Enabling denial

Last week, the idiocy surrounding the debate over offshore oil drilling convinced me that Matt Simmons’s prediction about Peak Oil issues dominating the 2008 campaign had not yet come to pass.  This week, the hype surrounding “speculators” convinces me that his prediction may not come to pass at all.

In “speculators,” everyone from members of Congress to the king of Saudi Arabia has found an excuse to ignore the supply-demand imbalance that’s at the heart of $138 oil.  It enables denial.

We’ll begin on Capitol Hill, where hedge fund honcho Michael Masters told Congresscritters of every stripe exactly what they want to hear: That if President Bush signs legislation curbing “speculation” in the oil markets, oil would fall to $70 a barrel, and gasoline to $2 a gallon — within 30 days.

Isn’t that just great?  Republicans can enjoy what they see as Americans’ God-given right to cheap fuel, and Democrats can say they’ve put the big bad speculators in their place (never mind that lower prices trash their ideals of encouraging conservation and limiting greenhouse gases).  And everyone can go on denying that world supply is about 85 million/bbl. a day, while demand is 87 million/bbl. a day, and that kind of situation can’t be sustained indefinitely.  (It’s also a handy diversion from the fact these “speculators” are seeking refuge in oil from a falling dollar.  Can’t talk about the value of the dollar.)

Blaming the speculators also plays into the agenda of Saudi Arabia’s King Abdullah.  Recapping a summit he hosted last weekend, the New York Timesreports, “The king spoke of the ‘selfish interests’ of speculators as a primary reason, and urged the gathered ministers to ‘rule out biased rumors’ and to ‘reach the real causes for the increase in price.'”  Rest assured that in King Abdullah’s world, the declining output of his country’s elephant fields — and the difficulties in bringing his newer fields online — has nothing, absolutely nothing, to do with the fact oil is $138 a barrel.  Move along, nothing to see here.

Everyone with a stake in denying Peak Oil, or the fundamental supply-demand imbalance, or whatever you want to call it, gains by trashing “speculators.”

And while you and I pay heed to the real issues, and people who watch establishment media are diverted by talk of “speculators,” the American booboisie who watch Bill O’Reilly learn that the answer to our energy woes are 100-year oil leases for U.S. companies in Iraq and more investment in ethanol.  We are so screwed.

The Daily Reckoning