Cato Institute: "It's Not Obama's Fault That Crude Oil Prices Have Increased"

Wait.. WHAT?!

www.cato.org...

Is President Obama responsible for spiraling price of gasoline? Republicans say yes, but the facts say no.

Why have gasoline prices increased since the start of the year? The simplest explanation is that the price of crude oil has increased. Specifically, the spot price for Brent (North Sea) crude has increased $16 a barrel since January. Given that there are 42 gallons to a barrel, that works out to a 38 cent increase in the price of a gallon of oil. Spot prices for gasoline trade in New York have increased about 41 cents per gallon over the same time frame. So there you go.

The article goes on...

So despite the popular perception of President Obama as anti-oil, domestic oil production is increasing for the first time since the Johnson administration. Alas, little of this has to do with the president. Prices increased from $22 in 2002 to just under $100 a barrel average in 2008 and supply has responded. President Obama is no more responsible for production increases than other presidents were responsible for production declines. Unfortunately, presidents get blamed for world market changes that occur during their time in office... but generally, they do not cause them.

Now don't get me wrong, I understand blaming everything on the President is good fun for some people, but this is the Cato Institute friends! Even you way over there on the fringe seem to like 'em!

Originally posted by negativenihil
Now don't get me wrong, I understand blaming everything on the President is good fun for some people, but this is the Cato Institute friends! Even you way over there on the fringe seem to like 'em!

It is generally why I enjoy reading Cato articles and opinion pieces. While many of their pieces (even during the Bush presidency) will target policies of a given administration -- they stick to their ideals and principles. They are absolutely correct here that crude oil prices are not the president's fault -- past or present.

I can ding presidents on many things but this one, just as the last time under Bush, I cannot honestly peg the blame on President Obama.

reply to post by negativenihil


It is sad when not even the cato institute know the answer that most of us on here know.

Why don´t they start with asking the question? Why is crude oil prices going up? It is because an uncertainty in the oil market due to sanctions put on Iran by Barrack Obama!

reply to post by NeoVain


Oil prices this decade:

2000 $27.39 $35.88
2001 $23.00 $29.33
2002 $22.81 $28.59
2003 $27.69 $33.98
2004 $37.66 $44.96
2005 $50.04 $57.77
2006 $58.30 $65.25
2007 $64.20 $69.75
2008 $91.48 $95.57
2009 $53.48 $56.15
2010 $71.21 $73.69
2011 $87.04 $87.33

Between 00 and 07 you will notice it doubles.

Source

Originally posted by NeoVain
reply to post by negativenihil

 

It is sad when not even the cato institute know the answer that most of us on here know.

Why don´t they start with asking the question? Why is crude oil prices going up? It is because an uncertainty in the oil market due to sanctions put on Iran by Barrack Obama!

That is looking at a very small narrow view as the poster that replied to you illustrated. While a president (and by extension Congress and/or country as a whole) can create policy that affects prices, the large portion of the market is controlled by the overall price of crude.

You gloss over monetary policy (since oil is based of the US Dollar), turmoil of regional supplies, OPEC, speculation, etc. Point being -- to levy the recent increase in crude solely upon the president's shoulders is neglecting a lot of other influences.

Originally posted by NeoVain
reply to post by negativenihil

 

Why don´t they start with asking the question? Why is crude oil prices going up? It is because an uncertainty in the oil market due to sanctions put on Iran by Barrack Obama!

They did ask that:

Why have gasoline prices increased since the start of the year? The simplest explanation is that the price of crude oil has increased. Specifically, the spot price for Brent (North Sea) crude has increased $16 a barrel since January.

What does crude oil from the North Sea have to do with Iran? Nothing. Supply from the North Sea is low, prices have risen as a result.

This is bull.

The reason the oil prices are high has nothing to do with supply and demand. The supply of oil is steady and demand has actually decreased over the past few years because people can't afford to drive as much as they used to.

What drove up the price of oil is speculators buying up oil futures and holding on to them until the price goes up. They withhold the oil from the market creating an artificial shortage to drive up the prices to maximize profits.

There are laws against this practice but, the organization responsible for enforcing the laws had its budget slashed by a third in 2008 by Republicans in congress. The Democrats did nothing to restore their funding during their complete control of the House, Senate and White House.

How to Manipulate the Oil Market for Just $1 Billion

According to the complaint, the defendants in early January 2008 bought up 4.6 million barrels of crude oil, representing the vast majority of physical barrels available at Cushing, Oklahoma, for February delivery. That was enough, according to the complaint, to create the impression of tight supplies, driving market prices higher.

At the time Arcadia et al were allegedly building this position, Cushing crude oil cost about $93 a barrel. So ostensibly it cost about $428 million to buy up enough physical crude to manipulate the market.

When the defendants allegedly took their second bite of the apple, in early March, according to the complaint, they amassed 6.3 million barrels of crude. At the time, Cushing crude cost an average of about $107 a barrel, so 6.3 million barrels would have cost about $674 million.

My second thought is that, if we assume for the sake of argument that even the concept alleged here is realistic, that relatively small operators could accomplish corner the WTI crude-oil market with just $1 billion, then how easy must it be for far larger players to manipulate the market for even greater gains?

WSJ

Sharks off the British coast: Oil tankers refuse to unload until prices rise... keeping YOUR fuel costs soaring

These tankers have been parked off our shores for months, refusing to unload their oil until prices have risen even higher. The delay makes millions for speculators... and keeps your petrol costs soaring. Laden with fuel, three oil tankers sit idly within sight of the British coastline, playing a waiting game that is driving up petrol prices for hard-pressed motorists.

They are part of a flotilla of ten vessels refusing to unload their cargo until market speculation has driven up its price to the level they want.

Daily Mail

Today, U.S. Senator Maria Cantwell (D-WA) demanded federal regulators use the authorities that Congress granted them last year to crack down on excessive oil market speculation that may be contributing to artificially high gas and diesel prices in Vancouver and around the country.

Cantwell called on the regulatory body to not delay any further in implementing overdue rules on speculative position limits. The 2010 Wall Street Reform bill called for the CFTC to implement speculative position limits in energy markets within 180 days of enactment. The CFTC is more than three months late on their January 2011 deadline to take action, while consumers continue to pay high prices at the pump.

CFTC Commissioner Bart Chilton – one of five commissioners at the agency – said in a March 25, 2011 letter to Cantwell that oil speculation is at “an all time high,” up 64 percent since June of 2008. According to analysis compiled by Chilton, excessive oil speculation costs drivers between $8-16 per tank, depending on the kind of car they drive.

In August 2009, the FTC finalized its Petroleum Market Manipulation Rule, which was promulgated in compliance with legislation Cantwell authored in 2005 and successfully shepherded into law in 2007, making it a crime to manipulate wholesale oil markets. She is now calling on the consumer protection agency to use its new authority to meet their responsibility to protect consumers.

In the letter sent last month to the FTC, Cantwell noted that the price per barrel of oil over the past three years has varied drastically despite comparatively little change to the world’s supply and demand.

Senator Cantwell


Read more Myths About Oil Prices

Obama has the power to use existing regulations to bring down oil prices but, because of his environmentalist, sustainable energy ideology, he refuses to use it, no matter how much it hurts the American people and drives down the economy.

Fighting the Oil Speculators
Gouged at the Pump

Earlier, the head of Exxon/Mobil estimated that speculation was responsible for over $40 per barrel in price increase at a time when oil was more than $100 per barrel.

Last June, the Commodity Futures Trading Commission (CFTC) Chairman, Gary Gensler, declared in New York City that “huge inflows of speculative money create a self-fulfilling prophecy that drives up commodity prices.”

Mr. Gensler and the CFTC received more legislated authority to police these Wall Street gamblers, but key members of Congress refused to give him a budget to, in his words, “be a more effective cop on the beat,” at a time of sharply-increasing trading volume. Congressional campaign budgets are being swelled by campaign contributions from those very Wall Street gamblers. This is called “cash-register politics.” Meanwhile, you the people pay and pay at the pump and wonder why no one is doing anything about it.

But an inadequate budget only explains part of Mr. Gensler’s problems. He is continually undermined by other CFTC Commissioners who do not want real enforcement action. He also seems to be wearing down under the pressure.

Mr. Obama and Energy Secretary Chu keep saying that there is enough oil in world markets and that speculatively-driven higher oil prices are undermining the U.S. economic recovery. Yet Mr. Obama seems unwilling to fully use his administration’s existing authority to crack down on the surging speculation.

There is much more action possible under current statutory authority for the regulators to use and earn their salaries. They need to hear louder rumblings from the people.

Counterpunch

Of course, there's plenty of blame to go around for our high oil prices; Republicans are equally to blame for slashing the budget to begin with. As long as Wall Street money rules Washington, we will be at the mercy of the speculators.

reply to post by boncho


funny thing you have all those years there, except the one we are talking about. Who cares why they went up in the past? I´m talking about NOW, this time!

reply to post by FortAnthem


I respect your opinion just as much as the economist that opinionated in the article. Though it shows a much broader depth than "Its the President's fault!" argument. Couple yours along with the very knowledgeable opinions of the article and we begin to get a more complete picture.

Again though, to squarely place the rise on say President Bush or President Obama is willfully or ignorantly ignoring all other factors of the market.

reply to post by NeoVain


If you truly believe this than you have really bought all the bs that you have been spoon-fed.

So Cato makes the case that we can't blame a President for Crude Prices . . . did they forget to give us their take on what is responsible?

They said: "The simplest explanation is that the price of crude oil has increased."

Dah!!! Thanks for that explanation!!!

O.K. lets just ignore the sad situation of the dollar and all of the debt hanging over the economy . . . couldn't be any of that.

Originally posted by Lukku
So Cato makes the case that we can't blame a President for Crude Prices . . . did they forget to give us their take on what is responsible?

They said: "The simplest explanation is that the price of crude oil has increased."

Dah!!! Thanks for that explanation!!!

O.K. lets just ignore the sad situation of the dollar and all of the debt hanging over the economy . . . couldn't be any of that.

Take the time and explore the opinion writer's other pieces and you might get your answer. They explored this before in 05, 06, 07...etc. Or are you only responding on the quoted text?

reply to post by ownbestenemy


I live in Sweden. Never before have gas prises risen so fast as they did right after Obama put those sanctions on Iran. it was 14.10kr/l before the sanctions, now it is at 15.50. Yes even other countries are affected. Oh and that is roughly 10 dollars/gallon by the way.

Originally posted by NeoVain
reply to post by ownbestenemy

 

I live in Sweden. Never before have gas prises risen so fast as they did right after Obama put those sanctions on Iran. it was 14.10kr/l before the sanctions, now it is at 15.50. Yes even other countries are affected. Oh and that is roughly 10 dollars/gallon by the way.

How do you equate it then to foreign policy? I would look to your own Government if this is the case. Sweden is known for placing price controls on commodities and other aspects of the economy. Such price controls lead to unpredictable consequences down to the consumer.

Sweden has a known philosophy of making it not reliant upon oil. It is noble and should be that of each nation, but trying to control the price just further complicates the matter. Your goal of being independent by 2020 is notable and I hope you achieve it; but forcing the hand of the market only makes things worse.

I am sure by implementing this plan, it has done more damage to your petrol prices than anything the President of the United States could ever do.

reply to post by ownbestenemy


I guess you fail to see the obvious. Not used to thinking are you? When Obama put sanctions on Iran, he pretty much forced the EU to do the same, This meant alot of EU countries could no longer get oil from Iran. That meant they had to take it from somewhere else, since oil demand is the same. That means those other suppliers have to increase their prices, as they got a higher demand. Hence even Sweden is affected by these sanctions, despite not having done anything. And Sweden is not the only country either beside the U.S with increased oil prices: Try the rest of Europe as well including most of the world. All because one stupid man without the foresight to figure out what will happen, unlike Ron Paul, that predicted this and everything else happening the last 10 years! Insanity like this would never happen with Ron Paul at the rudder, mark my words.

The ignorance of the average American is demonstrated by how well Ron Paul does in the election, the % of Ron Paul votes being directly linked to the number of Americans with a IQ above average, it seems.

Originally posted by NeoVain
reply to post by ownbestenemy

 

I guess you fail to see the obvious. Not used to thinking are you? When Obama put sanctions on Iran, he pretty much forced the EU to do the same, This meant alot of EU countries could no longer get oil from Iran. That meant they had to take it from somewhere else, since oil demand is the same. That means those other suppliers have to increase their prices, as they got a higher demand. Hence even Sweden is affected by these sanctions, despite not having dome anything. And Sweden is not the only country either beside the U.S with increased oil prices: Try the rest of Europe as well including most of the world. All because one stupid man without the foresight to figure out what will happen, unlike Ron Paul! Insanity like this would never happen with Ron Paul at the rudder, mark my words.

Wait -- I am not used to thinking? I don't put the whole of the issue into consideration? I never said that what President Obama -- actually Congress -- did in terms of sanctions wasn't in play. But to exclusively place the blame upon that is only narrowly viewing the situation.

Did it have an affect? Absolutely! Did it cause the massive spike? My guess, since I am no economist and by my assumption, neither are you, it had a small affect on the price of crude overall. It is easier to blame one man, a man in which I despise and abhor his politics, for the increase; but that wouldn't be prudent nor exercising the site's motto of denying ignorance.

I think that is what the Cato opinion piece is trying to say. Trying to say, look at the macroeconomics of the situation and not just the microcosm of it. To lay the complete blame on the president is being ignorant and taking the easy path.

Originally posted by NeoVain
The ignorance of the average American is demonstrated by how well Ron Paul does in the election, the % of Ron Paul votes being directly linked to the number of Americans with a IQ above average, it seems.

This is rich! Equate this to the electorate -- in which I assume you have no idea how the process actually works -- upon the People and our demonstration of ignorance. Could it be that Paul doesn't represent the cross-section of America?

I do ask though, can you produce evidence of your quoted statistic? Percentage of Ron Paul votes linked to IQ? You do know that IQ is an invalid qualifier for intelligence right?

How come they never bring up Iraq in these discussions?
They have the second largest oil reserves in the world - why not get the oil from there?
I don't get it.

Originally posted by links234

They did ask that:

If the question is asked, "Why does item X cost more?" and the response is, "Because the price went up.", that's a reply, not an answer.

While all answers are replies, not all replies are answers.

I dig the Cato Institute. They're a great libertarian think-tank. But this article is about a half-bubble off of level.

/TOA