the Times editor, Bill Keller, trying to justify the McCain hit piece.

The NYT page 1 lead today is an incredibly long 58 paragraph story entitled "For McCain, Self-Confidence On Ethics Poses Its Own Risks." It is an unusual title. But by using that title, the NYT is digging in the dirt a mile below the surface to find every fact that they can spin to make John McCain look like something other than a "straight talker." It is the mother of all hit pieces. This is not reporting, its agenda journalism. Do read it here.

The NYT insinuates that McCain had an affair with Vicki Iseman, a lobbyist, eight years ago. The NYT has uncovered nothing that could be called evidence under any possible definition of that word. McCain denies it. Iseman denies. No one the NYT interviews asserts that there was an affair. At no point do McCain or Iseman ask the NYT reporters to define the words such as "affair," "sexual relations" or even "is." The NYT does not establish any time when McCain and Iseman were even alone together. The sited sources the NYT dredges up that even suggest an appearance of impropriety are anonymous. Yet the NYT spends the bulk of their 58 paragraphs dredging up every fact they can to suggest otherwise.

The NYT replays the facts of the Keating 5 scandal from 20 years ago in which McCain played a minor role and for which he received a reprimand. Those facts are well known and in the public record. They are hardly front page news today. In fact, I would think the facts rank ever so slightly below drug use.

There is no indication whatsoever that, post Keating 5, McCain has ever done any favors for lobbyists in situations where his own views of what was best for the nation differed from the act being asked for by the lobbyist. Yet despite that, the NYT examines every personal tie that McCain has to every lobbyist, implying without citation to a single instance that McCain acted inappropriately. The NYT tells us that there are lobbyists working for McCain. Yet, once you get very near the 58th paragraph, the NYT finally tells us that McCain has often gone against the desires of lobbyists with whom he had any sort of relationship. Smoke by the cubic mile, innuendo by the dump truck full, facts in support thereof - zero.

You have to love this bit of hyper partisan reporting. After bringing up the Keating 5, allegations of an affair with a lobbyist, and allegations of favoritism to lobbyists in general, the NYT writes:

With his nomination this year all but certain, though, he is reminding voters again of his record of reform. His campaign has already begun comparing his credentials with those of Senator Barack Obama, a Democratic contender who has made lobbying and ethics rules a centerpiece of his own pitch to voters.

Credentials? To call what Obama has "credentials" stretches the meaning of the term beyond recognition. Obama has no credentials for the job of presidency. What Obama has is some small record - and I can't wait to see the details of that comparison.

So far, in the past year, we have Obama voting against our national security to support the tort bar in their attempt to strip the immunity provisions from the FISA reform bill, we have him voting against a free trade pact with South Korea in support of the Unions, we have him voting for the Unions to strip employees of their right to decide whether to unionize by secret ballot. And that is the tip of the iceberg. What about the near 100 million in earmarks Obama has asked for this year. Do any of those earmarks feed into campaign donors? When one looks at the differential between Obama's rhetoric and his reality, it becomes no difficult feat to imagine his photo in Webster's under the entry for "hypocrisy." What pure and unmitigated bullshit this is.

The rule in writing a story designed to influence your audience is to close with the strongest line you have - the one you want your listeners to most remember. So how does the NYT, after 58 paragraphs of smoke but no fire, end their article - with a mea culpa to its readers for printing this tabloid trash? Of course not.

"Any hint that I might have acted to reward a supporter,” [McCain] wrote, “would be taken as an egregious act of hypocrisy."

And there is no question whatsoever that the timing is significant. The NYT regularly holds their bombshells so that they will land at precisely the time to do the most damage. How many confidential leaks, held in some cases up to a year, have we seen published on the eve of major votes - or on the eve of the 2004 election. The vast majority of the "facts" reported in this piece are between 8 and 20 years old. This 58 paragraph piece of trash was timed to insure that it does not derail McCain's bid for the nomination, but to completely delegitimize him before he can begin to attack Obama. What utter low life scum slither through the halls of the NYT? Their stock value cannot reach $1 a share quick enough for me.

Update2: Here is the video of John McCain's response to the NYT hit piece in a news conference today:



Update 3: From the Politico - "Aides to Sen. John McCain (R-Ariz.) have released a remarkable 1,500-word document outlining what his campaign calls 'some of the facts that were provided to The New York Times but did not end up in the story.'" See the full text here.

Update1: TNR has the backstory on the NYT hitpiece as well as some observations of their own:

Beyond its revelations, however, what's most remarkable about the article is that it appeared in the paper at all: The new information it reveals focuses on the private matters of the candidate, and relies entirely on the anecdotal evidence of McCain's former staffers to justify the piece--both personal and anecdotal elements unusual in the Gray Lady. The story is filled with awkward journalistic moves--the piece contains a collection of decade-old stories about McCain and Iseman appearing at functions together and concerns voiced by McCain's aides that the Senator shouldn't be seen in public with Iseman--and departs from the Times' usual authoritative voice. At one point, the piece suggestively states: "In 1999 she began showing up so frequently in his offices and at campaign events that staff members took notice. One recalled asking, 'Why is she always around?'" In the absence of concrete, printable proof that McCain and Iseman were an item, the piece delicately steps around purported romance and instead reports on the debate within the McCain campaign about the alleged affair.

Read the entire article.

And now John McCain has responded to this story at a press conference he called in Toledo. Here is the story from Fox News:

With his wife, Cindy, standing by his side, John McCain lashed out Thursday at a report in The New York Times that revisits the Republican presidential candidate’s relationship with a female lobbyist, and rebuked the paper for spreading false rumors.

The Times article described how campaign aides kept him and lobbyist Vicki Iseman apart during the 2000 election for fear they were giving the impression they were having an affair. It noted how McCain wrote to government regulators on behalf of a client of the lobbyist while he was chairman of the Senate Commerce Committee.

McCain called a press conference in Toledo, Ohio, to slam the paper for embellishing his committee activities on Iseman’s behalf.

“I’m very disappointed in The New York Times piece. It’s not true,” he said.

. . . The article, published in Thursday’s edition of the Times but released the day before on its Web site, rehashes rumors spread during McCain’s 2000 presidential campaign.

. . . McCain, 71, and Iseman, 40, long ago denied ever having a romantic relationship, . . .

The Arizona senator said his campaign had been repeatedly contacted by the newspaper about the story.

“For months The New York Times has submitted questions and we have answered them fully and exhaustively, and unfortunately many of those answers were not included in the rather long piece in the New York Times,” he said.

McCain lamented that “this whole story is based on anonymous sources,” saying that could encompass any of the more than 100 aides he’s had contact with through the Commerce Committee.

The newspaper quoted anonymous aides as saying they had urged McCain and Iseman to stay away from each other prior to his failed presidential campaign in 2000. In its own follow-up story, The Washington Post quoted longtime aide John Weaver, who split with McCain last year, as saying he met with lobbyist Iseman and urged her to steer clear of McCain.

Weaver told the Times he arranged the meeting before the 2000 campaign after “a discussion among the campaign leadership” about Iseman.

Speaking with FOX News, Weaver said he met with Iseman at Union Station in either 1999 or 2000, he can’t remember which year, for about five minutes. The nature of the conversation was not about romantic involvement, but instead about how she was going around telling people how much enormous influence she had on McCain.

As a campaign professional, he said he didn’t want anyone saying they had influence over McCain so he met with her and told her to quit boasting, especially since McCain was making lobbying legislation at the time. Weaver said the conversation with Iseman and other related topics were well vetted by The Boston Globe during the New Hampshire primary in 2000.

But McCain said he was unaware of any such conversation, and denied that his aides ever tried to talk to him about his interactions with Iseman.

. . . Rick Davis, McCain’s campaign manager in 2000, told FOX News on Thursday that the campaign never had deep concerns about the relationship with Iseman or allegations of illicit favors for her client.

“I never had a single instance where this was a major issue in our campaign or any kind of an issue. And the idea that a decade later they have somehow uncovered some kind of a mystery is ridiculous,” Davis said.

Campaign spokeswoman Jill Hazelbaker likened the report to a “kind of gutter politics.”

“There is nothing in this story to suggest that John McCain has ever violated the principles that have guided his career,” she said.

Davis said the newspaper “didn’t say that there was anything improper here. They just tried to imply it. They didn’t say he had done anything for this lobbyist or this lobbying firm but they tried to imply it. If they are going to go this kind of route, why don’t they tell us where they got the information?”

. . . The McCain stories also allege that the Arizona senator wrote letters and pushed legislation involving television station ownership that would have benefited Iseman’s clients.

In late 1999, McCain twice wrote letters to the Federal Communications Commission on behalf of Florida-based Paxson Communications — which had paid Iseman as its lobbyist — urging quick consideration of a proposal to buy a television station license in Pittsburgh. At the time, Paxson’s chief executive, Lowell W. “Bud” Paxson, also was a major contributor to McCain’s 2000 presidential campaign.

McCain did not urge the FCC commissioners to approve the proposal, but he asked for speedy consideration of the deal, which was pending from two years earlier. In an unusual response, then-FCC Chairman William Kennard complained that McCain’s request “comes at a sensitive time in the deliberative process” and “could have procedural and substantive impacts on the commission’s deliberations and, thus, on the due process rights of the parties.”

McCain addressed the letters Thursday, saying: “I said I’m not telling you how to make a decision; I’m just telling you that you should move forward and make a decision on this issue. I believe that was appropriate.”

Read the entire story.

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