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    Danny Cardwell's picture

    The Commerce Clause And Rising Oil Prices

    Article I - The Legislative Branch
    Section 8

    Clause 3:

    To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

    “The authority to regulate commerce includes the right to control nearly all areas of the national economy.”

    Chief Justice John Marshall 1824

    The Commerce Clause was never clearly defined until 1824 when the Supreme Court heard the case of Gibbons v. Ogden. The case was the result of exclusive rights to the steamboat industry in the state of New York. The court ruled that the federal government, not the states had the power to regulate commerce across state lines. This case and the majority opinion was the birth of bureaucratic government regulatory agencies.

    The 115th Congress was sworn in on January 3rd with the goal of repealing Obamacare, rolling back regulations on businesses and capital markets, and restoring law and order. The Commerce Clause, at its best, is a reactionary tool used to protect citizens from the criminal intent of those in the business of increasing the profits of large corporations and financial institutions. In theory, once a particular form of graft has been detected, congress would investigate the inner workings of said criminal activity and produce laws preventing others from being injured by such behavior in the future. None of this is likely to happen under the Republican leadership.

    A decade after signs of the impending crash of the real-estate backed securities bubble started emerging, the GOP leadership has promised to eliminate many of the regulations put in place by the Obama administration. Based on the last 6 weeks of activity in capital markets, Wall Street is feeling pretty good about their prospects for 2017. We’re likely to continue seeing value added to capital markets throughout the calendar year, but what kind of long-term pain are the American people in for once the band stops playing?

    I’m certain oil prices are going back to 2008-2009 levels in the next 18 months to two years. I offer two points to support this claim: 1. Donald Trump’s pro-Russian sensitivities combined with the fact his cabinet is filled with plethora of pro oil climate change deniers make it likely he will use executive orders to lighten regulations on the oil industry. 2. We have a Republican congress that can roll back regulations on financial market speculations. I think we are going to see synthetic CDO’s based on oil futures drive oil prices up. The price of a barrel of oil closed at $53.99 on 1/6/17 that’s almost twice as high as the low mark in 2016. In fact, 2016 was the cheapest year at the pumps since 2004.

    Cheap oil prices are hurting Russia and Iran, (as well as Saudi Arabia, Venezuela, and Nigeria) but Russia is better situated to benefit from a Trump administration than any of the other oil producing nations. Russia is likely to get sanction relief while Iran is likely to face more sanctions. Both nations would benefit from higher oil prices, but for the Russian economy to get relief oil only has to reach $100.00 dollars a barrel; Iran needs oil to get to $130.00 a barrel to put their annual budgets back in line. I believe the Trump administration will use more sanctions and tough talk against Iran to distract the media from their efforts to help the Russian economy. I also believe the media will continue doing a poor job of covering the stories that have an impact on the lives of most Americans; while the right hand is working with the Russian government the media will be busy covering the left hand tweeting.

    We are likely to have a Presidential cabinet in place that has avoided the kind of congressional scrutiny we’ve seen in the past. According to Joy Reid’s reporting, “many of the key appointees haven’t filled out ethics and financial disclosure forms for proper vetting to take place.” Jeff Sessions is a great example of a useful distraction; while his confirmation hearing is likely to be the one most covered by the media, his agenda for the Justice department could be easily fulfilled by a number of less known and controversial white supremacists. In other words, what we know about him and his racism will ultimately be less damaging to the long-term financial health of our nation than what we don’t know about the economic interest of Donald Trump and many of those around him.

    Anyone with oil holdings in their portfolio will see a real boom before the next bust. We’ve been down this road before. Over the next few years we could very well see a continuation of the Obama recovery. The Federal Reserve will incrementally raise interest rates, but the cheap money policies that fueled the recovery will be replaced with pro-business deregulatory policies that offer favorable returns to those at the top of the economic ladder while providing little, if any, relief to those of us who will be paying for the impending tax cuts and the border wall with Mexico. The 115th Congress will use their ability to create or destroy regulations to shape the next decade. Based on the Republicans historical record that should give all of us pause, but then shake us into action. Instead of ruminating on 2016, maybe it’s time to come up with plausible strategies for our fight in 2017? 

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    Comments

    Thanks Danny.  High prices for oil on the commodities markets help lots of bad actors - petro-dictators, fossil fuel extractors, refiners, and distributors, pipeline operators, etc. - the best way to screw all of them is to tack a $5 gallon tax and rising on gasoline at the pump with all revenues rebated to the American people via a monthly check from the IRS.


    ??? A monthly check from the IRS for how much? $5 for every gallon of gas sold run through all the gas station operators, charged through Visa/Mastercard/Discover/AmEx, then recycled back to the people after how many months?

    And why are all these oil industry players "bad actors"? Refining oil is on the same level as "petro-dictator"? Distributing gas is evil, as is managing a pipeline? Then why are the American people getting money back for driving? Shouldn't you "screw all of them" too?


    If you define evil as destroying our biosphere, causing the 6th great extinction, falsifying data, and denying science, yes they are evil.


    What's your role in this, your mum and dad's, your neighbors', your town's? On one level they're just giving us what we ask. We want birthday cake every day, they bring it - blame them cause we're getting fat or the candles set the house on fire?


    I am not a perfect person.  I consume fossil fuels.  I do the best to consume as little as possible.  I bike and walk as much as I can.  I use public transportation whenever possible.  I keep the heat down in the winter and a/c off so long as I can bear the super-charged by AGW heat in summer. 

    I also urge people to vote for candidates who will change the current paradigm by incentivizing the production of clean green energy and disincentivizing the production and consumption of fossil fuels.

    We live in a society where most people have little or no control over their environment.  A few extraordinarily wealthy and powerful people continue to push us in the worst possible direction purely out of self-interest.  If that's not evil, what is?


    But you still consume, yet you call those in the energy business evil. Should they cut you off cold turkey.

    Rockefeller et al had no idea about global warming over a century later - were they evil too? What year did all non-green energy jobs become evil? Does that include energy supplying hospitals and old folks homes and blood banks? What about ambulances and fire trucks?


    Is your argument that only those who live in yurts can call the profiteers in the extraction industry evil?  I think you are saying that b/c I - a proud Prius owner - live in a society where it's nearly impossible, if not impossible, to survive without consuming fossil fuels, I am as culpable as people who choose to drive hummers who themselves are as guilty as the former CEO of ExxonMobil who funded climate deniers and stymied every suggestion that the corporation move towards renewables.  https://www.theguardian.com/environment/2015/jul/15/exxon-mobil-gave-mil...  I reject that argument in whole.

    Again, if super-rich people who deliberately ignore, or worse fund deniers of, basic science demonstrating that fossil fuels are burning up our planet only so they can become even richer aren't evil, who is?  We can add that these corporate chieftains and their lackeys are also responsible for destroying the environments and the livelihoods of millions of people as well.  http://www.aljazeera.com/news/2016/11/shell-sued-uk-decades-oil-spills-n...

    One last remark.  It seems to me that your universal guilt argument is really a way for you (and others) to avoid facing the monstrousness of those few who are driving energy-policy for their own ends and against those of biodiversity on this planet.  B/c everybody does at least some harm to the environment, you contend none is allowed to criticize even the worst malefactors.


    Every morning I get up & use the crapper (if lucky).

    I've no idea how to eliminate (sorry for pun) my role in polluting the environment.

    I've suspected since nursery school that this behavior is filthy and bad, but still, I can't quit it.

    I've been criticized a lot!!! My poop *does* stink!!! But yet I go on still!!!

    Of course you're allowed to criticize me. Just tell me how to do better.

    I don't want to be a blight on humanity. Even my gasses are non-green (not to mention my solids - yech).

    So tell me, how do I improve? I suspect the pizza shop around the corner is complicit, as is the Dorito chain and the Chinese takeout. Someone should shut them down - they're just making a buck off of fouling the planet.


    Danny's projections about oil prices rising due to the Trump effect were interesting so I looked at what the folks at oilprice.com had to say. The Russians are projecting oil at $40 a barrel this year and $45 the next year so supply and demand are still the factors controlling oil prices not speculation or regulation. Reduced regulation may produce some improved profits but has no effect on the continuing oil glut and slowing demand holding down prices. Even the cuts announced by OPEC that caused the recent spike in price won't last because they are mostly paper cuts and increased production from Libya, Nigeria and OPEC cheating will leave the world with a glut of oil for the foreseeable future.

     

    Perhaps Donald could send Vlad a new US made Ford SUV full of Trump steaks and wine as a conciliation  gift for not helping with his oil price problem.


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