How Times Change

Just a few short months ago, CONgress hauled executives from the big oil companies into Washington to testify about the high cost of crude oil.   The testimony quickly turned to inquisition as the hearings became a way for CONgressmen to sound tough (AKA popular) back home.

The blame was placed on greedy speculators, oil companies that were not making investments in new fields or alternative energy, buying back their own stock, and a whole host of other things.  That was when oil price spiked to $143/bbl.  Now oil prices have dropped to under $80 and seem to be falling even farther.  Oil company stocks have dropped over 50% from their highs this summer as well.

So where is the talk about speculators now?  Mutual funds, pension funds, and many individual investors have lost billions with oil's fall.  Who is responsible?  The market.

I would hope it would be obvious to CONgress that Big Oil was no more involved in the rise in crude as it was in its recent fall.  However, I am sure this will be used for political advantage at home to gain more votes.  It will probably go something like this:

"See Joe Voter those hearings did pay off.  Big Oil was scared and dropped their prices because they knew I, your trusted, elected official, backed them into a corner on behalf of my constituents."

Lee Raymond, former CEO of Exxon, stated it very clearly to CONgress a few months ago that oil is a commodity and its price is cyclical.  Nothing but market forces drive its price.  Sometimes it rises, and it always falls back to historical levels.  Crude oil is not immune to the commodity cycle any more than iron ore or bananas.  I wonder if CONgress will send an apology to all the speculators and oil company executives?

The Boone Doggle

I usually get very cynical when a billionaire goes on a crusade for the public good. The T Boone energy "plan" is one of those things that everyone should be skeptical about. Now I really enjoy watching T Boone on TV. His banter with the CNBC anchors is great entertainment. However, his energy "plan" is a complete farse. The $58 Million in advertising to promote his "plan" is just his way of cajoling Congress into forcing people to replace the natural gas used for electricity production into a automotive fuel. Not to mention he also wants to force people to give up their property rights so he can run power cables from his giant wind farms to cities in Texas.

An opinion piece in the WSJ today summarizes the "plan" and all its buffoonery today. Here are some parts:

Having reasons is not "a plan" either, but Mr. Pickens has his reasons. He says we spend $700 billion a year on foreign oil, which he calls a "transfer of wealth." But exchanging money for oil at the market price is an exchange of things of equal value. If we didn't value their oil more than our dollars, we wouldn't participate in such a bargain.

No: As Mr. Pickens says, we can't drill our way out of the dilemmas of living in the world. But drilling is one of many things we can do that are worth doing. Over time, the price mechanism and technology will tell us how to harness the energy that is infinite around us. There's the sun, the tides, geothermal and nuclear -- energy is not in short supply; only know-how is. And a shortage of know-how is a problem that our society, as long as its basic incentives remain intact, is constantly solving every single day.