The Back Alley Archives

Don't blame those 'greedy' oil companies
As you fill your tank for your next summer trek, consider what stands in the way of a lot of domestic oil development: Congress.

As you fill your gas tank for your next summer trip, ask yourself how gas prices have reached current nosebleed levels. For many, the easy answer is to curse the "greedy" oil companies. Consider for a moment an alternative reason.

Oil is a commodity and therefore is subject to the laws of supply and demand. In the simplest of terms, when demand begins to put pressure on supply, prices go up; simple Econ 101. In a supply-and-demand situation, there are really only two options; lower demand or increase supply. I don't anticipate that the demand for oil will decrease, as Americans love their cars and love to drive. This leaves us with increasing the supply.

I know there are other fuel and energy alternatives, but none are mature enough or as readily accessible as oil and its byproducts at the present time. They may be in the future, but that doesn't help us out at the gas pump today. While research and development of fuel and energy alternatives will and must go forward, the supply of oil in the interim can be increased and America has vast resources that can be tapped into today.

Blocked in D.C.
Investors Business Daily estimates there are 1 trillion barrels of oil trapped in shale in the U.S. and Canada. Retrieving just a 10th of it would quadruple our current oil reserves. There is a pool of oil in the Gulf of Mexico that is estimated to be as large as any in the Middle East. There is an equally large pool believed to be in Alaska.

The Chinese are attempting to tap into the Gulf oil supply by drilling diagonally from Cuba. I wonder what environmental safeguards they are using?

The fact is that there are environmentally safe methods of extracting oil from shale and drilling in both the Gulf and Alaska. Congress, however, continues to block these efforts. Just last week, the Senate voted to block any extraction from shale in Colorado. In essence, they voted to make your trips to the gas station more expensive, to make air travel more expensive, and to make heating your home more expensive.

That's something to think about in an election year.

Another topic: Social Security
Another issue that concerns many Americans these days is the sustainability of major entitlement programs like Social Security and Medicare. With all of Congress' talk about "saving and preserving" these programs, consider these facts about Social Security:

When Social Security (FICA) was introduced it was promised:

Participation in the program would be completely voluntary.

Participants would only have to pay 1% of the first $1,400 of their annual incomes into the program.

The money the participants elected to put into the program would be deductible from their income for tax purposes each year.

The money the participants put into the independent trust fund rather than into the general operating fund, would be used only to fund Social Security, and no other government program.

Payments to the retirees would never be taxed as income.

The millions who have paid into FICA for years and are now receiving a Social Security check every month -- and who then find they are getting taxed on 85% of the money they gave to the federal government to save for them -- may be interested in the following:

Social Security money has been removed from the trust fund and put it into the general fund so that Congress could spend it.

The income tax deduction for Social Security withholding has been eliminated.

Social Security annuities are now taxed.

Now contrast this with the fact that, after violating the original contract, the Congress passed a 100% retirement benefit for members who have served at least one term.

As President Ford said, "A government big enough to give you everything you want, is strong enough to take everything you have."

So instead of spending countless hours agonizing over which candidate to pull the lever for in November, you might be better served by asking your representatives and senators this question: Mr. or Mrs. Senator/Congressman: you are making a claim on what I have produced, which is to say you are asking me to serve you. How have you served me?

Hedge funds and big Wall Street banks are taking advantage of loopholes in federal trading limits to buy massive amounts of oil contracts, according to a growing number of lawmakers and prominent investors, who blame the practice for helping to push oil prices to record highs.

The federal agency that oversees oil trading, the Commodity Futures Trading Commission, has exempted these firms from rules that limit speculative buying, a prerogative traditionally reserved for airlines and trucking companies that need to lock in future fuel costs.

The CFTC has also waived regulations over the past decade on U.S. investors who trade commodities on some overseas markets, freeing those investors to accumulate large quantities of the future oil supply by making purchases on lightly regulated foreign exchanges.

Over the past five years, investors have become such a force on commodity markets that their appetite for oil contracts has been equal to China's increase in demand over the same period, said Michael Masters, a hedge fund manager who testified before Congress on the subject last month. The commodity markets, he added, were never intended for such large financial players.

By PAULINE JELINEK
16 minutes ago


WASHINGTON - A large Israeli military exercise this month may have been aimed at showing Jerusalem's abilities to attack Iranian nuclear facilities.

In a substantial show of force, Israel sent warplanes and other aircraft on a major exercise in the Eastern Mediterranean early this month, Pentagon officials said Friday.

Israel's military refused to confirm or deny that the maneuvers were practice for a strike in Iran.

Russia's foreign minister Friday warned against the use of force on Iran, saying there is no proof it is trying to build nuclear weapons with a program that Tehran says is for generating power.

U.S. officials spoke on condition of anonymity because they were not authorized to speak on the sensitive matter for the record.

"They have been conducting some large-scale exercises — they live in a tough neighborhood," one U.S. official said, though he offered no other recent examples.

The big exercise the first week of June was impossible to miss and may have been meant as a show of force as well as for practice on skills needed to execute a long-range strike mission.

The New York Times quoted U.S. officials Friday saying more than 100 Israeli F-16s and F-15s staged the maneuver, flying more than 900 miles, roughly the distance from Israel to Iran's Natanz nuclear enrichment facility, and that the exercise included refueling tankers and helicopters capable of rescuing downed pilots.

"It was noticed that a significant exercise took place — dozens and dozens of aircraft participated," one of the officials said. "We watch globally everyday, and this was noted."

The second U.S. defense official said the maneuver could be taken as a demonstration to Iran and the international community that Israel is serious about the need to challenge Iran's nuclear program — and could be prepared to do so militarily. "That's one of the assessments you could make out of the exercise," the official said.

Russian foreign minister Sergey Lavrov said Iran should be engaged in dialogue and encouraged to cooperate with the U.N. nuclear monitoring agency.

Lavrov made the statement when asked to comment on an Israeli Cabinet member's statement earlier this month that Israel could attack Iran if it does not halt its nuclear program.

"I hope the actual actions would be based on international law," Lavrov said. "And international law clearly protects Iran's and anyone else's territorial integrity."

The thing about the Chinese drilling from Cuba in the originally posted article has turned out to be an urban legend.

Hater, I think the connection in TT's article is that if Israel attacks Iran, the second largest oil reserve, it's gonna send futures prices up on concerns about supply disruption.

Prices dropped on the futures market yesterday, as China said they were raising prices on their subsidized oil internally.

Iran has nothing to offer the world except oil and they are constantly threatening to take their ball and go home.

Iran has nothing to offer the world except oil and they are constantly threatening to take their ball and go home.

And that is precisely why it is largely just a threat.

They have no other means of income.