Releasing the Crude

“Kilometers are shorter than miles. Save gas, take your next trip in kilometers.” --George Carlin

In an attempt to stabilize global oil supplies and reduce energy prices here in the United States the Obama administration is leading an international effort to release 60 million barrels of crude oil reserves to world markets.

The 28 member-states of the International Energy Agency (IEA) have made the decision to release the reserves after several weeks of secret talks. In addition to the situation in Libya, this action was also designed to increase the oil supply while lowering prices. The strategy worked immediately as the spot price of Brent crude fell 4.2% to $108.08 per barrel, while the spot price of West Texas Intermediate (WTI) crude was reduced 4.6% to close at $90.65 per barrel.

The total amount of oil to be released—60 million barrels over 30 days—is relatively trivial since the world consumes more than 89 million barrels each and every day. The reason for any significance at all is because half of the 60 million barrels will be drawn from America’s Strategic Petroleum Reserve, a failsafe pool that American presidents have access to in the face of oil supply disruptions that threaten either the economy or our nation’s security. If the President goes through with this plan fully, it will only be the third time the Strategic Petroleum Reserve has been tapped since it was created following the 1973-1974 Arab oil embargo. The other two instances were the 1991 Gulf War and Hurricane Katrina in 2005.

Even more important, is the signal it sends to the Organization of Petroleum Exporting Countries (OPEC) that the world’s consumers will not simply stand by and watch as global economic recovery is threatened by high oil prices. At a meeting earlier this month, OPEC members failed to ratify an agreement to increase oil production as a way to replace the lost production caused by the Libyan crisis. After the meeting however, Saudi Arabia and the Persian Gulf states split from the rest of OPEC and agreed to produce up to 1.5 million barrels of oil daily until the end of 2011.

Meanwhile, back in America, as the government attempted to explain its reasons for tapping into our own reserves, U.S. Energy Secretary Steven Chu said “We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery.” He went on to add “As we move forward we will continue to monitor the situation and stand ready to take additional steps if necessary.”

Prices were already falling at America’s gas pumps during the IEA’s debating of the oil release. The average price of a gallon of regular fuel has fallen to $3.61 compared with $3.83 in May. Last year at this time a gallon of gas cost $2.74.The IEA nations involved in the oil release will review its impact after 30 days as part of an effort to determine whether additional releases are required.

Energy stock declined broadly at the news of the oil release with most energy indices falling more than 2%. The IEA announcement was not the only news of the day however. The US Labor Department also released news of greater than projected unemployment insurance claims, and the Federal Reserve lowered its expectations for economic recovery and future growth.

With the economy struggling as it is, some economists maintain that a decline in oil and equity prices is to be expected. President Bush’s decision to tap the Strategic Petroleum Reserve in 1991 is widely credited with calming an oil market that was whipping itself into a frenzy. When Iraq invaded Kuwait on August 16, 1990, the two nations combined were producing 4.3 million barrels of oil a day. That loss, combined with threats to Saudi Arabian production, pushed oil prices from below $18.00 per barrel in July to a peak of $46 that October, an increase of 155% in just three months.

Most of us remember that fateful day, January 16, 1991, when the U.S. and its allies launched their first attacks against Baghdad and President Bush announced that the U.S. would begin releasing oil from its Strategic Reserve as part of an international effort to minimize world oil market disruptions. Within three months, the Gulf War was over and the price fell back to between $18.00 and $19.00 per barrel.

There is no doubt that some of you may be asking the question: Why now? The war in Libya has been raging since the middle of March and as mentioned above, Saudi Arabia and other Persian Gulf states have decided to increase their production to take up the slack. High gas prices have taken a big bite out of President Obama’s popularity so you may be thinking this latest move is more about getting re-elected than some strategic decision to tap America’s oil reserves.

The reality is that no matter what you and I think, it is happening and if nothing else, it is another reminder that American oil reserves are near record highs. Together, the Strategic Reserve and America’s commercial stockpiles currently hold approximately 1 billion barrels of crude oil, compared to an average of 900 million barrels since 1982. The nation has a lot of oil on hand in case of an emergency which should discourage any oil company’s attempt to cause any artificial price spike.

Another reality, and one that is more sobering, is that the United States government has released some very disappointing economic data over the past few weeks. Europe is not doing much better with countries like Greece on the verge of total economic collapse. The so-called “Arab Spring” despite its absence from today’s headlines, is also still very much alive and is being driven by continued protests in Syria whose heroic citizens by their example are fanning the flame of democracy throughout other Middle Eastern states. For once, uncertainty in the Middle East is not a concept made up by American oil companies—it is a reality.

Finance Magazine recently stated that “The global oil machine is a complex beast, but at its heart is simple supply and demand.” While that observation left out the issue of greed, this new release of oil from America’s reserves will add supply in a definitive way which will result in lower prices at the pump—at least for now.

Who said this is easy?

Michele Bachmann for President?

This past week, a Republican Congresswoman from the State of Minnesota announced her candidacy for the Presidency of the United States during a CNN televised debate between Republicans who are all seeking that same office.

Michele Bachmann, a veritable lightning rod for the Tea Party finally stated out loud what many had been thinking for some time—Congresswoman Bachmann will run for President. Does this mean that Sarah Palin will not run? Probably. It appears that she is making too much money at FOX and enjoying her pundit status more than if she ran for office—even if it were for the presidency. So, by hook or crook, Bachmann is the new attack dog for the right and does she ever have a bite!

Here are two examples of her ability to bite: (1) In advance of the 2010 national Census, Bachmann told the Washington Times that she would break the law by not completing the census forms. “I know for my family, the only question we will be answering is how many people are in our home. We won’t be answering any information beyond that, because the Constitution doesn’t require any information beyond that.” Sounds like something Timothy McVeigh would have said. Or, (2) While testifying in front of the Minnesota Senate in 2005, Bachmann said, “Literally, if we took away the minimum wage — if conceivably it was gone — we could potentially virtually wipe out unemployment completely because we would be able to offer jobs at whatever level.”

It gets worse……

Back in March 2011 when speaking to students and conservative activists in Manchester, New Hampshire, she complimented the crowd by stating, “You’re the state where the shot was heard ‘round the world at Lexington and Concord.”Of course, the Lexington and Concord Congresswoman Bachmann referred to are in Massachusetts. Marxist and socialist follower of Barack Obama that I am, I know where Lexington and Concord are, having even visited the historic site to learn and pay my respects. I suppose that as far as Bachmann is concerned, my doing that only proves that I am a left-winger who loves hanging around with other liberals in Massachusetts.

Barely a week later, the lady from Wisconsin showed the world that she is indeed a historian of the highest magnitude when she touted the “different cultures, different backgrounds, different traditions” of the early European settlers in America, adding that the “color of their skin” or “language” or “economic status” did not keep them from seeking happiness.

“Once you got here, we were all the same,” she said. “Isn’t that remarkable? It is absolutely remarkable.”

The Republican Congresswoman then went on however to refer to slavery as an “evil” and a “scourge” and a “stain on our history.”

“But we also know” she assured us, “that the very founders that wrote those documents worked tirelessly until slavery was no more in the United States with men like John Quincy Adams not resting until slavery was extinguished in the country.”

We all know (I hope) that slavery was an American institution lasting for generations AFTER the founding of our country in 1776, largely due to a compromise reached at the first Constitutional Convention establishing black Americans as three-fifths of a person (the three-fifths compromise). Of course, many of those same founding fathers were also slave owners.

The somewhat scary revelation regarding this “error” is the indication that Michele Bachmann has convinced herself that while slavery was indeed a “scourge” she has been also able in her mind to minimize its effects on black people specifically and the country in general. This attempt to minimize something as evil as slavery is actually more frightening and offensive than the mere fact that she was historically incorrect.

Mrs. Bachmann is also adept at what we used to call in sales, “changing the base.” In other words, if a customer complained that a product a salesperson was attempting to sell them did not come in green, the response would be to say, “Yes, it does not come in green, but it does have a three-year warranty.”

After her initial attempt to change the geography of the American Revolution, she shared on her Facebook Page, “So I misplaced the battles Concord and Lexington by saying they were in New Hampshire. It was my mistake, Massachusetts is where they happened. New Hampshire is where they are still proud of it!”

In the end, what is truly frightening is that Michele Bachmann has a firm grasp on right-wing grievance politics. She is better at it than other tea partiers because somehow movement grievances get confused with her own grievances so it is always about her and then she deftly makes it about her followers. And to her constituencies, historical ignorance is a good thing because it just proves that she does not blindly accept American history as it is portrayed by those left-wing zealots who hate America and everything about her.

Are you ready? Congresswoman Bachmann will have to give up her seat in order to run for President and she could win the nomination.

Say it ain’t so!

Memories

"It’s surprising how much of a memory is built around things unnoticed at the time”
--Barbara Kingsolver

Congress People, U.S. Senators, Cabinet officers, policy makers, journalists, bloggers and just about everyone else in the political universe of Washington have incredibly bad memories. The last time that the United States balanced its budget was just a decade ago. Even though this is not ancient history, almost no one in a government leadership position, in Congress or the U.S. Senate, or even in the media seems to remember how our great country managed at that time to go from large deficits at the start of that decade to a government with large surpluses ten years later.

Since our government is politically facilitated by a two-party system (even the Tea Partiers are wolves in Republican clothing), there are of course two versions to the story: A Republican one and of course a Democratic one. For the Democrats, President Clinton is the hero of the day. In this version, his decision to raise taxes in 1993 and to simultaneously reduce spending was the key to balancing the budget.

For the Republicans, the hero is Newt Gingrich (I know, it is almost impossible to believe). In this version, the Republican Congress that took power in 1995 after a rousing victory at the mid-term polls (sound familiar), demanded severe spending constraints. These constraints were ultimately the primary cause of the budget being balanced.

As always, there are the facts to set everything straight and as most attempts at determining the truth of a historical event go, this one is relatively easy.

In the spring of 1996, the non-partisan Congressional Budget Office (CBO), whose numbers are taken as the gospel in Washington, projected that the government would have a deficit of $244 billion in 2000 or roughly 2.7 percent of our nation’s Gross Domestic Product (GDP). Instead, the government actually experienced a budget surplus in 2000 of almost the same size. This created a shift from deficit to surplus of more than five percentage points of GDP, an amount that in our current economy would equal $750 billion.

The reason we begin with 1996 is that this is when President Clinton’s tax increases and spending restraints were all in place and it was also just after all the spending restrictions put in place by the Gingrich Congress had been passed into law.

So, even though the CBO was aware of all the deficit reduction measures being deployed by both political parties, it still projected a $244 billion budget deficit for 2000. Interestingly enough however, the changes to the budget in the subsequent years were opposite of what was expected. According to the CBO’s assessment, the legislated changes between 1996 and 2000 actually added $10 million to the budget surplus.

The phenomenon that got the United States from the large deficit projected for 2000 to the surplus that we actually experienced that year was much stronger than the projected growth. The CBO stated that growth would average just 2.1 percent when it actually averaged almost 4.3 percent. Even more critical, instead of ending the period with an unemployment rate of a projected six percent, unemployment in 2000 averaged only four percent.

It would be helpful if those in Congress, particularly the tea partiers, would pay more attention to history, since it would demonstrate to them that despite their manic concern over the deficit as opposed to spurring economic growth, it is economic growth that just might be the best way to lower the deficit. There is one constant in the history of industrialized nations: It is all but impossible to balance a nation’s budget when it is shackled with an unemployment rate of more than eight percent.

If, through stimulating the economy, we could bring the unemployment rate down to pre-recession levels of five percent, we would make huge steps in the direction of a balanced budget with no real need to slash and burn.

If the Paul Ryan’s and Michele Bachmann’s of the world could remember back to the 1990s then they might be pushing more aggressively for measures to spur growth. This would include not only more fiscal stimulus, but also more action from the Federal Reserve Board. The Fed, love them or hate them, has consistently been restrained in its attempts to boost the economy because of the incessant whining of the Republican right in Congress and now on the campaign trail.

The Fed, together with the Treasury and with the encouragement of Congress, should be pushing for a de-valuation of the dollar. A fiscal policy that is explicitly designed to reduce the dollar’s value would at the same time provide a boost to net exports, consequently helping to enable economic growth.

Finally, if the Fed opted to hold the bonds that it has purchased through its various quantitative easing programs it could then directly reduce the deficit. This would happen because the interest paid on these bonds is paid to the Fed and then refunded to the Treasury. It therefore creates a no net interest burden to the government. If the Fed bought and held $3 trillion on government bonds, it would lead to interest savings of close to $1.8 trillion over the course of the next ten years.

If our frenzied deficit reducing Congress people and Senators had better memories along with some creativity, we would all be talking about things like faster grown and increasing the Fed’s holdings of government bonds. But alas, we are instead talking about the privatization of Medicare, block granting Medicaid, cutting Social Security, and cutting as much out of the federal budget as possible.

That is what happens when a small but extremely vocal group of people seize control of the issues and subsequently the media and they say things like, “I find it interesting that it was back in the 1970s that the swine flu broke out under another, then another Democrat president, Jimmy Carter. I’m not blaming President Obama now I just think it’s an interesting coincidence” (Michele Bachmann speaking on the state of the U.S. economy, April 28, 2009).

Huh?

It Must Be Getting Close to Election Time

On June 1st, Secretary of the Interior Ken Salazar sent a letter to the Director of the Bureau of Land Management reversing his December 2010 order to make millions of acres of public land eligible for wilderness protection. The December order had reversed the Bush administration’s 2003 policy which had opened up western federal land to commercial development.

Salazar’s memo stated that on April 14, 2011 the United States Congress passed an appropriations bill which included a provision prohibiting the use of appropriated funds designed to facilitate the December order.

As you might imagine, environmental groups are angry and upset over the Obama administration’s reversal. William Meadows, president of the Wilderness Society, expressed their anger by stating, “Without strong and decisive action from the Department of the Interior, wilderness will not be given the protection it is due, putting millions of acres of public lands at risk.”

In addition to Meadows’ comments, a letter was sent to Congress with signatures from more than 50 conservation and recreation representatives from six western states which stated in part, “Rural counties with wilderness or other protected federal lands experience greater economic and population growth than those without wilderness.”

The Outdoor Industry Association added that “A decision by the Department of the Interior today to not implement the Bureau of Land Management Wild Lands Policy threatens the very infrastructure supporting the nation’s recreation economy.”

The Southern Utah Wilderness Alliance (SUWA) probably said it best however. in a press release—their response to the Salazar memo, stated, “Repeal of the No More Wilderness policy should have been the Obama administration’s top priority for public lands when it won the 2008 election. Instead, the administration dithered for nearly two years before reversing the Bush policy—sort of. It issued new, weak guidance—the Wild Lands policy—which was better than nothing. Today, they’ve retreated to nothing.”

As every conservationist in this country would agree, Secretary Salazar took the right step in December 2010 when he affirmed the Obama administration’s regulatory obligation to protect millions of acres of lands with wilderness value that are found primarily in the western part of the United States. Secretarial Order 3310 was an important step towards committing the nation to preserve wilderness. Salazar was compelled to issue such an order because the previous Bush administration had literally turned its back on its responsibilities to protect these lands. Essentially, the Obama administration’s Interior Secretary attempted to restore the wilderness policy that Bush overturned, a bipartisan policy that was honored by the five preceding presidential administrations—including the Senior President Bush.

The Republican Congress however, emboldened by the same oil and gas interests that have always opposed any kind of conservation-driven Wild Lands Policy, along with the new phenomenon of everyone jumping to the drum beat of deficit reduction before anything else, passed a rider in this year’s budget that was designed to restrict protection. While the rider defunded certain aspects of the Wild Land policy, it did not however, change the fact that these lands were still required to be managed as wilderness as explicitly provided for under the law.

In his zeal to strike the pose of the compromiser, President Obama has also agreed to work with some of the most vocal Congressional opponents of wilderness as part of an effort to formulate a consensus driven report that will recommend future wilderness designations.

Consensus is a noble aspiration, but it is difficult to imagine that those in Congress, who have so vehemently opposed the concept of wilderness, are going to all of a sudden be evenhanded in partnering with the administration. Possibly worse, this effort will be ultimately designed to lock out public discourse. Instead, the Interior Department would only seek the opinion of “…members of Congress, state and local officials, tribes and Federal land managers.” Members of the general public would be visibly absent from the table which is totally different from the way current laws govern public lands, driven by regulations that typically require a robust public participation in the process of governing federal land.

The fact that there is so much effort going in to change the status quo of how federal lands are governed must mean that there is quite a bit at stake. So, what is at stake here? Currently there are 245 million acres of public land managed by the Bureau of Land Management (BLM). A coherent wilderness policy would protect the last remaining unprotected wilderness lands, representing a sliver of the total lands managed by the BLM, but still totaling millions of acres of wilderness. Without such a policy, these lands would remain vulnerable to the earth moving equipment of the oil and gas industry as well as off-road vehicle recreation. For example, in Colorado alone, 85% of the BLM lands in Colorado are open to oil and gas development. In contrast, only 205,000 acres (or 1.7%) of BLM lands are currently protected as wilderness.

Why did we let this happen?

The Revolution Will Not Be Televised

For those of you who are at least in their fifties, you will remember the tall, black, baritone-voice of the now late great Gil Scott-Heron who was best known for his 1970 work, “The Revolution Will Not Be Televised” Mr. Scott-Heron breathed his last breath sometime this past Friday, May 27,2011 as a patient at a New York City hospital. The exact cause of his demise is still unknown though as a former drug addict, he had been at war with several health maladies for a number of years. He was 62 years old.

Gil Scott-Herron has the unfortunate distinction of being a referred to constantly as the forefather of the hip-hop genre, but in his own words just last year in a New Yorker magazine interview he said, “I just think they made a mistake.” He also stated in that same interview that he feels that many misinterpreted “The Revolution Will Not Be Televised” which was what anyone who heard his voice on the radio back in 1970 would describe as a diatribe against the mass media and America’s insatiable craving to consume.

In an earlier interview with The Telegraph in February of 2010, Mr. Scott-Herron said that “People would try and argue that it was this militant message, but how militant can you really be when you’re saying the revolution will not make you look five pounds thinner? My songs were always about the tone of voice rather than the words. A good comic will deliver a line deadpan—they let the audience laugh.”

Gil Scott-Heron began his life in Chicago, but as a teenager, he moved to New York City where he won a scholarship to the Fieldston School in the Bronx after his teachers noticed that he was a talented writer and storyteller. Felix Adler, the noted philosopher and humanist and also the founder of Fieldston explained the mission of his school by stating that “The ideal of the school is to develop individuals who will be competent to change their environment to greater conformity with moral ideals.”

As a student in this remarkable academic and social environment, Scott-Heron published a murder mystery before the age of 20 entitled The Vulture. While the work failed to reach a large audience, those who were fortunate enough to make its discovery were thrilled by its accurate and vivid depiction of the urban decay and racism in American culture of that time which despite the fact that many refuse to accept, still exists today.

Upon his arrival at Lincoln University, he met his future musical collaborator Brian Jackson and in 1970 they released Small Talk at 125th and Lenox, which included the now famous, “The Revolution Will Not Be Televised.”

Four years later, Clive Davis of Arista Records, signed Gil Scott-Heron and began churning out his music on albums released at least one every year between 1974 and 1982. In a 1979 concert, Gil Scott-Heron shared a Madison Square concert stage with the likes of Jackson Browne and Bruce Springsteen.

In the mid-1980s, Gill Scott Heron fell victim to drugs and was eventually bounced from his contract with Arista. He continued to perform however but had only a single album released between 1982 and 2010. While many hip-hop performers in recent years have borrowed from his works, creating samples, weaving Scott Heron’s artistry into their own music, he has not been pleased. “I don’t want to tell you how embarrassing that can be” he shared with the New Yorker in the interview referenced above. “Long as it don’t talk about yo mamma and stuff, I usually let it go. It’s not all that bad when you get sampled—hell, you make money. They give you some money to shut you up. I guess to shut you up they should have left you alone.”

Despite his constant and ongoing struggle with his addiction to drugs, he continued to perform and in 2010 he collaborated with producer Richard Russell and miraculously they released a kind of bluesy and spoken word album entitled I’m New Here. It is in a word, a masterpiece.
This past week, he had just returned from a European tour when he became ill and checked himself into New York City’s St. Luke’s Roosevelt Hospital Center.

I will miss him.