China National Offshore Oil Corporation (CNOOC) oil rig in China the Bohai Sea is to see in this file photo of 21 October 2003.
Credit: Reuters/China Newsphoto/FilesBy Matthew RobinsonNEW YORK | Fri 29 april 2011, 1: 40 pm EDT
NEW YORK (Reuters)-for many oil traders, the growing storm of Washington rhetoric about near record oil prices has all the relevance of a good piece of fiction--fine entertainment, but nothing more.
Unlike the imaginary giant Don Quixote is the villain of $ 4 gasoline prices real. Efforts to combat oil prices by President Barack Obama and his Republican opponents in Congress, however, are about as useless as jousting with windmills.
That hasn't stopped them trying.
With consumers fixated on gasoline prices now almost their 2008 peaks and the long presidential election cycle, both sides of the political aisle offer their own solutions to the prices: drilling for more oil; release supplies from the Strategic Petroleum Reserve; more natural gas use in vehicles; studies of markets for manipulation.
And while Obama has worked hard to hope for a short term improvement humor, realism has gradually ceded to realpolitik, forcing him to cooperate with others desperately seeking to see something--even if it's the wrong thing to do.
"What can they do? Nothing, "said Stephen Schork, editor of the Schork report, those involved in physical commodities market trading over 17 years. "This is a market which is basically pushed around by geopolitical events and a lot of money."
Nothing that is proposed is likely to happen, or may have an impact this year, next year or even in five years time, say many experts. If the market mantra goes, ultimately the cure for high prices just high prices.
While American drivers complaining about prices at the pump may be supplemented by $ 4 nationwide this past week, they still pay half as much as consumers in the United Kingdom and other European Nations, thanks to decades of low taxes that the nation's powerful thirst for gasoline have sparked.
"The real problem is that the Americans have a huge appetite for buying oil," said Adam Sieminski, chief energy Economist for Deutsche Bank.
US oil prices have shot to 32-month highs, more than $ 113 per barrel this month with US gasoline prices to within striking distance of the $ 4 a gallon level that helped lead to a decline in demand in 2008. Outside the United States its prices even higher, with more than $ 124 per barrel of Brent crude benchmark.
Traders blame olie's recent emergence on the conflict in Libya, which has reduced from OPEC nation supplies and concerns for potential disruption as a result of the turmoil in the Middle East.
For some, it is the biggest culprit loose us monetary policy, which has the dollar versus other currencies driven and encouraged investors to pour money into riskier assets such as commodities. This has given rise to a relatively new and popular dollar-oil trade, which will see oil prices rise as the dollar goes down.
Politicians have quickly the discussion back to party talking points that seem to come every time oil prices spike.
TALKING POINTS
Republicans blame rising prices on limitations for oil drilling. The Obama administration has pressed for investment in alternative fuels and announced that it was setting up a team to investigate whether speculators are pushing prices around.
A fresh investigation into markets not would probably find widespread price manipulation by speculators, analysts said. They noted that past probes of high gasoline prices by other authorities not large-scale crime show up.
Efforts are already underway to limit buying by passive institutional investors who have flooded the market with 242.6 billion dollars, according to CFTC data released Thursday. But proposals to limit the number of positions that they can keep his widely expected to be high enough to have limited effect.
"The new realities of oil prices is that investors in the market, just as hedgers and speculators in the market," said Sarah Emerson.
Releasing oil from the barrel of 700 million would U.s. Strategic Petroleum Reserve at this stage look more like an overt attempt to drive prices than a response to a disruption of supply in Libya now two months old. This step would probably have little more than a short-term impact, as U.S. oil inventories already relatively high.
Other policy areas, such as cutting tax breaks for oil Drillers could help reduce the u.s. budget deficit and popular with some voters look to big oil companies post strong returns. But it wouldn't lower fuel costs. If anything, this may limit further investment and production to scare off.
Calls to open up for drilling more offshore U.S. acreage not fast would bring in more supplies, and convert the u.s. auto fleet to alternative fuels also would take.
NO EASY FIX
Behind the political bluster is a real economic problem, provided to consumers in giant signs on service stations across the nation at a time when the economy is struggling with a shaky recovery has been strengthened.
The last time gasoline prices hit $ 4 a gallon, the United States was in the midst of recession, and drivers cut back on discretionary driving to compensate.
"I think it is all noise," said Amy Jaffe, Director of the Energy Forum at the Baker Institute of the solutions that are offered by the White House.
"Anything that the President has said except asks Saudi Arabia to increase production is a decoy."
Obama earlier this week pushed world oil producers production to raise prices. But the organisation of petroleum exporting countries has little spare capacity to pump more of the high-quality oil from Libya lost.
In addition, the Group has to produce more crude bullying yielded little success over the last ten years. That may be true more than ever, as producing countries with the steady decline of the US dollar, the currency must they now receive for their oil exports. This decline has come even a huge wave of social spending in the Middle East is bloated budget needs.
OPEC likely to take greater account of the long term damage could do it because prices get high enough to be a global economic recovery than of politics of the USA.
"(The United States), just like other countries, have always declared their concern at high prices. But this is not something that would dictate what OPEC does, "a Middle East OPEC delegate told Reuters.
That time can be better spent trying to encourage the restart of Nigerian oil production of foreign oil companies inactive by years of conflict with the rebels in the Niger Delta--rough thrust into quality Libyan oil.
"Hilary Clinton should be on the next plane to Nigeria," said Sieminski.
(Additional reporting by Amenda Bakr; Edit by David Gregorio)
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