Mother Nature, "Oil"y politicians, Bail-out Ben's Fed, Trichet's ECB

The Independent reports that "It seems unthinkable, but for the first time in human history, ice is on course to disappear entirely from the North Pole this year."

BBC reports that "Climate change has caused plants to seek cooler conditions at higher altitudes, scientists suggest. " It also reports that scientists have uncovered vast cracks in Arctic ice.

Now, to the Slick "oil" story...

Many reasons have been proposed for the steep increase in crude oil prices over the past one year. It is virtually impossible to diagnose the problem due to lack of data, which resulted in part from lack of oversight of the relevant trading exchanges. It is interesting to put together some of the dots that can be connected.

* Enron Loophole. This was part of the Commodity Futures Modernization Act of 2000. The loophole exempted private energy-trading markets, like the one operated by Enron, from regulatory oversight. Due credit has to be given to Congress for coming up with a brilliant name for the bill (see Core competency of Our Nation).

NYT elaborates further: "Related to that loophole is a broader one for a category called exempt commercial markets, envisioned in the 2000 law as innovative professional markets for nonfarm commodities that did not need as much scrutiny as public exchanges.

What lawmakers did not anticipate was that one of the exempt markets, the IntercontinentalExchange, known as the ICE and based in Atlanta, would become a hub for trading in a product that mirrors the natural gas futures contract trading on the regulated New York Mercantile Exchange.

In 2006, traders at a hedge fund used the ICE’s look-alike contract as part of what regulators later asserted was a scheme to manipulate natural gas prices, again at great cost to users. The fund denied the accusation, and civil litigation is pending."

Senator Barack Obama has proposed closing the Enron loophole and preventing traders of American crude oil from routing transactions through offshore markets. This appears to be a step in the right direction.

Jean-Claude Trichet, President of the European Central Bank (ECB) does not think that "speculation is the major culprit." He believes that supply and demand issuesare the primary drivers.

Helicopter Ben 'always find the silver lining' Bernanke, the Federal Reserve Chairman said the "silver lining" in high oil prices is that it provides "a powerful incentive for action," including conservation and other measures to become more energy efficient. (Economic Times, June 5, 2008).

Based on EIA's 2007 petroleum consumption data, for every gallon of petroleum consumed per person in India, China consumes 2.37 gallons and the U.S. consumes 25.36 gallons per person. No one

The U.S. currently produces approximately 5.12 million barrels of crude oil a day and imports 10.25 million barrels. Assuming no stockpiling, we are consuming more than 15 million barrels a day of crude, or more than barrels a person. This compares to about 0.6 to 0.7 for China and 0.25 for India. if we completely eliminated imports and used only our domestic production, we would be consuming 1.7 per person, still higher than the same numbers for China or for India.

Simply put, there is no reason why the United States should have first dibs on so much foreign oil. Except in the minds of the evangelists, there is no evidence that God has created the world's resources for consumption by the U.S. Serious steps need to be taken to reduce consumption dramatically and increase conservation. Major investments in infrastructure for public transportation need to be made. It is ironic that GM and Ford, the two companies who contributed the most to the demise of the public transportation system (streetcars/buses/rail), are themselves going downhill in the U.S. Meanwhile, Sen. Obama has talked about conservation while Sen. McCain has changed his tune and now wants to drill off the Florida shore today, and perhaps in ANWR tomorrow..

Conservation and reduction in usage efforts are paramount and urgent, in part because of the climate changes that our behavior is wreaking on nature. Let us hope that we act more responsibly than in the past and that people in the rest of the world don't emulate our past. It will be dastardly if we killed the Mother Earth that gave us our livelihood and our water and our oil.