Tuesday, June 10, 2008

Further Thoughts on Congress and Energy

The concept that there are trade-offs and consequences to choices just didn't seem to penetrate the "debate" on energy we had on Capitol Hill today.

Countries may or may not choose to develop energy resources for sale to the market for a variety of reasons--and this is not only true of the United States. When the United States chooses not to bring some of its own domestic energy resources online, that is a conscious choice--and other producers are not obligated to relieve us of the burden or responsibility for that choice.

Speculators can often drive up the price of a commodity. But speculators don't operate in a vacuum. If Congress wants to leave "all options on the table" vis-a-vis Iran, then that creates an opening for speculators to take advantage of perceived uncertainties.

I wrote on this question last month but nothing in today's "debate" indicates that any of these points was under serious discussion.

And I'm not holding my breath either.

Iranian government, at the highest policy levels, want to privatize up to 80% of the Iranian oil industry; coming almost full circle to the status quo in 1950.

This is a great opportunity for US & EU; I should think.
But I assume that that would require acceptance of current status quo, right?
Nick - Is it your view that the recent run-up in oil prices is a reflection of U.S.-Iran tensions? I was under the impression that the cause was an underlying tightness in the market.
To be more clear my question above should read "is in part a reflection of U.S.-Iran tensions?" Ordinary supply and demand seems to be a sufficient explanation of what is going on but I wonder if anyone is hedging the price of oil against a possible crisis.
My sense, David, is that there are a variety of factors involved in hedging but that speculation is aided when there remains the prospect of a conflict. Certainly it doesn't help and when combined with other factors plays a role in artificially pushing prices up.
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