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To: Umunhum who wrote (126036)	11/29/2009 3:12:45 PM
From: ChanceIs	2 Recommendations Read Replies (1) of 206084

RE: Global warming; cap-and-trade impacting oil prices. Bingo. I track it very closely and think it very relevant to crude prospects. Personally, I don't think that cap-and-trade has a snowball's chance in the bad place of passing. I was down at a conference at the American Enterprise Institute a while back. It might be worth an hour to take in the video replay - or listen to the podcast: Smoke, Mirrors, and Greenhouse Gas Control AEI Geoengineering Project The U.S. Senate is girding for battle over greenhouse gas control bills, and legions of diplomats are preparing to assemble in Copenhagen to debate a new accord on climate change to replace the Kyoto Protocol. In the United States, the Environmental Protection Agency grinds relentlessly forward in its plans to regulate greenhouse gases under the Clean Air Act. None of the options being considered resembles the simple carbon tax proposals deemed by economists to be the least expensive method of controlling greenhouse gas emissions. Why? What is causing reformers to tackle the most expensive environmental task ever attempted with policies known to cost far more than necessary? Will the result do much to help the environment? aei.org The hall talk was very interesting. One bond specialist from a major trading institution opined that the carbon market was proving to be much too volatile. From that I interpreted that margin would not be made available for carbon futures. Expressed differently, Schwab just sent me an email telling me that if I wanted to continue to use 10X levered ETF's I would have to put up 100% cash. The huge bond market doesn't support cap and trade. Bill Gross will tell Obama at the last minute to can it. Remember also that bonds are huge investors in utilities and they don't want their balance sheets confused even more with margin requirements for carbon futures. Also of note, the current bills are full of review cycles. One person told me that Southern Corporation gladly endorsed the senate version because it would take 20 years for anything to take effect. Remember New Source Review - introduced in 1977 and finally settled in 2006. Someone else opined that a simple carbon tax is alive, but cap-and-trade would first have to fail in the legislative cycle - which it will. Put on your cynical hat. Cap-and-trade is a stealth tax. The pundits in the formal portion of the conference plainly stated that none of the politicians wanted to be identified with raising taxes. If cap-and-trade is passed with impossible implementation strictures, then Congress gets credit for saving the polar bears w/o doing any real damage. But cap-and-trade won't even get that far. Be sure that the banks don't like it - except the carbon trading side. What they don't like they won't finance. They don't like Obama leaning on the Canadians about all of the carbon coming from the oil sands. Hard to see them financing more mammoth Canadian bulldozers. Ever consider shorting municipal bonds? You know that the states are in trouble, don't you? An indication of their desperation is this Bloomberg article which makes explicit the true nature and purpose of Global Warming: States Mull ‘Plan B’ Carbon Market as U.S. Climate Bill Falters By Simon Lomax Nov. 24 (Bloomberg) -- Cash-strapped states in search of new revenue may establish their own “cap-and-trade” program for greenhouse gases covering more than half the U.S. economy if Congress doesn’t set up a federal emissions market. ………….. $250 Billion in Deficits The regional cap-and-trade programs offer the states a new revenue source as the U.S. economy emerges from the worst recession since the Great Depression. States are working to close $250 billion of deficits and “won’t fully recover from this recession until late in the next decade,” the National Governors Association said Nov. 12. bloomberg.com

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