Posted By RichC on May 12, 2008
Water cooler conversations around the country have been discussing fuel prices and what they (and our nation) can do to get a handle on the rapid change in fuel costs. Experts suggest that the reason for the run up have been four fold: a) increased worldwide demand, b) flat production of new crude and refined fuels, c) the weak U.S. dollar … and d) oil speculation due to lower returns in other investments (as well as speculation on other commodities affected by high oil). Currently there is a move to tighten up requirements for oil speculators as well as to conserve by tightening up fuel economy standards while the U.S. continues to work on ‘green’ alternatives, but most of this will take time — something our economy may not have.
In my opinion an immediate relief is needed, and for the U.S. it will require intervention that will permit American oil companies access to a few more currently off limit known oil reserve areas. It will also require trade talks with emerging countries (ie. China and India) and oil producing countries who currently subsidized their citizens fuels. (see CNBC video clip below) I believe that the act of approving additional U.S. capacity will send a signal to speculators, and in turn might prevent an additional run-up in crude pricing … even though the new U.S. oil production will be slow to come online. Trade talks with oil production nations who subsidized their citizens ‘below market priced fuels’ will also help to reduce worldwide demand and keep oil from doubling from here … and at least slow the appetite for gasoline and diesel to prevent threatening and ‘fuel price’ induced worldwide economic slowdown or worse.
CNBC had a good discussion Monday morning which discussed a couple of these points.