I looked into the North Dakota State Bank and didn’t see any reason that would make much of a difference, so I check out their ‘export’ industries:
https://www.dmr.nd.gov/oilgas/stats/DailyProdPrice.pdf
https://www.dmr.nd.gov/oilgas/stats/gasprodsoldchart.pdf
https://www.dmr.nd.gov/oilgas/stats/DrillStats.pdf
all found here:
https://www.dmr.nd.gov/oilgas/
And all with under 500,000 people.
With the saudis setting price and letting quantity adjust looks like net demand isn’t going anywhere
Europe got by the ‘rollover event’ without drama.
German unemployment down a tad and muddling through.
Euro solvency issues (slowly) fading with ECB in control?
OPEC June Crude Output Down 157,000 Bbl/Day to 29.23 Mln
I agree the guilty need to be identified and punished, but that doesn’t stop with those responsible at BP, their suppliers and contractors, or the regulators who failed us. It runs much deeper, extending to our failed political process.
The financial crisis is analogous. The criminals need to be tracked down and prosecuted, as Bill Black did in after the savings and loan crisis. But the financial architecture/institutional structure that set it all up is at least equally at fault, as is the political process that created that institutional structure, as per my response to Roger.
I do think costs and losses should be paid for by BP, even if that means insolvency proceedings and 100% losses to shareholders and creditors.
I consider this a no bailout zone.
And any drop in aggregate demand/increase in unemployment should be ‘offset’ with whatever size tax cut and/or revenue sharing is necessary to sustain full employment.
And adding to Rogers idea again, my proposal for an $8/hr job for anyone willing and able to work should include those jobs for anyone wanting to join in the clean up efforts. (Not to say that clean up efforts should be limited to those workers.)
Punish BP or . . . ?
By Rodger Malcolm Mitchell
Those rotten scoundrels have ruined our oceans and our shores. They should pay not only for the cleanup, not only for the jobs lost because of the pollution, not only for the damage, but they even should pay for jobs lost because of President Obama’s decision to stop deep-water drilling. BP should pay, pay, pay until they bleed, then pay some more. These people must be held accountable.
Phew! Now I feel better.
But, wait. What is BP? It’s a legal description, nothing more than words on a piece of paper. It has no physical existence. You can’t punish BP any more than you can punish a law or a page of sheet music. BP, as a legal entity, neither caused, nor can cure, the oil spill. That disaster was caused by people, and it is people, not a piece of paper, who must be held accountable.
So the question becomes, which people should be punished? BP has a huge number of employees, the vast majority of whom had nothing to do with the oil spill. It has a huge number of innocent shareholders, a huge number of innocent suppliers, a huge number of innocent oil users. In some ways, you and I are part of BP, because as users of oil and oil-related products (i.e. all products) we are affected by what its employees do.
Which of those people should be “held accountable”? What if holding all of BP “accountable” means thousands of innocent people will be fired, or innocent suppliers will be put out of business, or all of us will have to pay more for our oil and gas, or all of us who hold BP stock, either directly or as part of a fund, will lose? What if punishing BP has an adverse effect on the whole economy. Is that wise?
Somewhere between vengeance and economic reality lies the answer. Punishing BP, as a company, punishes all of us who already are suffering from the gusher. And though widespread vengeance may feel good, there is a “cut-nose-spite-face” aspect to be considered. So, what can be done to help prevent a repeat?
First, let’s identify the people specifically responsible. Certain BP employees. Certain employees of BP suppliers. The guys who mixed and poured the rotten cement that didn’t hold.
And, with all the focus on BP, let’s not forget those government employees who failed equally. I’m talking about the people who, after having been bribed with nice gifts, so readily approved all of BP’s actions.
Yes, we should fine, fire, even jail all the responsible individuals. That would help prevent future problems. Of course, that doesn’t pay for all the efforts to cure the situation nor for all the losses. Who should pay the billions for that?
If you really care about the economy, and are not just flailing out in retribution, you would agree the economically wise approach would be for the federal government to pay. That way, the guilty would be punished, the innocent spared and the economy stimulated.
Government pays = people benefit. BP pays = people pay.
So what’s your choice: Vengeance or money in your pocket?
warren mosler says:
June 15, 2010 at 7:15 am
Well stated!
And we do know we all are responsible.
Our government regulators failed us much the same way they failed us in the financial crisis.
We have failed to create the alternative transportation (including user friendly public transportation, alternative fuels, incentives to reduce our travel needs, etc.) that could cut our use of crude oil by 50% or more, removing the need and incentives for what we know is dangerous offshore drilling.
We should know that the strategy of rushing to use up our domestic oil as soon as we discover it, rather than saving it for later when the rest of the world has used up theirs, is not in the best long term interest of our children and grand children.
We have elected representatives at all levels based on most everything but the wisdom of proposed agendas, often due to incentives we allow to remain in place regarding campaign finance, the power of special interests, and the incentives in place for our two party system to deliver candidates on criteria unrelated to their capabilities to provide the leadership on these critical issues.
Don’t get me started!
Thanks!
OPEC (and mainly the Saudis) is the only entity with excess capacity, so it is necessarily price setter. Specifically, they post prices to their refiners and who order all they want at that price. They don’t sell in the spot markets. See highlighted text below. ‘Balancing supply and demand’ is price setting.
The higher prices, particularly in euro, are functioning as a drag on the oil importing economies and also starting to show up in their inflation reports, complicating the decision process of the world’s central bankers. The combination of low aggregate demand and cost push price pressures is always problematic with regards to interest rate policy.
Urals Discount Widens as Russia Boosts Output: Energy Markets
By Christian Schmollinger
May 4 (Bloomberg) — Russian and Mexican oil is trading at growing discounts to U.S. and U.K. crude benchmarks as production by nations outside OPEC reaches a record.
Russia’s Urals for loading in the Mediterranean trades at $2.22 a barrel less than Britain’s Brent crude, compared with a premium of 3 cents a barrel on July 24. The discount between Mexico’s Maya grade and West Texas Intermediate was at $10.82 a barrel on April 30, near the widest in 17 months.
Rising output from Russia and Mexico will push non-OPEC supplies up 1 percent this year to an average 52 million barrels a day, according to the International Energy Agency. At the same time, quota violations among members of the Organization of Petroleum Exporting Countries means global production will increase at a time when the need for oil is diminishing.
“Inventories are growing and non-OPEC supply is expanding and OPEC continues to leak,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “Market bulls should be concerned about the supply overhang.”
The U.S., Mexico, China and Russia have been responsible for most of the growth, boosting output for the past five consecutive quarters, according to an April 27 research note by Barclays Capital. Non-OPEC production reached a record high 49.6 million barrels a day in March, according to data from Energy Intelligence Group.
OPEC Less Needed
The IEA lowered its demand estimate for OPEC, which produces 40 percent of the world’s oil, by 200,000 barrels day to an average of 28.8 million barrels a day to balance supply and demand. The group currently pumps 29.2 million a day, according to Bloomberg data.
OPEC’s spare capacity levels have ballooned to 5.645 million barrels a day in April after falling as low as 2 million in July 2008, when crude hit a record $147.27. The group can produce a total of 34.84 million a day and may add 12 million barrels by 2015 by opening 140 new projects, Secretary- General Abdalla El-Badri said in February.
Russia, the world’s largest oil producer, pumped 10.14 million barrels a day in March, a post-Soviet Union high, according to official data. Mexico exported 1.33 million a day in March, the highest since January 2009, according to data from Petroleos Mexicanos.
U.S. production surged during 2009 and into this year as output returned from post-Hurricane Ike shut-ins in September 2008. The country has pumped an average of 4.482 million barrels a day in the first four months of 2010, up 6.6 percent from the average in 2006 and 2007.
Price Pressure
“If the positive momentum carries into the rest of 2010 and starts filtering through non-OPEC output views for 2011, this could result in a more significant source of downward price pressure along the curve,” said Barclays Capital analyst Costanza Jacazio in the note.
Crude oil for June delivery was at $85.94 a barrel at 10:28 a.m. Singapore time in after-hours electronic trading on the New York Mercantile Exchange, retreating from yesterday’s intraday peak of $87.15, the highest since Oct. 9, 2008.
“The pricing has been driven by the expectations of a tighter market over the long-term and the market has put aside the near-term supply overhang,” said Purvin & Gertz’s Shum.
The non-OPEC “momentum raises the crucial question of whether or not it is sustainable,” said Barclays. “If it fades quickly, as we expect, this will likely have limited implications for oil balances and prices, as OPEC stands in a position to handle a short-term rise in non-OPEC output by simply postponing any further increase in volumes.”
With supply following demand, as with any monopolistic arena, it looks like the world crude oil balance remains very much neutral leaving the Saudis in full control as swing producer where they set prices and let quantity adjust to market demand.
Stable crude prices with 0 interest rates, high excess capacity and low aggregate demand should keep inflation at bay indefinitely, with productivity increases making deflation the greater risk.
A modest rise in consumption for next year means the Saudis/OPEC remain firmly in control of price.
Global oil consumption is likely to average 86.1 million barrels a day in 2010, the IEA said in an Oct. 9 monthly report, raising next year’s forecast for a third consecutive month. The agency expects demand of 84.6 million barrels a day this year. The IEA’s next monthly report will be issued on Nov. 12.
It will be up to members of the Organization of Petroleum Exporting Countries to satisfy the bulk of the world’s increasing need for oil as conventional production in countries outside the group peaks next year, the IEA said.
“Most of the increase in output would need to come from OPEC countries, which hold the bulk of remaining recoverable conventional oil resources,†the agency said in the report.
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No signs of a recovery here yet.
Yes, there’s conservation, efficiency gains, and some substitution but a lot of it is people driving to work.
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The Levy Economics Institute of Bard College
Public Policy Brief
No. 103, 2009
FINANCIAL AND MONETARY ISSUES
AS THE CRISIS UNFOLDS
James K. Galbraith
Beginning page 9:
Warren Mosler picked up on the theme of human resource
utilization and full employment in a particularly useful way.
Mosler suggested that stabilization of employment and prices is
akin to a buffer stock—something to which surpluses can be
added when demand is low, and drawn down when it is high.
Normally, a buffer stock works on a price signal: the authorities
agree to buy when market prices are below the buffer and to sell
when they are above. In this way, prices stabilize at the buffer
price. The Strategic Petroleum Reserve is potentially a good
example, though political decisions have prevented it from being
used as it should be.
The problem with most commodity buffers is elasticity of
supply: create a buffer stock in wool, and suddenly it pays to raise
sheep. But this problem is cured if the buffer stock is human
labor, which cannot be reproduced quickly. A program that provides
a public job at a fixed wage for all takers functions exactly
like a buffer stock, stabilizing both total employment and the
bottom tier of the wage structure. People can move in and out of
the buffer as private demand for their services varies. Meanwhile,
the work done in the buffer—the fact that people are working
rather than receiving unemployment insurance—helps keep the
buffer “fresh.†Private employers like hiring those who already
work, and will prefer hiring from the federal jobs program rather
than from among those who remain unemployed.
The point is: the problem of unemployment is easily cured,
without threat of inflation. It is merely sufficient to provide jobs,
at a fixed wage, to whoever wants them, and to organize work
that needs to be done. Such work should be socially useful and
environmentally low impact: from child care to teaching and
research, to elder care to conservation to arts and culture. Where
possible, it should contribute to global public and knowledge
goods. It should compete as little as possible with work normally
done in the private sector; for instance, by serving those who
cannot afford private sector provision of teaching and care. The
point is not to socialize the economy but to expand the range of
useful activity, so that what needs doing in society actually gets
done. The barrier to all this is simply a matter of politics and
organization, not of money.
The effect, nevertheless, would be to raise all private sector
wages to the buffer-stock minimum (say, $8/hour in the United
States), while eliminating the reserve of unemployed used to
depress wages in low-skilled private sector industries. There will
be no pressure to raise wages above the buffer threshold, since private
employers providing higher wages can draw on an indefinitely
large workforce willing, for the most part, to move from the
buffer to the private sector in return for those wages. Hence, the
program is not inflationary. There is therefore no excuse for waiting
a year or two years on the assumption that unemployment
will cure itself, and every reason to believe that at the end of such
a policy of “hopeful waiting,†the discovery will be made that the
problem has not been cured.
This chart shows demand for gasoline is still down year over year, even with substantially lower prices.
It is also another indication of the ‘soft spot’ in demand that may have hit a couple of months ago.
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