Highway Funding Plummets | Speculation Bill Stalls
 

[url=http://online.wsj.com/public/article/SB121721483297789245.html?mod=2_1577_leftbox]WSJ | Funds for Highways Plummet As Drivers Cut Gasoline Use[/url]
[quote][i]By CHRISTOPHER CONKEY

July 28, 2008 Page A1[/i]

An unprecedented cutback in driving is slashing the funds available to rebuild the nation's aging highway system and expand mass-transit options, underscoring the economic impact of high gasoline prices. The resulting financial strain is touching off a political battle over government priorities in a new era of expensive oil.

A report to be released Monday by the Transportation Department shows that over the past seven months, Americans have reduced their driving by more than 40 billion miles. Because of high gasoline prices, they drove 3.7% fewer miles in May than they did a year earlier, the report says, more than double the 1.8% drop-off seen in April.

The cutback furthers many U.S. policy goals, such as reducing oil consumption and curbing emissions. But, coupled with a rapid shift away from gas-guzzling vehicles, it also means consumers are paying less in federal fuel taxes, which go largely to help finance highway and mass-transit systems. As a result, many such projects may have to be pared down or eliminated.

The challenge comes at a time when surging costs for asphalt and other construction materials already are straining state and local transportation budgets. Those cost increases make it more expensive to maintain the nation's roads, bridges and rail networks.

In many areas, the ragged edges are already showing. About 25% of bridges in the U.S. are either "functionally obsolete" or "structurally deficient," like the Mississippi River bridge that collapsed in Minneapolis last August, killing 13 people.

Overall, the commission estimated, $225 billion a year is needed to meet the country's transportation infrastructure needs. Current spending is about 40% of that level.[/quote]
60% of $225 billion = $135 billion ... sounds like that now-useless $150-billion-plus Fiscal Stimulus package [much of which went straight into people's gas tanks, and thus overseas, mainly to countries that despise us] could have been better spent - that would've created a whole lot of new construction jobs, and ones of the real variety, not the "pulled out of thin air" Bureau of Labor Statistics kind. As far as longer-term infrastructure investment funding goes, someone remind me - how much is the war in Iraq costing per year? Or the [url=http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm]Interest on the $10 trillion national debt?[/url]


[url=http://money.cnn.com/2008/07/25/news/economy/congress_energy.ap/index.htm]Effort to limit oil speculation stalls in Senate[/url]: [i]Democrat's push to rein in oil market speculation meets with Republican opposition. Calls to expand domestic drilling are rejected.[/i][quote]WASHINGTON (AP) -- Senate Democrats failed Friday to advance a measure to rein in oil market speculators, one of a series of efforts to tell voters they are serious about addressing $4-a-gallon gasoline, and rejected Republican calls to expand offshore oil production.[/quote]
Sometimes parliamentary gridlock is a good thing - both the Dems' knee-jerk "evil speculators" bill and the GOP's drill-our-way-out-of-this-mess proposal are misguided and would not help bring oil prices down one iota. Hello? Oil prices have already dropped significantly in the past month, as U.S. demand plummets. That's supply-and-demand fundamentals and the free markets at work - the system clearly ain't broke, so stop trying to meddle with it.


[url=http://money.cnn.com/2008/07/28/news/companies/GM-cuts.ap/index.htm]GM slashes another 117,000 vehicles[/url]: [i]Latest production cuts bring General Motors' total reductions to just below the 300,000 units officials had hoped for this year.[/i][quote]Most of the cuts will affect production of full-size trucks and sport utility vehicles.[/quote]
GM's balance sheet is in shreds, but hey, they might just be up for a major environmental award for this one. :)

[quote=ewmayer;138457][URL="http://money.cnn.com/2008/07/28/news/companies/GM-cuts.ap/index.htm"]GM slashes another 117,000 vehicles[/URL]: [I]Latest production cuts bring General Motors' total reductions to just below the 300,000 units officials had hoped for this year.[/I]
GM's balance sheet is in shreds, but hey, they might just be up for a major environmental award for this one. :)[/quote]Saturday night, when I drove past the vacated first-in-the-universe Hummer dealership building near my home, it looked like there were several shiny Jeeps lined up on the highway side. It was just a split-second glimpse, because I hadn't actually expected any change there, but it may be that the look of dinkiness I predicted may not be an insurmountable obstacle after all.

Hmmm ... maybe someone figures that if Jeeps look dinky, they won't look like gas-guzzlers.

(How are they going to change the big "H" into a "J"?)

[QUOTE=cheesehead;138461](How are they going to change the big "H" into a "J"?)[/QUOTE]

By calling it [b]H[/b]appyland Jeep, maybe?

In California, maybe. :-) Not here.

Sanctions
 

Oil price is ultimately decided by a combination of production and demand, and expected production and demand in the future. Other factors, like the low value of the US dollar, makes the price seem even higher in the US, but is a very local factor to The USA.

As the price goes up demand goes down, which of course lowers the price of oil until a balance is reached. This has been discussed a lot. However the US imposed reductions in production is largely overlooked.

First the sanctions against Iraq and later the war. The sanctions started when the oil price was low and didn't have very large consequences. Oil exports from Iraq fell from more than 3 million barrels/day in 1989/1990 to almost nothing, and climbed to about 2 before the war against freedom, human rights and the people of Iraq. The war extinguished it, and iraqi oil export is still below 1,5 million barrels/day.

Now more and more sanctions are imposed against Iran and all companies doing business in Iran. Iran exports about 2,5 million barrels/day, and could export a lot more if they got better access to foreign competence, parts and capital. Iran is the second largest oil exporter in Opeq (by a large margin), and has the third largest proven oil reserves in the world, after Saudi Arabia and Canada. The sanctions are working, and more sanctions is expected to reduce oil exports from Iran further. Iran exported more than 5,5 million barrels/day before the first US sanctions began.

I think the US war against oil supply and expected oil supply is by far the most important reason for the recent rise in oil and gasoline prices.
Who profits? The Sauds, oil companies... Friends of GWB.

[quote=S00113;138558]the war against freedom, human rights and the people of Iraq.

< snip >

I think the US war against oil supply and expected oil supply is by far the most important reason for the recent rise in oil and gasoline prices.[/quote]But how, in your scenario, do you account for the timing? The rapid rise in prices of the past several months started [I]over four years after the U.S. invasion of Iraq[/I]. I hope you aren't arguing that it's taken four years for the effects you cite to finally reach the consciousness of oil traders.

If you want to criticize the U.S. Mideast military policy (as I and many others have done elsewhere) please stick to the actualities, not introducing some imaginary multi-year delay in a strained attempt to link it with every economic bump that comes along. There were oil prices quivers that happened right at the times of various military events, but they're in the past. A ridiculous stretch of the timing of military event influence only weakens your arguments.

There are more than enough reasons to criticize Bush administration military operations without dragging in some multi-year oil price change lag. Sure, those operations were important background factors for the current oil market, but there were other causes (such as, but not limited to, speculation) that have arisen in the past year or so, which are much more reasonably correlated to the recent (late-2007-to-present) oil price rise.

Note, for example, that though I've been warning about Hubbert's Peak in oil production in online forums for a long time, I never cite it as "by far the most important reason" for any particular price fluctuation. I'm not a Peak Oil alarmist (on a less-than-a-decade time scale, anyway). That approaching peak helps set an increasing floor on prices, but the shorter-term factors are also important in current pricing.

Yes, I note that you cite sanctions and other non-military factors. Had you restrained yourself to explaining connections between them and the oil market, I wouldn't have complained like this.

Okay, maybe that was too much protest, but editing time has expired.

[quote=cheesehead;138629]But how, in your scenario, do you account for the timing? The rapid rise in prices of the past several months started [I]over four years after the U.S. invasion of Iraq[/I]. I hope you aren't arguing that it's taken four years for the effects you cite to finally reach the consciousness of oil traders.[/quote]
Saudi Arabia had excess capacity at the time of the invation to replace the supply from Iraq. They promised to increase production to replace Iraqi oild before the war started, and did. This is is well known. Neither Saudi Arabia nor The USA expected the war to last for four years, and Saudi Arabia don't have much, if any, extra capacity left.

To tap oil fields for maximum output is an artform. If you tap one well too fast, you loose pressure and oil flows away from nearby wells. You basically have to search for it and may have to drill new wells to get it back, if possible. It is simple to increase output on the short term, but long term production increase is dependant on careful planning. How much oil you can pump from a field during it's lifetime is dependant on the number of wells, where you drill them and how fast and when you pump the oil up or and water or gas down for pressure support. It takes very talented people many years to learn an oil field, and it is more about intuition than exact science. Saudi Arabia was well prepared for expected increase in demand with excess capacity in case of a conflict, but did not have enough fields in development to handle many conflicts over a long time.

Also remember that many OPEC members oppose an increased production now, basically because they think americans deserve to pay more for oil. Those bad feelings have grown stronger with the wars.

[quote]If you want to criticize the U.S. Mideast military policy (as I and many others have done elsewhere) please stick to the actualities, not introducing some imaginary multi-year delay in a strained attempt to link it with every economic bump that comes along. There were oil prices quivers that happened right at the times of various military events, but they're in the past. A ridiculous stretch of the timing of military event influence only weakens your arguments.[/quote] This is not about an event four years ago, it is an ongoing process. StatoilHydro, the largest offshore oil and gas company in the world, announced this week their withdrawal from Iranian projects in the Persian Gulf, and cited american pressure as the reason. It was that or being shut out from doing business in The USA. StatoilHydro are not the first to leave, and Iran lacks the technology to develop the fields themselves.

Strenghtening and ongoing sanctions has reduced expected oil production in the future. Expected production in the future is just as important for setting the price as actual production this week. The prices don't jump because of an expected invasion with an expected production increase in another country to offset lost production, but increase as it becomes evident that the lost production won't be replaced anytime soon.

[quote]There are more than enough reasons to criticize Bush administration military operations without dragging in some multi-year oil price change lag. Sure, those operations were important background factors for the current oil market, but there were other causes (such as, but not limited to, speculation) that have arisen in the past year or so, which are much more reasonably correlated to the recent (late-2007-to-present) oil price rise.[/quote]
Speculation may account for a few dollars on the short term. Not a hundred dollars on long term.
[quote]Note, for example, that though I've been warning about Hubbert's Peak in oil production in online forums for a long time, I never cite it as "by far the most important reason" for any particular price fluctuation. I'm not a Peak Oil alarmist (on a less-than-a-decade time scale, anyway). That approaching peak helps set an increasing floor on prices, but the shorter-term factors are also important in current pricing.
[/quote]I think an artificial peak has been created by recent american foreign politics, and I think the people responsible are profiting from it. When you withdraw production and expected production from two of the largest oil exporters in the world, increased prices in the long term is the only possible result. Many more fields would have been developed by now if it wasn't for war and sanctions.

[quote]Yes, I note that you cite sanctions and other non-military factors. Had you restrained yourself to explaining connections between them and the oil market, I wouldn't have complained like this.[/quote]I didn't mean war against oil supply (or freedom) in the military sense. It is mostly about politics. Sanctions, political pressure and the way "peace" in Iraq was handled. The looting alone probably delayed new Iraqi productions by years. Add banning of Baath members from positions in the oil department.

[quote=S00113;138679]I didn't mean war against oil supply (or freedom) in the military sense.[/quote]It certainly looks like you meant a military war in at least some of your statements.

Consider your wording in post #181:
[quote=S00113;138558]First the sanctions against Iraq and later the war.[/quote]"... later the war" -- if you meant to depict a nonmilitary "war", why would you describe it as occurring later than the sanctions?[quote=S00113;138558]climbed to about 2 before the war against freedom, human rights and the people of Iraq.[/quote]Again, you refer to a war that occurs after the sanctions. You never give us any statement that would define all your uses of "war" as being nonmilitary.[quote=S00113;138558]The war extinguished it, and iraqi oil export is still below 1,5 million barrels/day.[/quote]"The war" still seems there most reasonably to refer to a military war, the U.S. invasion. If you want to argue that it doesn't, then tell us what reference date is implied by "still below 1,5 million barrels/day" -- "still below" since when? Isn't that referring to [I]still (since the U.S. invasion)[/I]?

Now, back to your post #184:

[quote=S00113;138679]The looting alone probably delayed new Iraqi productions by years.[/quote]What looting could you possibly be referring to, if not the looting that occurred right after the U.S. military invasion? There was no reported wave of looting immediately after any imposition of sanctions, was there?

I think what's happened is that in your first post, you used "war" to refer to the U.S. military invasion, but also used "war" elsewhere in your posting to refer to nonmilitary events. Then after I objected to your references to the U.S. military invasion, you temporarily forgot your dual usage when you protested that only the nonmilitary usage was meant.

I recommend that you admit that you [I]were[/I] referring to the U.S. military invasion in some sentences of your earlier post, and go on from there. Either admit that my post #182 was on-target, or give us a real refutation without trying to avoid taking responsibility for your words.

Tanker owners in "sickout" | SiVal commuting
 

[URL="http://www.bloomberg.com/apps/news?pid=20601109&sid=aWyhL5Kzop1s&refer=news"]Scooters, Shuttles Replace Mercedes, Maserati for Silicon Valley Commuters[/URL]: [I]Driving a Mercedes E500 gave Wes Richards a smooth ride to his office in Redwood City, California. Now he hops on a scooter for the 5-mile commute from his home in Atherton.[/I]
[quote] Aug. 6 (Bloomberg) -- Driving a Mercedes E500 gave Wes Richards a smooth ride to his office in Redwood City, California. Now he hops on a scooter for the 5-mile commute from his home in Atherton.

The price of gasoline trumped comfort, Richards said. He traded both his Mercedes sedan and his wife's Mercedes R350 sport-utility vehicle for a Piaggio scooter, a two-seat Smart car and a Toyota Prius.

``I don't miss having those cars,'' said Richards, 56, managing director of the Silicon Valley office of Korn/Ferry International, an executive-search firm. ``Those feelings are reinforced every time I visit the pump and fill up for $28, where before it was $90.''

The price of gasoline is changing Silicon Valley's commuting culture. Executives are giving up luxury cars, and companies like Google Inc. and Juniper Networks Inc. are making it easier for employees to telecommute, use mass transit or take company shuttles.[/quote]
[URL="http://www.bloomberg.com/apps/news?pid=20601109&sid=a7YjyGuwrZQg&refer=news"]Oil Companies May `Panic' on Outlook for Tanker Rental Rates: Chart of Day[/URL]: [I]Oil-tanker rental rates may rise after last week's 46 percent slump spurred owners to slow their vessels, reducing supply and increasing costs for oil producers and refineries who hire the vessels.[/I]
[quote]Oil-tanker rental rates may rise after last week's 46 percent slump spurred owners to slow their vessels, reducing supply and increasing costs for oil producers and refineries who hire the vessels.

Owners are telling captains to sail more slowly, according to three shipbrokers. The last time that happened, in the final months of 2007, rental rates posted the fastest two-month gain in at least 16 years, increasing costs for oil producers seeking to ship supplies to refineries.

The CHART OF THE DAY shows how slower sailing speeds at the end of last year helped bolster hiring rates. The average speed of very large crude carriers, or VLCCs, including those at anchor, has declined 3.8 percent to 10.21 knots since July 12.

``Panic will be moved from owners to the oil companies,'' Nikos Varvaropoulos, an official at Optima Shipbrokers, Greece's largest, said yesterday. The advance in the next several months may be ``even better'' than at the end of last year, he said.

Vessels on average slowed 20 percent to 12 knots in the final months of last year, according to a May 2 regulatory filing from Frontline Ltd., the world's largest owner of the vessels.[/quote]Interesting - the oil-tanker equivalent of a worker sickout, or better, a [URL="http://en.wikipedia.org/wiki/Slowdown"]slowdown[/URL].


Meanwhile, U.S. gas prices continue to retreat due to demand destruction - again from our favorite local Valero station:
[code][I]Fri, 25 Jul: 4.29[sup]9[/sup][/I]
Mon, 28 Jul: 4.25[sup]9[/sup]
Wed, 30 Jul: 4.23[sup]9[/sup]
Mon, 04 Aug: 4.19[sup]9[/sup]
Wed, 06 Aug: 4.17[sup]9[/sup][/code]

Reasons for the drop in oil prices
 

I have heard that China is no longer stockpiling diesel (as they have enough for their Olypmic possible demand [for generators]). Which I had heard was happening. I thought that it had been mentioned in this thread.

Secondly, I have heard that the hedge funds and speculators are heading for the exits (and it sounds like the pace is accelerating).