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Financial Markets

Energy Security and the Regulation Imperative in a New Economic Era

by: redwill67

Sun May 02, 2010 at 12:15:58 PM EDT

Another excellent article on Energy Security and Regulation! Enjoy!

Energy Security and the Regulation Imperative in a New Economic Era

Did the economic crisis stabilize oil prices? What is the future of energy security? Has China bypassed the United States in the green energy revolution? How will the global community approach the "fourth corridor" pipeline in relation to Iranian power and Russian resurgence?

Dr. Daniel Fine, research associate at the Massachusetts Institute of Technology's Mining and Minerals Resources Institute, addressed a diverse set of energy-related questions at The Fletcher School on September 15. The presentation was part of the International Security Studies Program Global Speaker Series.

Dr. Fine indicated that Saudi Arabia views the current price of oil, roughly $70-75 per barrel, as reflecting a price that is both fair and natural. The 2007-2008 price spike, which increased the per barrel price 220% over its 2005 level, was accompanied by a mere 2.5% increase in consumption. According to Dr. Fine, this undermines the oft-cited argument that consumption spikes drive price increases.

The real story of runaway oil prices, Dr. Fine said, lies in the enormous amount of available credit in the 2007-2008, which allowed speculators to buy and hold massive reserves, disturbing traditional forces of supply and demand. Combined with a global finance system that neglected deposits and encouraged rampant buying and a lack of regulation, this perfect storm brought the financial world to its knees in September 2008.

As the global economy shows signs of recovery, Dr. Fine urged the audience to ignore speculators. So-called "geopolitical analysts" on major news shows, he said, are often self-interested frauds with no actual training in geopolitics, serving only to promote a product (oil, gas, or energy) and make faulty predictions.

In the framework of energy security, Dr. Fine cited President Obama's speeches in Cairo and on Wall Street, as evidence of the administration's movement away from hard power "oil politics" and toward Joseph Nye's conception of soft power. Dr. Fine cited President Obama's Cairo speech as the backbone of a new regional policy in which the United States will move away from energy independence and toward energy interdependence, working alongside the global community and with regulators to ensure transparency.

The new geopolitics, Dr. Fine noted, focus on the location of and environment that surrounds oil supplies. He indicated that this symbolizes a shift from "great salesmanship" to true political geography with an associated acknowledgement of the reality of sector specific risk. In this context, Dr. Fine discussed the "fourth corridor" pipeline route, popularly known as Nabucco, which will stretch across the Caspian Sea to Austria. Turkey's attempts to claim 15% of the overall revenue would, if successful, render the proposed pipeline uneconomic, while the tumult in Georgia poses enormous political risk to the project. Russia, which holds a virtual monopoly on European natural gas supply and is dabbling anew in great power politics, is vehemently opposed to Nabucco. This is one of the reasons, Dr. Fine stressed, that Russia does not want to see regime change in Iran; the current anti-Western hard line ensures Iran's illegitimacy in the West and thus prevents Iranian oil sales to Western powers.

Dr. Fine also touched on China and its crucial coal factor. China will inevitability decline the carbon emissions cap to be proposed at COP15, and India, along with other developing powers, will follow suit in rejecting emissions caps. But Dr. Fine argued that China's emphasis on carbon capture synchronization, or CCS, demonstrates its relative advantage over the West in certain green energy issues.

Dr. Fine concluded by citing President Obama's recent hard-line regulation speech on Wall Street as an outline of future policy. If regulation fails, Dr. Fine indicated it is likely that a pricing bubble will return in concert with a buying surge. But with regulation, and with stringent enforcement by both the U.S. and Europe, a permanent cap on oil prices can be established that will maintain transparency and coincide with the fair and natural price.

Elise Crane, F11

http://fletcher.tufts.edu/news...

Discuss :: (0 Comments)

Fine: Lehman Brother's, others drove oil barrel prices up Expert blames speculation for price vola

by: redwill67

Sun May 02, 2010 at 12:08:35 PM EDT

An excellent article!

DELETED to to fair use violation.

Discuss :: (1 Comments)

On Crying Wolf, Or, Why I Don't Want To Give You $700 Billion

by: fake consultant

Wed Sep 24, 2008 at 17:11:18 PM EDT

As this is being written we are in the midst of the second day of testimony before Congress by Ben Bernanke and Henry Paulson in support of the Administration's proposed financial rescue package.

The basic sales pitch is that the Nation's financial problems are at this moment so severe that the only solution is to expose to risk $700 billion dollars of taxpayer money to buy assets with a currently unknown price...and to give the absolute and total power over what those valuations are, what should and should not be bought, what repayment terms will be sought-and additionally, what happens to any money recovered--to one man, Henry Paulson.

There are those who are not on board. They have critics, who continue to stress the dire consequences of inaction.

With all due respect to those critics...we have been down this road before with this Administration-and last time, they weren't so big on telling the truth...or getting the job done effectively.

We'll cover that ground, we'll talk a bit about "mark to market" issues-and on a positive note, we'll address the role of "warrants", the negotiating power of Warren Buffett, and how the taxpayer could actually see substantial recoveries of money down the road.

There's More... :: (1 Comments, 1694 words in story)

On A Way Forward, Or, Practical "Subprime Crisis" Solutions

by: fake consultant

Tue Sep 23, 2008 at 10:11:35 AM EDT

AUTHOR'S NOTE: This was originally published on February 14th of this year, but it seems to be exceptionally timely today.

We had a lively discussion last week regarding the causes and possible future of the "subprime crisis" that is on everyone's lips these days.

Having examined the sources of the problem, and noting the lack of holistic thinking about how things might be resolved, I've taken it upon myself to come forward with an idea that can actually get at the root causes of today's difficulties...and do it in a way that offers a potential "win-win-win" outcome for homeowners, investors-and the taxpayer.  

Paying attention, Presidential candidates?

Good-because time is short, and we need to get to work.

There's More... :: (1 Comments, 1512 words in story)

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