All,
The Greatest Generation of military officials got it right in WWII when they decided to make a fake army commanded by Patton that fooled the Germans into thinking the Normandy Invasions would happen at Calais. By the time the Nazi tank commander General Rommel got word that his panzer division was in the wrong place to thwart any invasion, it was too late, and the rest is history. The 3rd Army swept across France, pounded through the "Bulge", and liberated Europe by marching into Berlin.
Morris is right in his opinion that the energy situation is like a Pearl Harbor. The problem has been brewing for decades, and is now reaching destructive levels.
In this situation, I find it funny that the Dems are showing their lack of economic, business, and strategic - even diplomatic prowess on this issue by rejecting McCain's and Bush's bid to promote more offshore drilling.
As I see it, the way to beat the market in commodities (short of instituting new margin regulations on the commodities exchanges which I support, but that is a different matter) is by playing the short game that works so well in driving down prices in every bid-ask type of market.
First, a little lesson in shorting stocks or real estate. The way it works is that you "loan" the property to the person who is going to buy it, hoping that the person who buys will end up selling it back to you at a lower price. You therefore make money on the spread between the higher short-sale price and the lower buy-to-cover price when the property is returned to you. Keep in mind that the fundamental reason a stock or property declines in value is because an increase of stock or similar property enters the market. Once the excess property enters the market and the price is lowered, you cover or "close" your trade at a lower price. It is a very effective tool in keeping prices in check and putting pressure on them, keeping them from rising too fast.
Just as Dick Morris states in his article, one of the biggest factors in driving up the price other than hundreds of billions of dollars added to the commodities markets in recent years is Saudi Arabia's (and OPEC as a whole) lowered production levels. Production is at a 3% decline rate per year since 2005 in those countries.
So the question is how would you convince the OPEC nations to step up production in a short (inverse) market?
The answer is to threaten increase in domestic production. It is like a bluff in betting when you are sure you have the winning hand. Since the market is ripe for shorting (good short markets are created as prices rise continually out of step with fundamentals), the US would have the winning hand because we are one of the biggest consumers of the product. By threatening an increase in production, the OPEC nations would be forced to either lower prices to stave off any domestic production increases, or to "call our bluff" and wait and see if we would really start drilling.
The OPEC nations would surely not call our bet (The US would surely start drilling if forced to by high prices), and would want to keep our business by lowering prices.
So, why don't the Dems play along and why don't our government officials meet in closed committee meetings and decide together that they would never really start drilling unless the bluff was called, and then announce that they have unilaterally decided to start exploration and drilling? Imagine the economic turnaround in lower energy prices and increases in jobs (including jobs to man oil rigs) that would create!
See how that is like a short-sale? Either way, we will end up buying the oil at a lower cost than it is now, either because OPEC increases the amount of oil to market, or because we do it ourselves.
Tijs
MCCAIN SCORES WITH OFFSHORE DRILLING PROPOSAL
By DICK MORRIS & EILEEN MCGANN
Published on FOXNews.com on June 18, 2008.
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<http://pr1.netatlantic.com/t/6589052/30072428/591820/0/>
John McCain has drawn first blood in the political debate following
Barack Obama's victory in the primaries. His call yesterday for offshore
oil drilling - and Bush's decision to press the issue in Congress - puts
the Democrats in the position of advocating the wear-your-sweater
policies that made Jimmy Carter unpopular.
With gas prices nearing $5, all of the previous shibboleths need to be
discarded. Where once voters in swing states like Florida opposed
offshore drilling, the high gas prices are prompting them to reconsider.
McCain's argument that even hurricane Katrina did not cause any oil
spills from the offshore rigs in the Gulf of Mexico certainly will go
far to allay the fears of the average voter.
Obama Or McCain? Pick One!
<http://pr1.netatlantic.com/t/6589052/30072428/591821/0/> For
decades, Americans have dragged their feet when it comes to switching
their cars, leaving their SUVs at home, and backing alternative energy
development and new oil drilling. But the recent shock of a massive
surge in oil and gasoline prices has awakened the nation from its
complaisance. The soaring prices are the equivalent of Pearl Harbor in
jolting us out of our trance when it comes to energy.
Suddenly, everything is on the table. Offshore drilling, Alaska
drilling, nuclear power, wind, solar, flex-fuel cars, plug-in cars are
all increasingly attractive options and John McCain seems alive to the
need to go there while Obama is strangely passive. During the Democratic
primary, he opposed a gas tax holiday and continues to be against
offshore and Alaska drilling and squishy on nuclear power. That leaves
turning down your thermostat and walking to work as the Democratic
policies.
McCain has also been ratcheting up his attacks on oil speculators. With
the total value of trades in oil futures soaring from $13 billion in
2003 to $260 billion today, it is increasingly clear that it is not the
supply and demand for oil which is, alone, driving up the price, but it
is the supply and demand for oil futures which is stoking the upward
movement.
The Saudis have made a fatal mistake in not forcing down the price of
oil. We could have gone for decades as their hostage, letting their
control over our oil supplies choke us while enriching them. But they
got greedy and let the price skyrocket. The sudden shock which has sent
America reeling is just the stimulus we need for a massive movement away
from imported oil and toward new types of cars.
The political will for major change in our energy policy is now here and
those, like Obama, who don't get it need to rethink their positions. To
quote FDR, "this great nation calls for action and action now" on the
energy issue. What has been a back-burner problem now has moved onto
center stage and McCain has put himself in the forefront.
The Democratic ambivalence stems from liberal concerns about climate
change. The Party basically doesn't believe in carbon based energy and,
therefore, opposes oil exploration. That's why Obama pushes the windfall
profits tax on oil companies - a step that tells them "you drill, you
find oil, and we'll take away your profits." But Americans have their
priorities in order: more oil, more drilling AND alternative energy
sources, flex-fuel cars, plug in vehicles and nuclear power.
With his willingness to respond to the gas price crisis with bold
measures, McCain shows himself to be a pragmatist while Obama comes off
as an ideologue to puts climate change ahead of making it possible for
the average American to get to work.
Of course, the high price of gas makes it inevitable that the US will
lead the world in fighting climate change. With $5 gas, Americans will
switch en masse to cars that burn less gasoline. Already we have cut our
oil consumption by 500,000 barrels a day in the past year (about a 3%
cut). The move away from oil will be exponential from here on out,
dooming radical Islam and reversing climate change at the same time. But
while we are getting new cars, we need more oil and McCain has flanked
Obama on this issue. Big time.
Go to DickMorris.com
<http://pr1.netatlantic.com/t/6589052/30072428/588352/0/> to read all
of Dick's columns!
McCain Or Obama? Vote Here!
<http://pr1.netatlantic.com/t/6589052/30072428/591821/0/>
Tim Russert's Heart Attack, What You Must Know!
<http://pr1.netatlantic.com/t/6589052/30072428/591822/0/>
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