Let's play a game; drill, drill, DRILL, even if it doesn't make a difference.

It wouldn't impact it enough.

If the Fed announced QE3, for example, that would raise the price of oil $10 overnight. Drilling ANWR dry would lower it by $1.20, in the best-case scenario.

This isn't tree hugger logic. This is Goldman Sachs logic. You think Goldman analysts look at the United States oil supply as anything significant to determine their investment in oil futures? If you do, then there is really no hope for you in terms of understanding how this system works.

FYI, a coordinated PLANNED release of strategic reserves got the oil price down $3 a barrel recently, which is more than drilling all of Alaska could conceivably do.

Also, talking about stable sources (of which America never could be a significant one anyways, in a market where fundamental supply and demand hardly matter), Canada's oilsands and the North Sea will dwarf America's contribution. You can have your pie and eat it, and let other secure countries drill their way to hell, and rob future generations of cheap oil, without pulling out all the stops to dent $1.20 in the world oil price.

 

Seriously, what has to be the discount rate on the societal value of future generations for people who advocate full-on drilling. Surely no one can think this is finite. What, are we leaving future generations with lumps of coal?

How can people be so short-sighted? It really aggravates me.

 

...I didn't mention that there was a natural gas bubble.

I do blame them for the commodities bubble in general, hence "another bubble".

http://www.foreignpolicy.com/articles/2011/04/27/how_goldman_sachs_created_the_food_crisis

 

This argument has been brought up ad nauseam---it ignores the fact that commodities prices are linked, since they are substitutes. Therefore, as prices rise in one sector, unrelated commodoties in terms of futures markets properties (but related in terms of the actual good they produce) will rise as well as people scramble to meet their food needs.

This is economic theory 101. That people conceived that there was no notion of causality behind futures markets causing price increases because there were price increases across the board...very shoddy analysis. Disappointing this was even published in the Economist.

 

Hold your horses.

If anything, it's even more embarrassing that I'm a student who noticed this---but Kaufman and others have brought this up. If you think it's hubris to bring up that it's shoddy analysis, then so be it. You don't even address the post at hand, but rather point to the fact that I am a student who noticed this (which if anything, makes your argument weaker). If it makes you feel any better, it has also been noticed by Economics PHDs who are infinitely more qualified than I am. I wager they would say the same thing. No one even thought of the idea of substitutes when they said futures markets don't cause price increases? I think that's a pretty glaring weakness, especially as it IS in my Econ 101 textbook.

Anyways, I'm not impressed by the fact "you know these guys" or are "one of these guys" Kaufman demonizes. I would be impressed if you brought points to the table. Instead, all you can say is---I worked in the field, so shut up. As long as it keeps up that way, I don't see why we should be having a discussion, to be honest.

 

Also, I wish I was in Econ 101.

That would make my life a whole lot easier.

 

On your first point, I feel like this sums up my view on things quite well---

Speculators may do no harm as bubbles on a
steady stream of enterprise. But the position is serious
when enterprise becomes the bubble on a
whirlpool of speculation.

-JOHN MAYNARD KEYNES,
The General Theory of
Employment Interest and Money

On the second point---Pigou taxes are discretionary and could be offset and made revenue-neutral by decreasing income taxes in a similar number so that they would have no effect on a consumer except to shift consumer tastes. They can be made progressive by transfers to the poor. A rapid increase in oil prices is an arbitrary and regressive tax that is too steep, and too fast in comparison. Also, a bubble bursts. When we're on the upside, it acts as a terrifyingly fast Pigou tax, while on the downside, it plunges the speculators into ruin, crashes the economy, and gives us cheaper oil than perhaps the fundamentals would indicate (witness $31 oil in 2008).

 

I'm all for penalizing inefficiency in cars, and making it a progressive tax. The Pigou tax could be applied more heavily on the fuel private jets use, just as a quick example. There are ways to design it to try to make it fair, and not so steep. I'm partial to making it revenue-neutral, but that can be worked out too. The important thing is design; contrary to the bubble now, which is anyone's guess.

To be honest, my ideal is to mitigate speculators with regulations, then apply a fair Pigou tax. The public will never accept a tax on top of the wild bubbles that push oil up up up up.