Okay, I have more to add to my Blog about supply and demand for OIL. As former geologist and energy executive, I have studied my industry, and know oil is plentiful; but over the past year, the American public has been led to believe we are truly running out of oil. In prior narratives, I have talked about oil being plentiful and about supply/demand for oil being controlled largely by OPEC. OPEC, primarily Saudi Arabia, determines available supply of oil on world markets. The world in which Saudi makes decisions is the what is called the “physical” world. The physical world is where oil is produced and consumed. The physical world impacts every aspect of world politics and economics as we see almost daily in turf wars in the Middle East. However, harking back to my days with Enron, I know there is another world that impacts the price of oil… that being the “financial” world. The financial world is the “futures market”… this is where oil is traded on paper. In the “financial” world, oil is bought and sold on phantom markets where supply and demand is theorectical. Typically, the “financial” world price and the “physical” world price converge upon delivery of the commodity, so that the final price of a commodity is in sync in both worlds. Financial or futures markets were developed by farmers to manage their risk of prices of their crops back in the 1800’s. But in 1990, under the leadership of Jeff Skilling, Enron was able to dramatically expand futures trading of oil and natural gas in the financial market by getting approval of “mark-to-market” accounting by the SEC. By this seemingly meaningless event, suddenly the world market for petroleum products changed. Of course, few realized the implications at the time. Looking back over my career, I have determined that the seed planted by Skilling in 1990, has grown into a “venus fly-trap” and created a false sense of “supply and demand” for petroleum products. To this end, it is clear that when the market price for oil ran up to $149/barrel this past summer of 2008, it was due entirely to “speculators” rather than consumers. And when our dim-wit Congress was harranging oil company executives from ExxonMobile, they should have been interrogating management of Morgan Stanley and other investment banks. I can now look back and see the manipulation by these companies… the proof is all around us. Prices for petroleum have fallen even faster than they ran up, but in both cases no one can point to a meaningful reason. Moreover, there seems to be a complete disconnect between the “physical” and “financial” worlds of commodities worldwide. Therefore, I bite my tongue in saying this, but the time has come to add more regulation to trading of commodities… particularly petroleum products. I am not suggesting that the government of the United States intervene directly, but it is now clear to me that tighter oversight is necessary. Petroleum has become the life blood of the world and we can no longer allow speculators to manipulate prices. My suggestion would be a higher “margin” requirement. The futures markets as set up today allows a 10-fold leverage your money by using futures positions. In other words, I only have to pledge $1 dollar to leverage $10 dollars of commodities. This means that I risk only $1 dollar to purchase $10 dollars in futures contracts. If I win my futures bet, I get a 10 fold return, yet my downside is minimal. This leverage has resulted in wild swings in nearly all commodity markets, and these swings have nothing to do with “supply and demand”. While I enjoyed the financial benefits of the futures market leverage, I saw the implications as early as 1994 while still working for Enron. I saw the ugly side of allowing “speculators” the ability to leverage futures as if one were gambling in “Vegas” While I hate regulations, there are times when regulation is necessary, and in the futures markets today… regulation is necessary to prevent a world-wide depression. I see this as necessary, will regulators?
Category Archives: Blog
Isn’t it nice to see Congress busy reaaranging the deck chairs on the Titanic!
Given the serious issues facing this country, not the least of which is an explosion in debt being proposed by Obama, our dim-witted Congress, led by consummate petty politicians, is busy rearanging the Senate’s chamber chairs as it figures out how to seat or unseat Roland Burris from Illinois. WHO CARES? I will say it again: “Who cares?” We can’t do any worse than the current crop of inexperienced, spineless worms leading Congress… that is Reid and Pelosi. I am serious when I say; the caliber of our leadership lacks the depth of “real-world” experience of any kind to develop serious and comprehensive solutions to our overwhelming combination of societal and economic problems. And I fear that as the educational level of our citizenry continues to nose-dive, the future caliber of Congress will only decline. And if you are not frightened by the prospect of future Congress’ possessing even less vision and less leadership skill, you are deaf, dumb and most likely blind. And while I still possess all my 5 senses, I already feel the gravitational pull of Congress gearing up to deny my god given rights to “life, liberty and the pursuit of happiness”.
Education, Education, Education… that’s all I hear!
Education is important, but as the saying goes: “You can drag a horse to water, but you cain’t make him drink”. The same applies to learning. If students are not there to learn, we can throw unimaginable sums of money at education and it will result in the same outcome as today’s outcome… NOTHING! From what I see, the problem is not money, not teachers, not enough public concern, but rather a lack of interest in learning by students. Drop-out rates are staggering! Teachers fear for their lives in some schools. And politicians sit around and talk about spending more money on teacher pay. WHY? Why pay teachers more, they can’t teach a student that is not receptive to learning. Until students come to school to learn, we are just wasting money, and playing petty politics. America better wake up… education is the only solution to our economic woes. History tells us that well educated societies have higher standards of living. But I fear our coming generation of American’s lack the basic R’s, and will never be able to compete with other countries like China or India. In those countries not only is education looked upon as a solution to grinding poverty, their wage scales are far far lower than America’s. The combination of highly educated citizenry and low wage scales is a “deadly” combination for our next generation of mental dwarfs… who are more knowledgeable of “Little Caesar” the pizza guy than the real Caesar from ancient Rome.
So-called “torture” by American standards would be considered “patty cake” in most Countries.
Why is it that our good friends on the radical left fringe argue “American soldiers have tortured enemy combatants”? As my headline suggests no country outside the United States would risk losing dozens or even thousands of its citizens if captured enemy could be coerced into giving up critical information, yet here in America we have people who are against so-called torture of any kind… for example playing Barney music 24hours a day is considered torture by nimrods of the left, yet our enemy laugh at this silliness. When they torture people it often leads to serious consequences like… oh beheading, cutting off fingers, acid baths… you know REAL torture. Why does anyone listen to the silliness spewed by bleeding heart liberals who probably would opt to “shoo flies” out of their house rather than KILL them. NUTZ!!! NUTZ is all I can say. While two wrong don’t make a “right” certainly we need to use appropriate techniques to coerce information from our enemy. We have too much to lose to worry about a hurting people’s feelings. At the rate we are going, we are going to have to outlaw “war” as being too harsh. At that point, we might as well raise the flag of surrender.
Why can’t I block the onslaught of disgusting TV commercials?
The FCC and other groups preach at us parents about monitoring what our children watch. To this aim, chips have been embedded into our TV’s to allow blocking of adult content. But what I find despicable and egregious is that I cannot block all the disgusting, revolting and embarrassing TV commercials I am bombarded with daily? Is there nothing off limits in TV commercials these days? For the record, I do not want to know about any of the following: irritable bowel syndrome, incontinence, erectile dysfunction, diarrhea, female products, hemorrhoids, bladder control problems, the benefits of certain bathroom tissue, prostate issues, colon health, Sally Fields, Billy Mays, and all the other similarly inane, stupid TV commercials. It should be my option to block any commercial I find offensive… and I find a growing number of commercials passionately offensive. We’ve lost all sensibilities in this country, and I know people say: “Oh what’s the big deal these things are all part of life”. Sure they are but I don’t want to fuckin be exposed to these things sitting with my kids, my girlfriend, my friends and anytime food is involved. WHAT THE HELL IS GOING ON AROUND HERE!!!
Commemorative coins showing Obama on them are appalling…
And my guess is that some entrepreneurial white guy is behind this crazy, insulting charade. Any simpleton that buys a commemorative coin, should ask themselves WHY??? What could possibly be meaningful about owning a silly coin with Obama’s picture on it? How about a commemorative plate? My guess… same stupid white guy scheme… And you know, what really bugs me is that Obama must approve of these silly trinkets to bear his likeness. otherwise, I doubt this could be sold. Who is this Obama guy? I am a lowly worker bee, and I would never allow some charlatan to hock my likeness simply to make a fast buck… yet Obama does? To be honest I don’t recognize this country anymore… what ever happened to common decency and integrity? Today it seems the guiding principle this country subscribes to is: “Anything for a buck… including a Senate seat”.
Chuck Tyson's Texas Tea 