Darffot: the Lower 48 means the continental US, which is where TRC had jurisdiction (basically Texas)....
Ray: No. Exclusively Texas.
you misunderstood me. the meaning of what i said is that the Lower 48 was "basically Texas", although of course there was and continues to be production outside of Texas. as Deffeyes explains:
"Texas oil production so dominated the industry that regulating each Texas oil well to a percentage of its capacity was enough to maintain oil prices. OPEC was modeled after the Texas Railroad Commission. Just substitute Saudi Arabia for Texas."
OPEC's Secretary Ali Rodriguez estimated that $7 of the $35 price of a barrel of WTI in October, 2000 was due to excess and economically pointless speculation
this is what's known as pulling a number out of one's ass. it's meaningless, and considering it comes from OPEC, it's propaganda to boot. i take OPEC's statements with a large grain of salt. as recently as this past summer, when WTI was in the high 30s, they were trying to reassure the markets that they still targeted a long term "price band" of 22-28. more recently, they have announced production cuts to support $40 as a "floor", which the market seems to believe.
How different in October, 2004 when Bush was so certain that he owned his election "victory" that he could arrogantly allow his friends in the awl patch to fleece the world markets with $55/bbl.
that's pretty funny revisionism. don't you recall Woodward's book last year, where he said Prince Bandar ("Bandar Bush") was going to get the Saudis to knock crude prices down to the low 20s by August so that Bush could get reelected?
and when $50+ crude hit in the fall, the story making the rounds was that Soros was jacking the markets to create economic pain so that people would vote for Kerry. personally, i'd say who the fark knows. besides, Bush's friends in the patch, the commercials, were net short the futures at the time, so how did they benefit? the main beneficiaries were hedge fund operators who live in blue states.
but one thing we do know is that his friends in your "awl patch" were not fleecing world markets. by and large they had already sold or hedged their production months if not years in advance.
you need to understand that the $55 price applies to WTI, which is pretty much a paper barrel as opposed to a dominant physical product. even as WTI climbed (or should i say "clumb" to keep in the elitist, blue-state spirit?), spreads to WTI continued to widen, so it didn't do a lot of good for companies selling sour product.
meanwhile, something like 97% to 99% of the CL futures contracts are not settled physically, so it is just a zero-sum game between speculators and hedgers. the notion that it is "fleecing world markets" is incorrect.
Today, that figure is estimated at about 1% on a base of about 83 mmbpd production. This is a recipe for vast market manipulation by speculators.
again, you need to distinguish between a paper barrel that flashes by on CNBC and the vast majority of sour product which trades at a historically steep discount to WTI.
also, you conflate the "awl patch" (producers, i.e., commercials) and "speculators", saying they both benefit. in fact, they take opposite sides of the trade from each other or there would be no futures market.
a propos of nothing, speaking in general terms, and awl in awl, i'd say that conspiracy theories are likely to find their most receptive audience among naive students and other financial ignoramuses on college campuses, as opposed to people who actually follow the markets. |
