I hate to call any politician a liar. It just seems redundant. But John McCain seems to have disembarked from the “Straight Talk Express” while it was still in motion. And he is now being dragged under the wheels. And now Barak Obama seems to have jumped under there with him. The issue that is grinding up our presidential want-a-be’s is offshore drilling. If this were just another “welfare cheats” verses “tax and spend” debates I could fall asleep smirking. Not to ham this up, but I think that the great American neophytes from both ends of the political children’s hour can be led around by their noses so easily that it seems as a species we are genetically predisposed to nose rings.
Please consider a little piece of news I stumbled across in that paragon of right wing justifications, the Wall Street Journal. The giant Cantarell Oil Field, the world’s second largest, has announced, according to the Journal, that it will be supplying 15% less oil this year to American refineries than it did last year. And that fits into a world wide pattern. The four largest oil fields in the world are, in descending order of proven reserves; Ghawar in Saudi Arabia, Cantarell, off the northern gulf coast of Mexico, Da Quing in China, and Burgun, in Kuwait. And the year in which each began producing was; Ghawar, 1951 – Cantarell, 1949 – Da Qing, 1960 – Burgun, 1939. In other words no new major oil fields have been discovered since 1960. And all of the world’s major fields are well past maturity. And that is why the price of gasoline is going up.
The price spike ain’t caused just by speculators and it ain’t caused by just Exon-Mobil greed. Greedy speculators don’t help. But cutting them out of the equation is like taking an aspirin for your fever when you have a flesh eating bacteria eating your leg. You will feel a little better but your leg is still going to stink and eventually drop off. Or, as the Chairman of a major American oil development company pointed out back in 1999; “…by 2010 we will need on the order of an additional fifty million barrels a day from existing reserves.” That was said at the London Institute of Petroleum, by the Chairman of Halliburton, Dick Cheney; and yes, that Dick Cheney. He did not say “new oil”, because Dick knew as far back as 1999 there was no where to find 50 million barrels a day of new oil; not in ANWAR, not in the Gulf of Mexico, not off the coast of California, or Texas or Florida. (please see http://dieoff.org/42Countries/42Countries.htm for an idea of how long we have left to ignore this problem.)
The United States today (2008) has proven oil reserves of 21 billion barrels. In 1970 we had proven reserves of 39 billion barrels (and that included the Prudhoe Bay field.). Prudhoe Bay, Alaska is the largest field in North America. Production began there in 1977. The output from that field peaked in 1988. The USGS estimates that the Artic National Wildlife Refuge, just south of Prudhoe Bay, might contain, and the word is “might”, as much as 90 billion barrels of oil, or might contain as little as 7.7 billion barrels of recoverable oil. (Artic oil fields tend to contain a much higher percentage of natural gas then oil.)
Meanwhile, it is estimated - with considerable better assuredness - that the continental shelf might (there’s that word “might” again) contain about 85.9 billion barrels of recoverable oil. And drilling there is not quite as controversial a choice as drilling in ANWR. But either way, if we started drilling tomorrow the first oil from either source would begin to impact the global price of oil no sooner than the year 2030, by which time Prudhoe Bay will be effectively a dry hole. And ANWR and the continental shelf together will not equal the loss of our shrinking onshore oil reserves. In other words, we can’t drill fast enough to replace what we’ll burn while we drill new wells, which means new wells are not going to drive down the global price of oil.
But consider another couple of numbers; in May of 2007 Americans bought 385,625 gallons of gasoline a day. In May of 2008 Americans bought 367,992 gallons a day, or about 17,000 gallons a day less. (http://www.eia.doe.gov/) And the only difference was that in 2008 gasoline cost about a dollar per gallon more than it did in 2007. About 19 gallons of gasoline can be produced from each barrel of oil, so that drop of 17,000 gallons of gasoline projects into a saving of 1,000 barrels of oil a day - by projection, 365,000 barrels of oil saved over a year. And that is an immediate saving. We don’t have to wait twenty years for conservation to affect the global price of oil. It is already driving the price down. 
So it seems logical to me that the fastest and surest way to lower the cost of gasoline is not to drill, but to immediately raise the “Corporate Average Fuel Economy” (CAFE) requirement for all cars sold in America, from the 27 mpg average, where it has been stuck for the past 20 years, but to the 35 mpg which Detroit will not now be required to achieve until 2020. And if Detroit whines that it cannot meet that requirment in a year, let me point out right now the Ford Fiesta diesel, sold only in Europe, has a 63.3 mpg average. Meanwhile the only 40+ mpg autos sold in America at the moment are the 2008 Honda Civic and the 2008 Toyota Prius. Not a single product from Detroit can come within ten miles per gallon of those two autos from Japanese manufacturers. 
Only in a world of topsy-turvy logic can McCain and Obama compete to be first to endorse off-shore drilling as a cure for our addiction to foreign oil, instead of insisting upon an immediate CAFÉ increase, so the market place can help us go cold turkey from our addiction to foreign oil.
Please consider a little piece of news I stumbled across in that paragon of right wing justifications, the Wall Street Journal. The giant Cantarell Oil Field, the world’s second largest, has announced, according to the Journal, that it will be supplying 15% less oil this year to American refineries than it did last year. And that fits into a world wide pattern. The four largest oil fields in the world are, in descending order of proven reserves; Ghawar in Saudi Arabia, Cantarell, off the northern gulf coast of Mexico, Da Quing in China, and Burgun, in Kuwait. And the year in which each began producing was; Ghawar, 1951 – Cantarell, 1949 – Da Qing, 1960 – Burgun, 1939. In other words no new major oil fields have been discovered since 1960. And all of the world’s major fields are well past maturity. And that is why the price of gasoline is going up.The price spike ain’t caused just by speculators and it ain’t caused by just Exon-Mobil greed. Greedy speculators don’t help. But cutting them out of the equation is like taking an aspirin for your fever when you have a flesh eating bacteria eating your leg. You will feel a little better but your leg is still going to stink and eventually drop off. Or, as the Chairman of a major American oil development company pointed out back in 1999; “…by 2010 we will need on the order of an additional fifty million barrels a day from existing reserves.” That was said at the London Institute of Petroleum, by the Chairman of Halliburton, Dick Cheney; and yes, that Dick Cheney. He did not say “new oil”, because Dick knew as far back as 1999 there was no where to find 50 million barrels a day of new oil; not in ANWAR, not in the Gulf of Mexico, not off the coast of California, or Texas or Florida. (please see http://dieoff.org/42Countries/42Countries.htm for an idea of how long we have left to ignore this problem.)The United States today (2008) has proven oil reserves of 21 billion barrels. In 1970 we had proven reserves of 39 billion barrels (and that included the Prudhoe Bay field.). Prudhoe Bay, Alaska is the largest field in North America. Production began there in 1977. The output from that field peaked in 1988. The USGS estimates that the Artic National Wildlife Refuge, just south of Prudhoe Bay, might contain, and the word is “might”, as much as 90 billion barrels of oil, or might contain as little as 7.7 billion barrels of recoverable oil. (Artic oil fields tend to contain a much higher percentage of natural gas then oil.)Meanwhile, it is estimated - with considerable better assuredness - that the continental shelf might (there’s that word “might” again) contain about 85.9 billion barrels of recoverable oil. And drilling there is not quite as controversial a choice as drilling in ANWR. But either way, if we started drilling tomorrow the first oil from either source would begin to impact the global price of oil no sooner than the year 2030, by which time Prudhoe Bay will be effectively a dry hole. And ANWR and the continental shelf together will not equal the loss of our shrinking onshore oil reserves. In other words, we can’t drill fast enough to replace what we’ll burn while we drill new wells, which means new wells are not going to drive down the global price of oil.But consider another couple of numbers; in May of 2007 Americans bought 385,625 gallons of gasoline a day. In May of 2008 Americans bought 367,992 gallons a day, or about 17,000 gallons a day less. (http://www.eia.doe.gov/) And the only difference was that in 2008 gasoline cost about a dollar per gallon more than it did in 2007. About 19 gallons of gasoline can be produced from each barrel of oil, so that drop of 17,000 gallons of gasoline projects into a saving of 1,000 barrels of oil a day - by projection, 365,000 barrels of oil saved over a year. And that is an immediate saving. We don’t have to wait twenty years for conservation to affect the global price of oil. It is already driving the price down. So it seems logical to me that the fastest and surest way to lower the cost of gasoline is not to drill, but to immediately raise the “Corporate Average Fuel Economy” (CAFE) requirement for all cars sold in America, from the 27 mpg average, where it has been stuck for the past 20 years, but to the 35 mpg which Detroit will not now be required to achieve until 2020. And if Detroit whines that it cannot meet that requirment in a year, let me point out right now the Ford Fiesta diesel, sold only in Europe, has a 63.3 mpg average. Meanwhile the only 40+ mpg autos sold in America at the moment are the 2008 Honda Civic and the 2008 Toyota Prius. Not a single product from Detroit can come within ten miles per gallon of those two autos from Japanese manufacturers. Only in a world of topsy-turvy logic can McCain and Obama compete to be first to endorse off-shore drilling as a cure for our addiction to foreign oil, instead of insisting upon an immediate CAFÉ increase, so the market place can help us go cold turkey from our addiction to foreign oil. - 30 -
Are we running out of oil? According to U.S. government sources, we have burned over 875 billion barrels of oil over the last 75 years. There are 42 gallons in every barrel of oil, so we burn about 9 billion gallons of oil every day in the United States. But there are 1,000 billion barrels of proven and probable reserves still in the ground. No, we are not running out of oil in the near future. It is clearly time to start conserving and moving to other energy sources, but despite what the mainstream media would have you believe, the experts can find no logical explanation for the current price run-up. Even after the 9/11 terrorist attacks in New York oil was selling for just $17.45 a barrel. Michael Lynch, President of Strategic Energy & Economic Research believes that “…at about $80 a barrel the market crossed into the irrational exuberance level…It’s hard to find a rational explanation for the gain of the last six months.” Unless of course, the explanation has nothing to do the true value of oil, but with market gaming. The price of oil has risen 697%, that is six hundred ninety-seven percent, since November 2001, and on June 6, 2008 it hit $139 a barrel. Why?
There is no mystery here. There is a long history of people “gaming” isolated unregulated or under regulated markets. In 1979-80 the Hunt brothers pushed the price of silver from $11 an ounce to $50 an ounce in 5 months by controlling just 100 ounces out of a world supply estimated at more than 400 million ounces. That bubble collapsed by April of 1980 but the same thing is happening now with essential commodities, including oil and food, because we are talking about a tiny market, relative to the global economy: the futures market. The commodity futures can be manipulated by buying on “margin”, which means that with access to a few million dollars, usually in unregulated “hedge funds,” speculators can leverage hundreds of billions of dollars in profit for themselves with the connivance of bureaucrats blinded by ideology.
You might call it the revenge of the unregulated economy, or maybe “Enron, risen from the grave”, because that is the most recent philosophical base of the current market mess. Wikipedia most succinctly describes the process in the California electricity market in 2000, in which Enron was a central player; “Deregulating the producers …did not encourage new producers to create more power and drive down prices. Instead,…The producers used moments of spike energy production to inflate the price of energy… Manipulation strategies were known to energy traders under names such as "Fat Boy", "Death Star”, "Forney Perpetual Loop", "Ricochet", "Ping Pong", "Black Widow", "Big Foot", "Red Congo", "Cong Catcher" and "Get Shorty"…. On December 15, 2000…California was paying a wholesale price. .of over $1400 per megawatt, compared to $45 per megawatt average one year earlier.” In 2002 S. David Freeman, who ran California’s Power Authority during the so called energy crises, could have been describing the current (2008) oil price spikes when he testified before a Senate Subcommittee; “…a market approach for electricity (or commodity trading) is inherently gameable….Never again can we allow private interest to create artificial or even real shortages and to be in control.” 
Because they are risking so little (and in any case it is OPM, Other People’s Money) they take huge risks, driving prices in huge swings up and then down. And it isn’t just oil. Again, from Der Spiegal: “In Chicago, the home of the world’s largest commodities futures exchange, the volume of futures being traded is already 30 times as high as the annual grain production in the United States…”Real Trading”, says Hubert Gabrisch of the Institute for Economic Research…has “become the exception on the exchanges”. Prices are now determined by speculators, financial jugglers with no interest whatsoever in having any contact with or physically delivering the vast amounts of grain they own.”
Hedge fund manager, Micheal Masters, told congress last month that speculators had purchased 1.1 billion barrels of oil futures, 8 times the amount in the national strategic oil reserve. They certainly never expect to actually deliver that oil to a customer, or even get within smelling distance of it. And speculators have now bought enough corn futures to fuel the entire U.S. ethanol program for a year. The closest these traders ever get to corn is if it shows up on their dinner plate. Trading House Morgan Stanley now owns agricultural land in the Ukraine. A New York fund owns 2,700 acres of farmland in Britain. And the British Emergent Asset Management company is buying African farms south of the Sahara Desert. What the hell are these brokers going to do with that property? This is not trading commodity futures, it is fantasy trading like a fantasy baseball or a fantasy football league. And it desperately needs to be brought under control
How did we get in this mess? It was easy. Step one was the historically low interest rates, which meant that cash was plentiful and at the same time you couldn’t make much money lending money. That drove investors to look elsewhere for large profits, at places they had never bothered to look at before. Couple this with the “free market” fanatics, and the “deregulation” craze, and a “bubble” was inevitable. In fact, we have now suffered through a dozen bubbles, each one bigger than the last and all fueled by the deregulation craze. And investment guru George Soros believes we are approaching a “Super Bubble” that could pop and throw us into another worldwide “Great Depression”. And that is why the Saudi oil minister is our new best friend. A world wide depression might mean a revolution in his nation: and ours.
We need to return to a real market economy. We need to do that while we still have a choice, before a complete economic collapse forces us to do it.
