As we contemplate declining stocks and record oil prices, here is an informative audio of an interview with  Jeffrey Brown, who goes by westexas on The Oil Drum blog. Westexas and khebab developed the Export Land Model, predicting how much oil exporting countries would limit exports in the face of declining production.

The Reality Report interviews Jeffrey J. Brown, an oil exploration geoscientist, primarily in Texas. We discuss the rapid rise in the price of oil, how this is being covered by media, political reactions, and the need to transform from an economy of mass global consumers to one of local producers. Jeff Brown’s website is: http://graphoilogy.blogspot.com/

Citing the tech bubble, housing bubble and investment scandals, many people see high oil prices as yet another bubble, fueled primarily by legions of gullible new investors. Econbrowser's James Hamilton believes that speculation plays a role in higher oil prices, but asks:

How big a contribution could oil speculation be making?

    A key reason why oil prices have been going up is that Asia and the oil producing countries are consuming more while global oil production has stagnated. That means Europe and America had to consume less, and a very high price proved necessary to accomplish that.

    I do believe that speculation has been another factor that contributed to recent high oil prices. However, a key element of the bubble story is that there needs to be a very limited response of quantity demanded to the price increases, which the most recent data persuade me is no longer the case. Some of the estimates I've been hearing of the size of the contribution speculation is currently making to the price are therefore difficult to defend. Here I explain why, essentially elaborating on Paul Krugman's theme.

<snip>

    We were only able to buy 19.9 mb/d in the first quarter when we offered a price near $100. So why would it have been possible to secure the 21 mb/d that consumers would likely have wanted at a price of $72?

    Given these data, I think it is impossible to argue that the volume of futures market purchases alone could be the reason why oil prices went up this year. A key and necessary element of any speculation-based interpretation must be some explanation for the factors governing the physical quantity of oil being supplied to the market.

    We're hearing from a number of experts asserting that there's no reason why the oil price should have gone up. I wish one of them would tell me where an extra million barrels per day in supply is supposed to come from.

Court Spares Exxon $2 Billion In Damages From Valdez Spill

The Supreme Court on Wednesday slashed the $2.5 billion punitive damages award in the 1989 Exxon Valdez disaster to $500 million.

Not that they were ever gonna pay it anyway. Voting was 5-3, Stevens, Ginsburg and Breyer dissenting and Alito abstaining because he owns Exxon stock.

From today's WSJ, Campaign 08

McCain Challenges Auto Makers on Fuel Efficiency

He proposes $5,000 tax credits towards the purchase of Zero Emissions Vehicles and a $300 million prize for a longer-range battery, which will be necessary to make EVs more than short range urban vehicles. The more I look into EVs the more I find batteries to be a very tough nut to crack. Whereas a tank of gas doesn't care how far you commute, a given battery will work best at a particular discharge percentage. If you happen to commute just far enough to discharge the battery correctly, that's great - otherwise you could be spending thousands on replacing batteries for your EV.

Senator's Broad Range of Energy Policies Defies Categories

"Sen. John McCain is putting energy policy at the center of his presidential campaign ..." but the list is long and contradictory. Subsidizing wind, solar or ethanol "distorts the market," but he's in favor of subsidies for nukes and clean coal because, "We know clean coal is a winner." He wants to (temporarily) lower the gasoline tax, but favors a cap and trade that would raise the price of gasoline. He's for penalizing luxury car makers that fail to meet CAFE standards, but he's opposed CAFE standards in the past. He opposed drilling in ANWR, but now he's for drilling offshore.

Obama Tilts Toward Center, Irking Some Activists

Obama's stances on FISA and corporate taxes are seen as a strategy to challenge McCain for the center.

Many, many government officials and media pundits have blamed "speculators" for rising commodity prices, but as Huffington Post reports:

(Energy Secretary) Bodman disputed that assertion Saturday, saying oil production has not kept pace with growing demand, especially from developing countries like China and India.

"Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing prices and increasingly volatile prices," Bodman told reporters. "There is no evidence that we can find that speculators are driving futures prices" for oil.

He said commodities markets have experienced a huge influx of money from financial investors in recent years, but they have been following the market upward rather than driving the increase in the price of oil.

They make handy bogeymen, but these speculators are essentially traders in a free market. They bet on prices going higher, on prices going lower and a bewildering array of other variables as well. And they lose money when they bet wrong. To argue against speculation is to argue that we should move away from free market pricing and towards subsidized pricing, like China and India, or even towards a planned economy, like the failed Soviet Union.

NY Times reports that former auto and airline passengers are flocking to an Amtrak that is unprepared for heavy use. The public rail service needs funding for more routes and railcars, which has not been forthcoming from Congress. Like other carriers, Amtrak has been stung by the cost of fuel.

Last year Senator Frank Lautenberg, Democrat of New Jersey, and others won overwhelming Senate approval for a bill that would offer the states 80 cents for every 20 cents they spend on new intercity passenger rail service, the same as the match offered for highway projects.

The House passed a bill with the same provision by a veto-proof margin earlier this month. The bill will soon go to a conference committee, but the White House is threatening to veto it because it wants the passenger rail system to be turned over to private operators.
...
Amtrak’s fortunes also hinge on who wins the White House; Senator John McCain of Arizona, the presumptive Republican nominee, was a staunch opponent of subsidies to Amtrak when he was chairman of the Senate Commerce Committee. Barack Obama, the probable Democratic nominee, was a co-sponsor of the Senate version of the bill to provide an 80/20 financing match.

Good summer for a 'staycation.' BTW once again, I formatted the entire article only to be told I wasn't really logged in.