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Soaring energy prices, who's to blame?

26 04 08 - 03:03



Soaring energy prices, who's to blame?




By Alan Fein




New York - Wednesday, oil futures dipped after the Energy Department reported an unexpected rise in supply levels last week, though with record oil and gasoline prices global consumption remains high while OPEC continues to hold down production.



Soaring energy prices, who's to blame?



New York - Wednesday, oil futures dipped after the Energy Department reported an unexpected rise in supply levels last week, though with record oil and gasoline prices global consumption remains high while OPEC continues to hold down production.

Crude oil futures finished the trading session in New York up 23 cents a barrel at $118.30 after having dropped to an intra-day low of nearly $116 following the government's weekly supply report that indicated that U.S. stocks of crude oil rose 2.4 million barrels for the week ending April 18. Energy pundits were looking for oil supplies to have only risen 1.8 million barrels.

Gasoline futures topped a record-setting $3.05 a gallon on the Mercantile Exchange, closing up 3 cents on May contracts. The EIA reported that gasoline stocks fell 3.2 million barrels, far more than the 2.1 million barrel consensus decline.

This morning, AAA reports that consumers are paying $3.556 a gallon at the pump on a national average, up more than 2 cents a gallon from yesterday and 30 cents more than month-ago average prices.

Voice of America's Michael Bowman points at growing global demand for crude oil and an unwillingness by OPEC members to increase production as to blame for the high cost of energy. "The trend has inflicted pain on consumers and petroleum-dependent industries while massively boosting the fortunes of oil-producing nations and petroleum companies," writes Bowman.

Bowman's story echoes the Bush administration's sentiment, as VOA pieces typically are written in a fashion supporting the U.S. government's position on global topics. Yet OPEC has ignored President Bush and Vice President Cheney who have both visited the Middle East to ask members of the Cartel to increase production levels with the same response - "no".

OPEC says speculators are to blame for the run up in crude oil prices, insisting that current production levels are more than adequate to meet global demand. But as countries like China and India develop, consumption levels are increasing and that has strained supplies to the point where speculation in a dollar-based commodity such as crude oil can push prices up.

With the United States in an unofficial recession, the greenback has fallen to such an extent that dollar denominated commodities such as oil are seen as a 'safe haven' against inflation and to that extent it is a better bet than the dollar.

Here in the U.S., Democrats on Capitol Hill have fought 'big oil' from exploring offshore and resisted pleas for trying to expand refineries. Democrats have also pushed for these same oil companies to pay 'windfall' taxes on their profits, yet through their efforts they've curbed domestic exploration and development levels during an unprecedented point in our nation's history where demand is outpacing supplies.

Earlier this week, OPEC Secretary General Abdalla Salem el-Badri said the cartel plans to boost its oil production targets by five million barrels a day - in four years, which does little to quell consumer demand that by then will be on equal ground where it is now against growing consumption globally. Yet turning on the tap currently could be done, though at risk is a fallback in prices at the wellhead which would cut into the price-gouging run on profits the Cartel's members are enjoying as they buy up lucrative U.S. assets thanks to the housing debacle that has all but crashed the major U.S. investment banks to pieces while antiquated federal regulatory actions come too late to curve the financial crisis that hit Wall Street.

In all, a complex situation of finger-pointing, blame and guilt.

Yet do we blame OPEC for being greedy or take it on the chin? The answer it seems is to pass it through to consumers during an election year and blame it on a Republican administration, a tactic that so far has voters questioning government action.

"No one thread makes a quilt", says I, and in the case of rising global demand for energy and an economic fall-back in the United States during an election year it's surprising that there's any rational logic left on Wall Street or Capitol Hill. Meanwhile, you consumers out there can continue to suck it up and pay the cost of higher gasoline, home heating and yes, food, until such time as the market settles back into a normal posture and the vacancy sign on the White House is taken down in November - no matter who moves in. Used tags: , , ,


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Soaring energy prices, who's to blame?

Saturday 26 April 2008 at 03:03 am



Soaring energy prices, who's to blame?




By Alan Fein




New York - Wednesday, oil futures dipped after the Energy Department reported an unexpected rise in supply levels last week, though with record oil and gasoline prices global consumption remains high while OPEC continues to hold down production. more