LOGA Industry Report - Winter 2009 - (Page 15) Market Speculation or Market Manipulation? There are many factors that come into play when the marketplace determines the market price for a commodity. However, the simple market demand and supply factors are the key ones – always have been and always will be, notwithstanding market speculation or market manipulation. If there is a pipeline explosion or a drilling rig captured in Nigeria, the price of oil immediately rises because the unknowing assume that the supply of oil will be disrupted. This makes perfect sense to the unknowing. And, oh, by the way, the price of gasoline will go up as a result of the rising cost of oil. The unknowing – the perfect target for the speculators and manipulators. Oil fell today to $55./bbl – the lowest it has been since January 2007. It took 19 months for the price to rise from approximately $55./bbl to the record setting $146./bbl in July. Within 125 days, oil has fallen back to where it started its climb. Has supply or demand changed that significantly to establish this volatile swing? Yes, demand has fallen off due to the high price of oil/gasoline during the summer months and the current financial crisis, but have those factors really created such a significant drop in this very short period of time? Or is it the work of market speculators and market manipulators? Everyone should understand that this is the result of extreme speculation that does not adhere to any of the market fundamentals. The supply of oil does not change dramatically unless there is a devastating hurricane season such as Katrina and Rita or a major outbreak of war in a foreign oilproducing country that actually affects the supply of oil in a significant quantity. But none of this has happened in the past 19 months while the price of oil has steadily climbed. I firmly believe that the oil market has been victimized by greedy speculators and manipulators whose only interest was their own financial benefit. They have no involvement in the oil industry – they are simply capitalizing on a market that is prone to speculation and manipulation. You only have to look at the recent leasing frenzy in the Haynesville play to see the effects of speculation in a market. The oil industry needs long term stability for the continued development of From the Pipeline Support for the T. Boone Pickens Energy Plan This latest energy crisis should serve as a wake-up call. We cannot afford to stand by and watch as America’s national security and economy becomes more dependent on unstable foreign nations for nearly 70 percent of the oil we use each day. As in the past, this nation has the resolve and technology to overcome this difficult situation. We spend nearly 700 billion dollars every year buying foreign oil, which represents the greatest transfer of wealth in the history of mankind. Even with the current downturn in oil and gas values, this enormous transfer of wealth is unconscionable. The new president of the 111th Congress needs to enact an energy plan that significantly reduces our foreign oil dependency. A reduction by 30 percent within 10 years would be an achievable goal. This would put us on the track toward independence. This plan must include proven American technology and resources; the development of new energy sources; and the expansion and modernization of the national electrical grid to transport renewable energy to homes and businesses. Delaying any further means tacit support for continuing America’s addiction to foreign oil. I urge you to join with T. Boone Pickens and his army of supporters in calling for an Energy Independence Plan to be enacted within the first 100 days of the new administration. Mr. president elect, America is depending on you! Sincerely, State Representative Henry L. Burns District 9 Where is Our Bailout? I have been amused by the politicians on both sides of the aisle who have rushed to the aid of the Wall Street banks and given away some $750,000 billion of our money to save those who caused the harm to themselves. Where was our Congress in the mid 80s when our industry lost over half of the jobs due to oil dropping from $36 per barrel to $12 in one month. Where was our Congress when crude dropped to $9 per barrel in the late 90s? Congress is quick to point blame on “Big Oil” when the prices rise, but they forget us when the prices drop. In the early 80s IPAA had a Young Producers Group that went to Washington DC to lobby on behalf of our industry. We were given talking points on national security, energy independence and other valid points to convince elected officials that they need our industry to survive. One of my earliest appointments was to visit with a newly elected congressman from Harlem who now happens to be the chairman of the powerful Ways and Means Committee. Congressman Rangel was receptive to my visit, listened intently as I made my pitch, and then made the following statement. “Son, there are only five producing states in the country, and forty-five consuming states. We could care less about you folks in the oil and gas industry. We just want cheap gasoline.” It was at that time that I realized I was wasting my time trying to convince Congress to help us. Fast forward to today, where prices are once again on a roller coaster and Congressman Rangel did not get his wish of cheap gasoline. But once again, as we head into the election season, we do not have anyone on our side, so I guess we must do as we always have, pick ourselves up by the bootstraps, and continue doing what we do without anyone to help us but ourselves. Michael H. Woods Woods Operating Co., Inc. www.loga.la | 15 http://www.loga.la
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