Jaded Sage:

Democrat, Republican, Conservative, Liberal, it doesn’t matter. On a day when oil prices rocketed to $140 a barrel based purely on speculation of future oil prices it is time to let your Congressmen know how you feel about this issue. You can guarantee I will be sending out some letters tonight.

From Wall Street Journal’s Marketwatch

Last update: 4:24 p.m. EDT June 23, 2008

Gas could fall to $2 if Congress acts, analysts say

Limiting speculation would push prices to fundamental level, lawmakers told

By Rex Nutting & Michael Kitchen, MarketWatch

WASHINGTON (MarketWatch) — The price of retail gasoline could fall by half, to around $2 a gallon, within 30 days of passage of a law to limit speculation in energy-futures markets, four energy analysts told Congress on Monday.

Testifying to the House Energy and Commerce Committee, Michael Masters of Masters Capital Management said that the price of oil would quickly drop closer to its marginal cost of around $65 to $75 a barrel, about half the current $135.

Fadel Gheit of Oppenheimer & Co., Edward Krapels of Energy Security Analysis and Roger Diwan of PFC Energy Consultants agreed with Masters’ assessment at a hearing on proposed legislation to limit speculation in futures markets.

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Every winter we hear about little old ladies who can’t afford their energy bill and live in small cold apartments. Well, it appears the Ukraine is playing that role these days. Russia’s energy company Gazprom has reduced the flow of natural gas to the Ukraine by 25% because of a delinquent bill. The former Soviet Republic owes Russia $600 million. The Ukraine, by far the largest importer of Russia’s natural gas,  has promised to pay the bill but says the reduction in gas output from Russia is not a major issue since the winter in that generally cold nation has been mild. Some believe Russia’s move was meant to show the region that she plans on continuing Putin’s strong hand. Russia and the Ukraine have a long history of tension culminating in Stalin’s decimation of the population of this largely agricultural country in the 1930s when he starved between seven and nine million Ukrainians after they failed to embrace his policies.

The closing of the oil spiket comes on the heels of the election in Russia of a new President, Dmitry Medvedev, who promises to have a more aggressive foreign policy. Anti-government rallies and dissent have been quashed in the wake of the election. Opposition parties have vocally referred to the election as a sham. Protests from  pro-Putin youths known as the Nashi rallying in front of the US Embassy against the occupation of Iraq and the US’s recognition of Kosovar independence were allowed to commence. Russia  historically has had strong ties with Serbia, the Baltic nation that recently lost the mostly Muslim state of Kosovo. Russia, no stranger to aggression throughout its long history, continues to flex its muscle in the region. The Cold War may be in the history books but that does not mean Russia as a Eurasian power has faded as well.

The free world community made a big mistake when they agreed without reservation to allow Beijing to hold the 2008 summer games. If China wishes to be an equal economic partner they must play fair. China’s currency is artificially deflated to the tune of 40%. The reality is China’s fiscal policy is not only hurting the United States, the European Community is also deeply affected by it. In 2006, the EU imported 191 billion Euros from China and exported 63 billion Euros and the deficit is trending upward. Not only is China undervaluing its currency but they are also pursuing protectionist policies to prevent foreign nations from selling certain products within China. The current dilemma, however, is how to go about punishing China for practicing unfair trade. The logical solution would be to simply place a tariff on imported Chinese goods, say 40%, which would decline in kind with the revaluation of the Yuan. The problem is many Western companies have moved their factories overseas to take advantage of kinder profit margins. To impose a tariff would hurt these companies. So what, you say. They are traitors anyway, right? Well,  many Americans own these companies’ stocks and such punitive measures would cause a ripple through the market. Even if we were prepared to aggressively go after the unequal trade situation, lobby groups would push back hard against such laws. The one area where the West could start to show how serious we are about the situation would have been to stop the Olympics from going to China until fair trade was a reality. Too late now. As we continue to hoard goods on our walls, in our kitchen cabinets, on our feet and in our clothes closet it should not be lost that most carry the label “made in China”. There is no doubt the movement of manufacturing jobs began with adjustment by Walmart to go from their famous slogan of the early 1980s “Made in America” to one in which nearly every product sold there today is made in China. Some say the natural byproduct of globalization is the transfer of manufacturing jobs. I’m fine with that as long as everyone is playing by the same rules.

For a good analysis of Walmart’s role in the loss of manufacturing jobs watch PBS’ Frontline special online: Is Walmart Good For America?

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