"Mo' Oil, Mo' Oil, Mo' Oil!"

The U.S. energy secretary says insufficient oil production, not speculation, is driving soaring crude prices.

Secretary Samuel Bodman's comments Saturday on the eve of an energy summit in the Saudi port city of Jiddah set the stage for a showdown between the U.S. and conference host Saudi Arabia.

Saudi Arabia has largely blamed speculation in the oil markets for the record prices.

Bodman says oil production has not kept pace with growing demand for oil, especially from developing countries like China and India.

The U.S. official says commodities markets have experienced a huge influx of money from financial investors in recent years, but they have been following the market upward rather than causing prices to rise.

With the cost of crude oil surging to record highs, a heated battle of blame is in full swing, with a lineup of suspects that includes the oil industry, Congress, commodity speculators, environmentalists and developing countries in Asia.

A study last year by a Swedish researcher predicted oil production will peak sometime between this year and 2018.

Other analysts, however, say that we've barely explored our energy potential, much less run the risk of being tapped out completely.

"New field discoveries are only about 25 percent of the source of most of the reserve additions of oil," said William Fisher, a geologist at the University of Texas at Austin. "About 70 percent of it comes from oil through increased recovery out of existing fields. Around the world, up to this existing point, we have already discovered about 7 trillion barrels of oil in the ground."

Increasing the current rate of recovery from 35 to 45 percent, said Fisher, could yield an even greater surplus of petroleum. "Ten percent of 7 trillion barrels is a lot of oil," he said. "But peak-oil advocates just concentrate on new discoveries and put that aside."

By Fisher's reckoning, rising oil prices are more likely due to an old-fashioned case of supply and demand - as well as the faltering U.S. dollar.

"We've just had a red-hot increase in demand in the emerging economies of Asia, particularly China and India," he said. "The other contributor is the weakening value of the dollar compared with the Euro, since oil is priced and sold in dollars."

A third offender: commodity speculation. "When you see a commodity like oil that will vary by 2 to 3 percent of its value in a day's time, you suspect that there's some speculation that's going on," Fisher said. "And I'm not saying it's a nasty word - people speculate in margins all the time - but that would, in my view, have some secondary role."

Still, the growing demands of a fuel-hungry planet obscures a different, self-imposed problem, said David Cole, chairman of the non-profit Center for Automotive Research.

"We have failed to develop our resources due to the inability of Congress to permit drilling in high-probability petroleum regions," he said, arguing that the United States has had an "absurd energy policy" for years.

"The only thing Congress has done over the years is promote the development of corn ethanol, which doesn't make any sense because it has very low energy potential," Cole said. "I think our broad energy capability is still very substantial, but we really need to bridge the gap between our existing resources and alternative technologies, including cellulosic biofuels and lithium batteries."

     Echoing the President Bush and GOP presumptive nominee Senator John McCain call for more off shore drilling of America's coasts, the US Energy Secretary is spinning the cause of high gas prices to insufficient oil production. In my opinion, that assessment of the energy crisis is a biased one that is solely looking out for the interests of the oil companies. As I see it, the main cause of rising oil prices is the weakening dollar because oil uses the dollar as it's currency. The more the dollar is devalued the more the price of oil rises. The Federal Reserve Banks policies of low interest rates have cheapened the dollar and in my opinion, deliberately so. Commodities futures investing has also significantly contributed to rising oil prices because such speculative trading involves predicting what the price of the commodity, such as oil, will be in the future, so quite naturally the speculators will predict higher prices to make higher profits. If a moratorium was placed on all commodities futures speculation the prices of oil and food would go down significantly. Wall Street and the Fed are the main culprits in the high price of oil, in my opinion.

tags: bush  business  capitalism  oil  teh fed  john mccain  disaster capitallism  economy  fraud  mccain  big oil  world  futures trading  

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