WATCH VIDEO FIRST!
This is an example of how CNN gets it all wrong. We all have been feeling the hurt of rising gas prices, and pain at the pump is a reminder that our dependence on foreign oil is unsustainable. So naturally the media is having a field day, dedicating daily segments to the gas problem. I have yet to see any major media organization actually get to the heart of the issue and explain to the public what’s going on. CNN has reached a new low by equating some of President Obama’s recent statements on gas prices to meaningless rhetorical weapons in his “political playbook.”
CNN correspondent Dana Bash begins by calling out Obama for his partisan gesture which she labels as, “Part of the rhetorical playbook politicians have used for years when gas prices go up.”
Obama-I asked my attorney general to look into any cases of price gouging so we can make sure no one is being taken advantage of at the pump.
A move straight from Chapter 1…price gouging! How do we know it’s partisan rubbish? Because Al Gore and John Kerry agree of course! Roll tape…
Gore-Need for investigation of collusion, antitrust violations, and price gouging.
Kerry-Real gouging going on on oil.
Bash concludes, “Experts say price gouging investigations go nowhere and politicians know it.”
Okay John King’s wifey, let’s bring in the experts. Commodity futures speculation (the long-form birth certificate term for price gouging) is another complex financial instrument difficult for the laymen to understand. So ideally the expert on this multifaceted financial mechanism would be an economist. CNN got Amy Myers Jaffe, director of the Energy Forum or Rice University (notice the typo?). The Energy Forum is a part of the James Baker Institute who’s board of adviors includes Goldman Sachs alums, former energy secretaries, and auto industry CEO’s (keep that in mind). After researching Ms. Jaffe’s credentials, I discovered she was not an economist, but had gone to Princeton and received a B.A. degree in Near Eastern Studies and Arabic. So…what do you have to say about Obama’s position on oil futures speculation Amy…
That’s just camouflage. I wanna pretend I’m doing something even though I’m doing nothing.
Spoken like a true expert. CNN didn’t just accuse Obama of using the “political playbook,” Republicans are guilty too.
Chapter 2 of the political playbook: Oil Drilling
Cue montage climaxing with chants of “DRILL BABY DRILL!”
Bash claims oil drilling doesn’t work because of partisan divide and environmental concerns.
The other move from the Democratic playbook is oil subsidies,
Obama-We still have a tax loophole that is costing taxpayers 4 billion dollars every year.
Bash-Again, an oldie! Slapping oil companies is stand gas prices fare.
Again, more film clips of lefties like Gore and Clinton agreeing.
No liberal media bias here, CNN is guilty of making a false equivalency. There isn’t always two sides to an argument, and in this case one side uses empirical evidence while the other is guilty of using the political playbook. They fail to inform the public what oil futures speculation is, what influence offshore drilling has on energy markets, and why we even have oil subsidies. Instead they reduce our political discourse to a sporting event, always with a winners and loser.
Oil speculation is not camouflage, it’s real and it is contributing to a rise in gas prices and perhaps a new economic bubble. Hedge funds, investors, and the big banks on Wall Street are all trying to make money betting on the price fluctuation of oil. Speculation is okay in moderation, but excessive speculation can artificially inflate the price of oil beyond what natural supply and demand forces would determine. While many blame the rise at the pump on turmoil in Northern Africa or the Middle East, they should consider that the Saudi’s promised to make up for any shortfalls in global supplies. Libya only has 2 percent of the world’s oil, so the recent civil war doesn’t really affect supply. Speculation has played an increasing role, and oil speculation has gone up 64 percent since 2008. The media has failed to explain it, so I’ll do my best.
Commodities markets have two kinds of participants, physical hedgers and speculators. The physical hedgers are the producers of the commodities or business that purchase them (Ex: wheat farmers and cereal companies buying large quantities of grain). So using the same example, the market is a place for farmers to do business with cereal companies, but it also lets physical hedgers buy themselves protection against market uncertainty by buying futures contracts.
I recommend everyone buy Matt Taibbi’s book Griftopia, he explains speculation by uses corn growers and buyers as an example.
Consider yourself Kellogg’s cereal company and your business model relies on you being able to buy corn at a maximum price of $3.00 a bushel. Corn is selling at $2.90 a bushel and you want to protect yourself from the risk that prices might spike next here because of increasing drought seasons (due to climate change). So to insure your company you buy futures contracts for corn that give you the ability to buy corn at $3.00 a bushel for a set period of time regardless of market fluctuations. It also helps the producer. If you grow corn and are concerned that next year there will be an excess supply, driving prices down you might buy futures at $3.00. If there is a drought you might miss out on the rising value of your commodity, but if things go according to plan you can sell corn above the market value.
So the buyers and sellers described are physical hedgers, the other participant is the speculator. The original purpose of the speculator was to guarantee the physical hedgers that they would always have a market to sell their products.
So say you’re the corn grower and you bring your crop to the market when cereal companies aren’t buying. The speculator buys the corn and holds onto it. They buy the corn at $2.80 a bushel and two months later the Kellog’s wants to by corn, he buys the corn from the speculator at $3.00 a bushel. The speculator makes a profit, the grower is guaranteed a market, and the cereal company gets the commodities it needs, rainbows and fairy dust right?
Once Goldman Sachs is involved you know things are about to go down the shitter. In the 90’s investment banks lobbied for the right to buy futures contracts and give the speculator all the rights of a physical hedger. The government originally had position limits, which guaranteed that trading on commodities markets would be dominated by the physical hedgers with the speculators there to keep the equilibrium. Hey, farming is a risky job! The livelihood of hard working Americans should not be subject to Mother Nature. But it’s never enough for Wall Street, they constantly push the envelope and as always get what they want, this time futures contracts.
They pushed for this because they know they could make big money. The higher oil prices go, the more money futures buyers make. So with oil prices appearing to be on an upward climb, more and more investment banks put their capital into futures, which distorts the markets, and distorts the natural supply/demand fluctuation.
Does this sound like a move from the political playbook or an issue the public should be concerned about?
So what are the Republicans guilty of again?
DRILL BABY DRILL, DRILL BABY DRILL, DRILL BABY DRILL!
That’s right, the increasingly redundant and false accusation that the rise in oil prices are the fault of communists like Obama who refuse to increase offshore drilling.
Fact Check: The U.S. only has 2 percent of the world’s oil reserves. If we were to triple production there would be no impact until 2020 and only nickels and dimes would be saved at the pump.
This is just rhetoric, another way for Republicans to criticize the president. Whether it they call Obama a socialist (which he falls short of), doubt his faith, or demand him to show them his papers, Republicans ignore the facts in search of political gain.
And just to address the subsidies, by should taxpayers give up $4 billion a year to an industry doing phenomenally well. Exxon made $10.7 billion in the first quarter alone!
Take a look at Big Oil CEO pay:
2010 CEO Compensation of Major Oil Companies, from Equilar
1. Rex Tillerson (Exxon Mobil): $21.5 million
2. James Mulva (ConocoPhillips): $17.9 million
3. John Watson (Chevron): $14.0 million
4. Peter Voser (Shell): $12.8 million
5. William Kleese (Valero Energy): $9.8 million
6. Clarence Cazalot (Marathon Oil): $8.8 million
7. Robert Dudley (BP): $6.8 million
If we were to take Obama’s advice and use that $4 billion to invest in technology and double our vehicle fuel efficiency standards, gas prices would go down 20 percent.
Political playbook or political reality?
The one truth that CNN addresses is that we only have this conversation when gas prices go up, and with their decline it goes away for some time. I think that has in part to do with the failure of the media to properly educate the public.
I can’t finish this without mentioning climate change, something you rarely hear about on television. Message to the climate cranks: Disregard the science. Oh, you already have! For me, when I’m confronted with evidence that global warming is related to human activity and there is an overwhelming scientific consensus, I take it seriously. Skeptics obviously don’t. It puzzles me that conservatives have blind faith in a self-regulating free market system, but when confronted with scientific fact they become skeptical, but anyway… Imagine there was an asteroid heading towards earth on May 21st (If you haven’t heard it’s judgment day, go down to Port Authority and repent before it’s too late!) and 99.9 percent of scientists said it was on path to impact the earth. .1 percent of scientists are given the same media attention as the overwhelming majority and claim it’s a hoax, a socialist plot to expand the NASA budget. Would you support a mission to try and deflect the asteroid, or trust the .1 percent of scientists who say there’s nothing to worry about. I would go Armageddon on their ass and send a team of disenfranchised, middle-aged oil rig workers with no aeronautical experience in a spacecraft to carefully place a nuclear device in the center of the asteroid and blow that sucker to hell. Even if it was a 50/50 chance, I think we’d all be in favor of protecting the earth. This is the same approach we should take to global warming. We only have one planet, one experiment, why risk it? All we have to lose is our dependence on foreign oil. So instead of complaining about gas prices, we should be figuring out ways to dissolve our dependency. And with Republican governors like Chris Christie, Rick Scott, and Scott Walker rejecting federal money to build public transportation, it’s easy to see who is serious and who is playing partisan games.
No matter whom death has taken, the news is rarely welcoming. But the death of Osama Bin Laden transcends the innate vengeance that time and time again reduces humanity to its immaturity. While I’ve remained an outspoken critic of the “War on Terror” waged by the Bush Administration and continued on Obama’s watched, I’d be naïve to deny the moral significance of this historic event. The families of those who died on 9/11 can now find comfort in the demise of the pathetic creature that mercilessly took the lives of their loved ones. The brave men and women, home and abroad that risked or tragically lost their lives in defense of the American people finally have a tangible justification for a war that’s mission was often ambiguous and obscure.
Osama Bin Laden will certainly become a martyr figure in the eyes of some, but to the masses his death will mark an extraordinary transition in the Middle East. Islamic fundamentalism has taken the back seat in the democratic uprisings of the Arab Spring and Bin Laden is a man of a dying breed. The first decade of the 21st century was branded by the global war on terror. I’d like to think that this event is not the end of anything, but the beginning of a new era, a decade marked not by the evils of religious fundamentalism, but by secular democracy.
an ode to gun wavin’ new haven!