President Bush Threatens Veto of Poison-pill Laden Drilling Bill; Oil Falls to $90/bbl

So far, Republicans have managed not to cave on offshore drilling (though ANWR seems to be out of the question). House Democrats passed a bill which would allow energy exploration on the Outer Continental Shelf, but sharply limited drilling closer to land. The bill would also increase the tax burden on oil companies to subsidize wind, solar, and conservation programs. President Bush says "no deal" and it looks like Senate Republicans will keep it from a vote.

Oil fell to near $90 per barrel today, the lowest it has been in seven months. Following the financial mini-crisis over the weekend, I bet Saudi Arabia is sending a big "I told you so" to the rest of OPEC. Of the oil producing states, Saudi Arabia seems most concerned with keeping the price of oil low enough to stave off the development of energy alternatives or a world-wide economic slump, either of which would cause oil revenues to plummet.

In related news, the Commodity Futures Trading Commission actually looked through the data and discovered that speculators were not manipulating the market to cause prices to skyrocket.

Lo and behold, the CFTC found that index traders and swap dealers actually reduced their stake in crude oil futures as prices spiked. The number of contracts held by these investors betting that prices would increase -- the net long position -- fell by 11%, and more were shorting oil than going long over the six-month period. In other words, index traders and swap dealers were driving the future price of oil down.
Commodity index funds also have a much smaller share of the oil market than everyone thought: just 13%. Even if the figure was 70% or more, as some assumed, it wouldn't have mattered. In a futures exchange, trades are matched, so one trader's gain is another's loss. The overall volume is irrelevant.
The CFTC study is especially notable because it came in response to extraordinary political pressure. Congress held more than 40 hearings on "speculation" over the summer, and commission chief Walter Lukken was the pinata. Federal bureaucracies have been known to try to appease their Congressional funders, so the CFTC deserves special credit for debunking the speculator frenzy.

Don't expect this to stop both presidential candidates from blaming the boogeyman for high gas prices.

Posted by: Gabriel Malor at 10:54 AM

Comments

Good old Bush. He is gonna take another MSM bullet for the Team.

Posted by: ArandomPerson at September 17, 2008 10:56 AM (MSMPS)

That's the one thing that truly frosts me about McCain, his "me-too" Bush-bashing.

I know he probably has to do it, but it still sucks.

Posted by: A Balrog of Morgoth at September 17, 2008 11:00 AM (wgLRl)

McCain is the new boogey-man, ever since Obama's 80's commercial with that disco ball.

I hope to hell Bush and Cheney each made some big bucks off of this oil thing and they wave it in front of everyone's noses come January.

Posted by: roy at September 17, 2008 11:00 AM (cB77O)

Time Magazine via Yahoo has such a great way of framing this bill:

Looking to neutralize a key Republican campaign issue, the House majority passes legislation allowing offshore drilling

'>Democrats Join the 'Drill, Baby, Drill!' Chorus Time.com

Posted by: buzzion at September 17, 2008 11:02 AM (Lrsi6)

5 Gabe, I appreciate you taking up the slack and providing AoSHQ content this morning, but where's ace? Is he still passed out? Or suffering from a Palinmania hangover?

Posted by: OregonMuse at September 17, 2008 11:03 AM (FO+YO)

6 What I don't get is the whole arbitrary 50mi rule. Drill everywhere. It's an issue of sovereignty, and it's an issue of economics. Let the environmental regulators do their job to ensure that drilling operations are sound, and let the flood of American oil exports set the damn market. Yeah, it'll take a few years, but with the rest of the economy looking the way it does; I'm pretty sure we've got the spare labor.

Posted by: shank at September 17, 2008 11:03 AM (+H1yK)

7 Good on Bush for standing up to these idiots.

However, I have a question about this line:

In a futures exchange, trades are matched, so one trader's gain is another's loss.

That doesn't make sense in the long run. Each sale profits someone, while the only person who really loses is the last one in line, when the prices fall.

A buys at 90, sells to B for 100. B, who bought at 100, sells to C for 110. C, who bought at 110, sells to D for 120. Did person A or B or C lose money?

Maybe on the potential profit of buying at 90 and selling for 120, but it seems to me that each person in line profited, except for D, who now is stuck with something he bought for 120 that is now worth 90. So three entities profited and one lost. That doesn't sound like a one-to-one win/loss arrangement to me.

Sounds like someone is trying to cover the asses of the speculators' responsibility for this run-up to me.

And please feel free to correct me if I got this wrong.

Posted by: wiserbud at September 17, 2008 11:03 AM (bx2tz)

8 I was wondering when they would get to asking the President about it.
I think this will have significant impact on the Senate side and they will not pass anything close to the House's version. Letting this thing die suits everybody but the Repubs get more boost than the Dems.

This was supposed to help with covering their asses back home but I don't think it went far enough. For the "centrist" repubs senators up for reelection this is a boon, they can claim to be green still and tell their backers they knew it wouldn't pass.

The Dems are taking one big gamble here though leaving it up to the veto pen of they next president. I think they are safe even with McCain but I am beginning to think the only issue that McCain is willing to go to the mat over with his own party is immigration. I don't think McCain will be as green as people once thought. I think that was all pander and now that it's worth nothing he'll forget it.

Posted by: Rocks at September 17, 2008 11:04 AM (Q1lie)

9 Part of me wishes that Bush kept mum about his veto until after the Senate voted.

We need to put these cock-knockers, Dems and Reeps, on record. Let them vote so we see where they stand. Then Bush would've looked like a hero by vetoing the bill (assuming it passed) and bitchslapping Congress.

Posted by: Bart at September 17, 2008 11:04 AM (w3NmV)

10 Go "W." Hope he uses the veto pen AND the bully pulpit to smack down the San Francisco Skank and her idiot colleagues..

Posted by: Reiver at September 17, 2008 11:05 AM (Yi1Sk)

11 "Congress held more than 40 hearings on "speculation" over the summer,..."

If only we could find a way to harness the hot air emanating from Congress. I guess they feel its better to talk about the problem than allow drilling. Vote the bums out. Keep the pressure on the Senate.

Posted by: Thomas Schneider at September 17, 2008 11:06 AM (KNCWm)

Wow. Speculators actually helped to drive the price of oil downward?!?!

Unpossible!

Posted by: EC at September 17, 2008 11:09 AM (mAhn3)

Letting this thing die suits everybody but the Repubs get more boost than the Dems.

That would be nice, but I have a bit of doubt. The news reports will be "Republicans block Democrats sensible drilling proposal." You'll hear claims of "We tried to compromise but those evil Rethuglicans blocked it because their masters at Big Oil weren't going to steal enough money from you poor people this way."

Posted by: buzzion at September 17, 2008 11:12 AM (Lrsi6)

The news reports will be "Republicans block Democrats sensible drilling proposal."

and said reports are being believed by fewer and fewer voters. Let them run it - they're like addicts and can't change their templates.

Posted by: blogRot at September 17, 2008 11:14 AM (EKMxC)

15 hat's the one thing that truly frosts me about McCain, his "me-too" Bush-bashing.

I know he probably has to do it, but it still sucks.

Why? Why does he "have to" do it? This bit has always frosted me. For the past 7 years, President Bush has been under 24/7 continuous assault from the Democrats and their sockpuppets in the MSM, and the GOP response to all the smears and lies has been to run for the tall grass, with McCain leading the way. Of course they point to Bush's low poll numbers as a reason, but I wonder if it has ever occurred to these pinheads that maybe Bush's numbers wouldn't be so low if they stuck up for him once in a while.

My RINO senator has been running ads in the local TV market where he disses Bush and tries to show how buddy buddy he is with Obama. This bit of treachery has just cost him my vote. I hope he chokes on it.

Posted by: OregonMuse at September 17, 2008 11:15 AM (FO+YO)

16 good for dubya to be out front calling BS on this farce.

also, I see Mo Dowd "sauteed herself in sarahville", apparently going to the walmart in wasilla. maybe she was trolling for a hubby, since she can't connect with the metrosexuals in ny

Posted by: billypaintbrush at September 17, 2008 11:15 AM (J4OqM)

George Bush has been in office for 7 1/2 years. The first six the economy was fine.

A little over one year ago:

1) Consumer confidence stood at a 2 1/2 year high;

2) Regular gasoline sold for $2.19 a gallon;

3) the unemployment rate was 4.5%.

4) the DOW JONES hit a record high--14,000 +

5) American's were buying new cars, taking cruises, vacations o'seas, living large!...

But Americans wanted 'CHANGE'! So, in 2006 they voted in a Democratic Congress & yep--we got 'CHANGE' all right!.....

1) Consumer confidence has plummeted ;

2) Gasoline is now over $4 a gallon & climbing!;

3) Unemployment is up to 5% (a 10% increase);

4) Americans have seen their home equity drop by $12 TRILLION DOLLARS & prices still dropping;

5) 1% of American homes are in foreclosure.

6) as I write, THE DOW is probing another low - 11,300--$2.5 TRILLION DOLLARS HAS EVAPORATED FROM THEIR STOCKS, BONDS & MUTUAL FUNDS INVESTMENT PORTFOLIOS!

YEP , IN 2006 AMERICA VOTED FOR CHANGE!...AND WE SURE AS HELL GOT IT!!!....NOW the DEM'S CANDIDATE FOR PRESIDENT--AND THE POLLS SAY HE'S GONNA BE 'THE MAN'--CLAIMS HE'S GONNA REALLY GIVE US CHANGE!!....JUST HOW MUCH MORE 'CHANGE' DO YA THINK YOU CAN STAND???.....

Posted by: Cromagnum at September 17, 2008 11:16 AM (iVVqW)

18 Unpossible!

Incontheivable!

Posted by: Bart at September 17, 2008 11:19 AM (w3NmV)

19 Doesn't the ban on drilling expire at the end of this month anyway? Don't we really just need to hang on just 2 more weeks, and then the government just needs to get out of the way?

Posted by: rrobin at September 17, 2008 11:20 AM (8nB5X)

20 McCain needs a huge disco ball at his inauguration ball.

Posted by: Jean at September 17, 2008 11:22 AM (L64A6)

McCain needs a huge disco ball at his inauguration ball.

Would ABBA mind if he played their songs at his functions?

Posted by: EC at September 17, 2008 11:23 AM (mAhn3)

22 Meh.

Here's today's big news: Sarah Palin Shoots a Bigfoot

From a helicopter. With an assault rifle.

Posted by: Tinian at September 17, 2008 11:23 AM (1Mq7K)

23 6 What I don't get is the whole arbitrary 50mi rule. Drill everywhere. It's an issue of sovereignty, and it's an issue of economics. Let the environmental regulators do their job to ensure that drilling operations are sound, and let the flood of American oil exports set the damn market. Yeah, it'll take a few years, but with the rest of the economy looking the way it does; I'm pretty sure we've got the spare labor.

UMM because that is where most of the oil is within 50 miles of the coast, therefore Dumocrats want that off limits

Posted by: PaREP> at September 17, 2008 11:30 AM (dWdDN)

24 11/11/2006

DJIA ~ 12,108.43
NASDAQ ~ 2,389.72
NYSE ~ 8,827.98
S&P 500 ~ 1,380.90
AMEX ~ 1,986.37
Brent crude ~ 58 bbl *
heating oil ~ 1.73 gal *
Lumber ~ 235 mbf *
unleaded gas ~ 1.56 gal *
Employed 151,998,000
Unemployment rate 4.4 %
Unemployed 6,711,000
Average earnings 16.91
CPI (1980) 2.46
* Chicago mercantile exchange

Posted by: Tinian at September 17, 2008 11:33 AM (1Mq7K)

25 The 50 mile rule is bs. Outside of 50 miles makes it too damn expensive to drill for what's there and they know it.

What I don't understand is why states have a say in it at all outside of 12 nautical miles. Past that it's international waters and I don't think they states should have any say or get anything from it. The states have every right to cash from stuff IN the state but outside of that they can forget it IMHO.

Posted by: Rocks at September 17, 2008 11:36 AM (Q1lie)

26 #25, 12 miles is the limit for ship navigation, i.e. foreign-flagged ships require permission to transit within that area (except for innocent passage in a case where there is no other route from point A to point B, e.g. Strait of Hormuz). The area controlled by soveriegn nations for exploitation of resources goes out quite a bit further..225 miles, IIRC without looking it up.

Posted by: A Balrog of Morgoth at September 17, 2008 11:43 AM (wgLRl)

27 Balrog I get that. I'm just saying that outside of a certain limit it should be on the feds alone with the states out of it. Do they states get to dictate to the feds what happens in the skies for air travel overhead? I don't think so. The same should apply here.

Posted by: Rocks at September 17, 2008 11:57 AM (Q1lie)

28 The eastern gulf 50 miles is shallow water (130' - 150'). I do not know if there there is any oil out there but I got to go 150 miles out to get to the deep water.

Posted by: Vmaximus at September 17, 2008 12:16 PM (sA5Gz)

29 I really thought that circumstance had dealt the Republicans a truly winning issue that they simply could not blow but i see that i have underestimated them again.

Posted by: WalrusRex at September 17, 2008 12:20 PM (DVVXZ)

30 Gird your loins ladies!

Posted by: runninrebel at September 17, 2008 12:29 PM (0n9wc)

31 this is a horrible bill that i hope never makes it to law... crazy madness, no drilling within 50 miles, now the MSM will hype it all out of porportion...

Posted by: shoey at September 17, 2008 02:58 PM (IRh55)

32 Well, I'll give him this: when President Bush threatens a veto, he's not kidding.

Posted by: Christopher Taylor at September 17, 2008 04:42 PM (0+Ggj)

33 Thanks to Bush.

Man, the world would suck without him. I feel like a total tool, but this does remind me (as I was told it should) of that ending to Batman, where he says he can take the heat he doesn't deserve because it's better for society.

Bush is a hero.

Posted by: Shill at September 17, 2008 05:41 PM (8jYMc)

34 Shill: exactly. He's the guy that does what he has to and does what's right while being hated and maligned and treated like trash every single day. The hate aimed at this guy tells you a lot about the man when you look at who hates him.

Posted by: Christopher Taylor at September 17, 2008 06:44 PM (0+Ggj)

35 Woo...hold on . The investigation into oil speculation was non conclusive due to a lack of proper govt oversight. The paper trail was scant due to unregulated activities on the commodities market and no control of overseas contracts. Political opinions are fine and we all may disagree...but when opinion becomes mindless idealogy and takes money from our wallets its time to take action. Unless, the contributors to this blog are all rich corporate executives, I recommend an intervention. Time to grow up and think.

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