McCain Attacks
| July 28th, 2008 by Robert | Word Count: 1270 | Reading Time 5:04 | 2,288 views |
Well, it’s nothing new to see a Presidential candidate weather various storms of negativity and character attacks from all sides, but I have recently run across a specific attack on McCain which I thought deserved some attention. Of course the price of energy (oil) has long been on the minds of our country and rightfully so. Our country seemed to be undeterred when the price of gas hit $2.00 per gallon. People complained, but nothing changed as far as driving habits and car purchase decisions. However, as the price has reached past $2.50-$3.00-$3.50 and now above $4.00, Americans have began to change their lifestyles. No longer are the roads and new car lots filled with monstrous SUVs and the simple idea of carpooling has reached new levels of acceptance. It took some time, but we are changing our habits as a result of the price of gas.
Not too long ago, I wrote an article detailing that the only effective way to alter our energy costs in our immediate future was to find a way to lower our demand for oil. If you would like to read it, click here: Oil Demand & Supply. In reality, the demand for oil is weakening and market forecasters are beginning to push predictions forth affecting the price of oil. If less people are driving and if there is less “extra cash” in the economy, people tend to stay home and conserve their earnings. As we all know, our economy is riding on a dangerous path right now. We have indicators in terrible shape and we have some in ok shape. However, the overall public sentiment is that we are heading for an economic downturn. It’s a fairly predictable outcome due to the fact that any monetary gains we have in wage increases are quickly overtaken by energy, food, insurance, and a variety of other costs. We cannot keep up with the costs of living in our current economic state.
Things must change and they are. A few weeks ago, President Bush gave a speech with emphasis on our economic situation. During the 1 full hour of his speech, the price per barrel of oil dropped about $10. One hour, $10 dollars. Did Bush put forth a new energy plan? Did he announce an increase in oil production? Did he announce anything related to oil production? No. He only spoke about the dire straits our economy was in. These dire straits translated into projected lower demand for oil. It’s a very simple flow chart. Less money equals less demand for “stuff.” A major component of that “stuff” is the use of oil to get or build it. The markets immediately recognized this and the future prices of oil began to drop.
Great, it is very simple economics, but how does this have anything to do with McCain you may ask? Actually, there was another announcement by President Bush that resulted in another decrease of the price of oil. He removed the Presidential ban on offshore drilling in our country. It wasn’t just a ceremonial act as some would have you believe (there is a law that still bans offshore drilling which would need to be repealed). It was a significant statement because it opens the path to future drilling for our own oil, thus lowering the demand on foreign oil. Well, guess what, the future markets for oil immediately dropped again. At the beginning of July, price per barrel of oil was at $145, as of writing, it is at $123. $22 is a 15% drop in a few weeks. There has been nothing to change the price of oil other than potential economic indicators (and simple statements) expecting lower demand. McCain has supported this theory and he has been attacked because of it.
If you go back and read the article I linked above, you would know that several energy consultants stated that if you remove speculation from the price per barrel of oil, it would be roughly half of the current cost. What exactly is speculation? Markets speculate the price of oil includes many various factors of economic conditions (including weather). If the market begins “speculating” that people will not have the same demand for something in the future, the price will drop. The market is correctly speculating that with the economic crisis we are entering into, along with the potential for drilling for our own oil in the future, our demand for oil will decrease. Price has receded appropriately.
Has our actual price per gallon of gas decreased by 15%? Of course it hasn’t. In the last month, the national average of a gallon of gas has fallen about 2-3%. Well, we shouldn’t expect an immediate drop considering the current inventory includes the higher prices oil costs. Or should we? My question to you then is why does gas immediately go up when a hurricane enters our gulf coast which threatens our refineries? The future of gas yes, could be impacted, but the current inventory costs are still lower. It’s all about speculation and preying upon the fear of the public masses. If something bad is “potentially” going to happen, have the media play the part and drive the fear home. People will be scared, run to the station and fill up on the “cheap” gas. Businesses accordingly raise their prices to curtail this short increase in demand and profit greatly on a potential issue.
However, it doesn’t turn around that fast when things are going good. We are fed the laundry list of costs involved in gas and oil production and inventory costs, etc. The media of course is in the middle of all this making sure most people don’t understand what is going on. The public is the puppet, while media, government, and oil companies are the puppeteers. McCain is right in his support that recent statements made by our President have affected oil costs. He may not give an economic dissertation as to why, but the fact of the matter is it’s true. There are people and media sites attacking McCain because they have missed the link between speculation and cost of oil. It makes for a great attack ad or blog/media post, but they are the ones who are wrong.
Demand and supply are always critical, but speculation throws a wrench into pricing. We have allowed our media to “control” our senses and thus, we are paying a 50% “future tax” on the price of oil because we have allowed them to fuel our fears. In reality, the power exists in the hands of consumers. If we truly re-evaluate our lifestyles and choose to focus on demanding less oil, we can change the costs now and in the future. The markets will heed the new forecasts and the price of oil would return to its true cost, much lower than currently with rampant speculation included. As the energy analysts stated, the true costs of oil right now is at about $60-$70 per barrel. That is a 50% drop in cost today. Theoretically, gas would return to something closer to $2.00 per gallon than $4.00.
Most people will never take the effort to examine an attack ad on a Presidential candidate because they are easily led by our media. As people attack either candidate, try and find your own position on the matter. The media cannot be trusted. The attacks leveled at McCain for believing statements made by our President can affect oil are ludicrous. Of course a simple statement by the President can affect the price when speculation is such an important part of the market!
on July 28th, 2008 at 9:39 pm:
As an update, I just ran across this tidbit on Reuters:
“During the dramatic price increases in recent months, refiners and retailers shouldered margin losses rather than pass the higher cost of crude to motorists. They will try to hang on to recent margin gains, but softer U.S. gasoline demand makes that very difficult… says Trilby Lundberg”
Margin losses? Where are the margin losses when Exxon reported $40+ Billion in profits for 2007? How about the millions of dollars being sucked out the pockets of American citizens while Exxon and their compatriots are “shouldering” the losses of the oil industry? I’m sorry, but that’s a joke of a statement. It’s called profiteering.
on July 28th, 2008 at 10:02 pm:
If we could get the government to start backing the ideas that people have out there for alternative fuel,I would say that within the next year, gas prices would be $2.00 a gallon or less. The technology is here, just waiting for the American people to say that we have had enough. Lets quit making the oil companies and the foreign countries rich.
A good friend of mine was in the military during the latter part of WW#2 through 1946 or 1947, I can’t remember which but it doesn’t matter that much. Anyway while he was stationed somewhere in Indiana, he witnessed a 1946 or 1947 Ford car, only powered by an electric motor that ran for 24 hours non stop 65 miles per hour with the lights and radio on.
Now 60 odd years later they still say that it can’t be done. How many BILLIONS of dollars do these oil people need, to say that they have enough???
on July 29th, 2008 at 8:49 am:
I think the government and the car companies have finally realized things need to change, but they place time lines on change in the measure of 5 or 10 years. As you have said, the technology has been around for many decades. With the advancements we have made in all areas of technology, I cannot believe there is not one sustainable power source which can rival gas in terms of speed and longevity.
There are ways to augment the gas mileage without removing gas from the equation. If we can double, triple, or even more, the mpg for a vehicle, that is the exact same as lowering the price per gallon as we know it. There ARE ways, they are just being made out to be too difficult to implement or too expensive to sustain.
We are in a game of chicken and the consumer is the one who will always be on the losing end.
on July 29th, 2008 at 3:30 pm:
More additional content displaying lower consumer demand for gas and oil. Quoted directly from CNN:
“Americans drove 9.6 billion fewer miles in May compared with a year earlier, according to a report Monday from the Federal Highway Administration.
“We have seen the longest decline in vehicular miles traveled since we started collecting this data,” said U.S. Transportation Secretary Mary E. Peters in a conference call with reporters.
Peters said that in the first four months of this year, Americans traveled 40.5 billion miles less compared with the same period in 2007. She said the decline in usage means less tax revenue for highway system.”
on July 31st, 2008 at 12:22 pm:
Today, Exxon released their earnings for the second quarter of 2008. $1,500 per second of profit for the second quarter = $11.68 BILLION in profit. Wasn’t there a mention about margin losses above? I’m not seeing it. Once again, Exxon set a record for earnings.
Of course the analysts and media are playing the numbers game rationalizing how Exxon is not taking advantage of the market, etc. Are we really that naive?
on August 13th, 2008 at 11:08 am:
The latest news from CNN today (Aug 13):
“As summer vacation season kicked in, Americans got out of their cars, driving 12.2 billion fewer miles in June than the same month a year earlier.
Overall, Americans drove 53.2 billion fewer miles November through June than they did over the same eight-month period a year earlier…
…larger decline than the 49.3 billion fewer miles driven by Americans over the entire decade of the 1970s, a period marked by oil embargoes and gas lines…
…motorists consumed 400 million fewer gallons of gasoline and 318 million fewer gallons of diesel in the first quarter of 2008 than in the same period in 2007.”
on August 13th, 2008 at 5:17 pm:
Information from Reuters (Aug 12):
“U.S. oil demand during the first half of 2008 fell by an average 800,000 barrels per day (bpd) compared with the same period a year ago, the biggest volume decline in 26 years…
Total U.S. petroleum and other liquids consumption is projected to shrink by almost 500,000 (bpd) in 2008 based on prospects for a weak economy and continuing high crude oil and product prices extending into 2009,” the EIA said.
U.S. daily oil use fell by a slight 7,000 barrels last year and is forecast to decline by 480,000 barrels this year and then by another 120,000 barrels next year.
The EIA is now forecasting that U.S. oil demand in 2009 will average 20.08 million bpd, the lowest level since 2003.”