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20 Signs That The U.S. Economy Is Heading For Big Trouble In The Months Ahead

Trouble In The Months AheadIs the U.S. economy about to experience a major downturn?  Unfortunately, there are a whole bunch of signs that economic activity in the United States is really slowing down right now.  Freight volumes and freight expenditures are way down, consumer confidence has declined sharply, major retail chains all over America are closing hundreds of stores, and the “sequester” threatens to give the American people their first significant opportunity to experience what “austerity” tastes like.  Gas prices are going up rapidly, corporate insiders are dumping massive amounts of stock and there are high profile corporate bankruptcies in the news almost every single day now.  In many ways, what we are going through right now feels very similar to 2008 before the crash happened.  Back then the warning signs of economic trouble were very obvious, but our politicians and the mainstream media insisted that everything was just fine, and the stock market was very much detached from reality.  When the stock market did finally catch up with reality, it happened very, very rapidly.  Sadly, most people do not appear to have learned any lessons from the crisis of 2008.  Americans continue to rack up staggering amounts of debt, and Wall Street is more reckless than ever.  As a society, we seem to have concluded that 2008 was just a temporary malfunction rather than an indication that our entire system was fundamentally flawed.  In the end, we will pay a great price for our overconfidence and our recklessness. (Read More….)

The Economic Collapse.

The Obama Oil Embargo

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David Kreutzer, Ph.D.
April 18, 2012 at 6:46 am

From canceling oil leases in his second week in office to denying the XL Pipeline this year President Obama and his administration have offered up a non-stop assault on affordable energy.  Now that high gasoline prices have come home to roost, the president is flailing around for an energy policy.

His recent attempts at energy policy include:

  • Nobody can do anything about high gasoline prices.
  • Maybe I should release crude from the Strategic Petroleum Reserve.
  • There is a lot of drilling that I haven’t been able to stop.  Don’t I get credit for that?

The latest attempt is to blame everything on speculators.  And why not?  Previous polling shows that 80 percent of Americans believe petroleum price spikes are caused by speculation, which means no more than 20 percent believe it is caused by the fundamentals of supply and demand.

There are several flaws in “the speculators did it” theory.  The first is why do they only do it occasionally?  That is, why don’t speculators want to make unconscionable profits all the time?

Second, why do the index funds and all the other bad guys only speculate in oil?  Where are the profiteering speculators in natural gas, whose current price is about half of what it averaged over the last decade?

Third, there are sophisticated traders on both sides of the petroleum markets.  For every speculator who makes money on a trade, somebody else will lose money.  Blaming speculators on continued price increases requires an endless string of chumps to take the other side of the speculators’ deals.  If anybody should be the chumps, it should be the newbies from the insurance industry and hedge funds, but they are at the top of the most-wanted list.

Finally, for speculation to drive up prices, the speculators must either cause oil production to slow down (which they haven’t) or to pull oil off the market.  If the flow of petroleum and its products remains unchanged, the price at the pump will not change.  If petroleum is pulled off the market, which can happen even though there are limits to what can be stored, it will eventually come back on the market.  And the question becomes, “When the oil comes back on the market, is the price higher or lower than when it was pulled off the market?”  The price will only be higher if the amount supplied at that time is lower or the demand is higher.  In either of those cases, speculators have helped moderate price fluctuations and will be rewarded with profits.  If the price is lower, then the speculators did a bad thing and will be punished by losing money.

The real problem is that combating high gasoline prices requires a greater supply, and this administration’s policies have pushed the other way.  It seems the administration does not really want lower gasoline prices.  Steven Chu, Obama’s non-car-owning Secretary of Energy, famously said we need to get our gasoline prices up to the $8-$10/gallon level they are in Europe.

imageUnfortunately for the president, the voters want more gasoline and lower prices.  So, in the time-honored Washington tradition, he creates a boogeyman and blames his energy failures on speculators.

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President Obama Has A Plan To Tackle Oil Market Manipulation

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Mamta Badkar
Apr. 17, 2012, 8:42 AM

President Obama is expected to announce a plan to tackle oil market manipulation today.

Obama will make a statement in the White House Rose Garden about the issue at 11 a.m. EDT.

The president has been criticized for doing little to curb rising gas prices. The plan would increase spending for Wall Street enforcement, at a time when Republicans are trying to curb the extent of federal financial regulations.

Obama’s $52 million plan involves strengthening federal supervision of oil markets and increasing fines for market manipulation, according to CBS News.

The plan calls for a six-fold increase in the surveillance and enforcement staff of the Commodity Futures Trading Commission to better monitor and deter oil market manipulation.

It also aims to increase spending on technology to improve surveillance of energy markets, increase civil and criminal fines against firms caught engaging in market manipulation from $1 million – $10 million.

In April last year, President Obama said his attorney general had launched a task force with “Just one job: rooting out cases of fraud or manipulation in the oil markets that might affect gas prices, including any illegal activity by traders and speculators.”

Don’t Miss: How $5 Gasoline Will Change Every Aspect Of The American Economy >

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The oil industry’s plan to lower gas prices

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By Steve Hargreaves @CNNMoney March 23, 2012: 5:20 AM ET

NEW YORK (CNNMoney) — The oil industry recently laid out a set of proposals it believes will instantly lower gasoline prices.

The proposals call for more domestic oil production, fewer environmental regulations on refineries and fuel, and for not raising taxes on the industry. They’re basically what the Republican presidential candidates are calling for.

But analysts say those ideas will do little to lower gas prices in the short term. Here’s why:

More drilling: The industry has long held that this is key to lowering prices, and “unlocking America’s energy potential” is a theme all the Republican candidates are touting.

The industry has studies saying that if it was allowed to drill off both the East and West coasts, on all federal land that isn’t a national park and in Alaska’s national wildlife refuge it could produce another 10 million barrels of oil a day by 2030 — double the nation’s current oil output.

Eighteen years is a long time to wait for gas prices to come down. But the industry says that if Obama merely announced such a plan oil prices would drop overnight in anticipation of this new production.

“Markets are driven by expectations,” Jack Gerard, president of the American Petroleum Institute, said on a recent conference call.

Saudi Arabia can’t save us from high oil prices

Gerard noted that oil prices fell $16 in the two days after George W. Bush lifted a moratorium on drilling off the coasts in 2008, a moratorium that was effectively reinstated after BP’s (BP) Gulf of Mexico disaster.

But oil traders are skeptical.

“Just because a policy is announced doesn’t mean it can be easily or quickly attained, and the markets will discount that,” said Addison Armstrong, director of market research at the brokerage Tradition Energy.

Those against more drilling note that U.S. oil production has increased by about 15% since Obama took office, and prices have only gone up.

Obama himself likes to take credit for this production increase, although actual federal acreage available for drilling is down slightly from the Bush administration.

The extra production comes mostly from private land and is spurred by higher prices, new technology and the expanded use of hydraulic fracturing.

Known as fracking for short, the process is highly controversial as many fear it is contaminating the ground water. Yet Obama has allowed it to continue mostly unfettered — and has taken flack from his left flank as a result.

In the medium term it’s hard to say what impact increased production from the United Sates would have on oil prices.

Ten million barrels a day is a lot of oil, though critics say the industry would never be able to generate that much and note the potential high environmental costs of drilling everywhere.

Plus OPEC might simply cut that amount of production to keep prices high.

Either way, it’s unlikely more drilling now would lower gas prices anytime soon.

Fewer regulations: Cutting regulations is another mantra of the American Right, and more regulations are indeed looming for the oil and gas industry.

It’s thought that Obama’s Environmental Protection Agency will propose new standards designed to cut air pollution and global warming on both refineries and fuels.

The oil industry says the new fuel standards alone could add anywhere from six to nine cents to a gallon of gas.

Yet not implementing those regulations wouldn’t lower the price of gas now — analysts aren’t expecting them to be put in place until after the election.

Plus, it’s uncertain they will really cost that much.

“Historically, the cost impacts [of additional regulations] have been estimated to be higher than they really are,” said Joseph Stanislaw, founder of J.A. Stanislaw Group, an energy and investment advisory firm.

Less taxes: As any good lobby group would, API has used every chance it gets to rally against proposals from the Obama administration that would eliminate up to $4 billion a year in tax breaks for the oil industry.

“No economist in the world will tell you gas prices can be reduced by increasing taxes,” said API’s Gerard.

Speculators are driving up gas prices – Opinion

Eliminating the tax breaks has been opposed by nearly every Republican politician as well.

But while eliminating those tax breaks might be bad for oil company shareholders, it’s hard to see how they would have much of a bearing on raising or lowering gas prices.

What is driving prices: Fundamentally, what politicians on both sides of the isle are missing is the fact that gas prices are not being driven by domestic policies.

They are being driven by oil prices, which are in turn rising mostly on fears over a confrontation with Iran.

“There’s a lot of oil out there right now, but people are scared,” said Stanislaw. “This is largely outside of the control of the United States.”  To top of page

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Obama’s Anti-Energy Policies Are Bankrupting America

Published on May 5, 2011 by HeritageFoundation

Randall Stilley has witnessed firsthand the Obama administration‘s job-killing agenda. As the president and chief executive of Seahawk Drilling, he had to lay off 632 employees before filing for bankruptcy — a direct result of President Obama’s anti-energy policies.

“As an American,” he told us, “you never want to look at your own government and say they’re hurting you personally, they’re hurting your business and they’re doing it in a way that’s irresponsible. I’m not very proud of our government right now and the way they handled this.”

Randall Stilley has witnessed firsthand the Obama administration’s job-killing agenda. As the president and chief executive of Seahawk Drilling, he had to lay off 632 employees before filing for bankruptcy — a direct result of President Barack Obama’s anti-energy policies.

Stilley’s company owned and operated 20 shallow-water rigs in the Gulf of Mexico. The lack of energy production — a consequence of Obama’s drilling moratorium and subsequent “permitorium” — led to Seahawk’s demise. Now he’s speaking out, sharing Seahawk’s story in a new video from Heritage and the Institute for Energy Research. (Click to watch.)

It’s an unfortunate example of how policies in Washington are harming American jobs and also squelching energy production at a time when consumers are paying $4-per-gallon for gasoline.

Fortunately, not everyone in the nation’s capital is content with higher prices and fewer jobs. Today the U.S. House considers the first of several bills that directly addresses energy and jobs. Lawmakers will vote today on legislation that requires the Obama administration to conduct oil and natural gas lease sales in the Gulf of Mexico and in the waters offshore Virginia.

It’s a welcome change from the anti-drilling policies first imposed by the Obama administration one year ago. On May 6, 2010, the first moratorium on Gulf drilling took effect, followed by a longer ban that lasted until October. But even after it was lifted, few deepwater permits have been issued.

The long-term implications are disastrous for America. That prompted House Natural Resources Chairman Doc Hastings (R-WA) to pursue a remedy through legislation. Today’s vote would ensure that companies continue energy development by requiring lease sales. Two other bills would speed up the permitting process and craft a long-term plan for offshore lease sales.

“What we’re proposing is to lower gas prices, create American jobs, which ironically will help drive up government revenues, and ultimately, in the wake of all the turmoil we’ve seen in the world, create an environment in which we are energy independent or on a path to energy independence,” Rep. Peter Roskam (R-IL) explained yesterday.

Even without the president’s signature, the legislation has already had a positive impact. After it passed in committee, the Obama administration promised to hold one lease sale in 2011. (Ever since 1958, there has been at least one lease sale every year.)

But while one lease sale is better than none, Hastings isn’t satisfied. He wants the Obama administration to hold four lease sales before June 2012  – including one off the coast of Virginia.

Aside from creating new jobs and discovering new sources of energy, the lease sales contribute a substantial sum of revenue for the federal treasury. In 2008, the offshore industry paid $9.4 billion for bids on new leases. Last year, that figure dropped to $979 million in lease bids.

The drop in revenue is a reflection of the Obama administration’s anti-energy policies. And lease sales are only part of the equation. According to the government’s own Energy Information Administration, production in the Gulf of Mexico will drop by 190,000 barrels per day. That means less money from royalty payments on offshore rigs as well.

Faced with mounting criticism, the Obama administration has defended its policies as a safety precaution following last year’s oil spill. But one year later, the Bureau of Ocean Energy Management, Regulation and Enforcement is issuing drilling permits at such a slow pace that it’s hard to swallow the explanation.

At the same time, the Obama administration and Democrats in Congress are seeking new ways to penalize energy businesses. As Curtis Dubay and Nick Loris write on The Foundry, a proposal from Senate Finance Chairman Max Baucus (D-MT) would significantly increase taxes paid by U.S. oil and gas companies competing abroad — exactly the wrong approach with gas prices on the rise.

Meanwhile, job creators like Leslie Bertucci and Randall Stilley continue to bear the brunt of the Obama administration’s misguided policies. Bertucci, who told us last month about her company’s struggle to survive, has dipped into personal savings to avoid layoffs.

Stilley didn’t have that option at Seahawk. And he’s not optimistic about what the future holds under this administration.

“As an American,” he told us, “you never want to look at your own government and say they’re hurting you personally, they’re hurting your business and they’re doing it in a way that’s irresponsible. I’m not very proud of our government right now and the way they handled this.”

Original Article

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