Oil – A Question of Economics

The recent debate over falling oil prices has become an over simplified economic question of supply and demand, ignoring other interrelated economic theories. Despite the global recession and, oil demand has remained at 90-91 million barrels per day (mbd) over the past 5 years. However, due to the recession, Western nations have slowly reduced their demand. Meanwhile low growth, fuel efficiency, and demand in Asia has risen to compensate for this fall. The International Energy Agency (IEA) has reduced its growth forecasts for 2015 suggesting that demand may grow modestly by a 1 mbd to nearly 93 mbd.

Despite the political instability in parts of the MENA region, supply has managed to keep up with demand. This is largely due to the emergence of shale oil in the United States, which has ramped up its production to 8.7 mbd, which is 1 mbd more than last year. Some commentators even suggest that US oil production may reach up to 12 mbd by 2015. Meanwhile, Russia has also been putting record volumes of crude oil on to the market.

A decrease in demand and an increase of supply has caused oil prices to fall over the past five years from an average of $110 to $85 per barrel this year. The oil & gas media are full of doom and gloom about how these prices are unaffordable for the Middle Eastern nations who will now rack up budget deficits if the current price level persists. Some media outlets have even placed the blame of the price fall on OPEC’s shoulders, citing the revival in production in Libya and Iraq for the current demise. OPEC has consistently produced around 30 mbd, reaching a peak in 2012 of 31 mbd and remains near to that today. However, the largest increase in world supply was brought on by the US and its drive for self-sufficiency. The US’s investment in shale oil has lead to an ever increasing supply coming on stream. This ultimately reduces the US’s need for high priced imports, and leaves large quantities of West African oil looking for buyers. Under these conditions, the US may soon be exporting oil into the market, although many commentators remain skeptical that the US export ban will be lifted any time in the near future. Yet with or without the ban, the US is already exporting record amounts of refined products and incidental condensates from its shale oil, leaving great impacts on prices in the oil markets.

With western media suggesting OPEC should reduce production and avoid deficit financing, there seems to be an issue of double standards arising. Should we ask the US to abandon plans to export oil? Surely, the MENA countries could follow America’s lead and ask China to finance its deficit as well and allow market capitalism to run its full course. The competition theory in economics tells us that high costs and inefficient producers will be driven out of the market as prices fall. Doing so would eventually drive out the high cost and environmentally threatening deep water, arctic, tar sands and shale oil fields. In the long run, higher output at lower prices will finance and in due time reduce the deficit of the low cost oil producers. In addition to this, the true cost benefit analysis of these environmentally threatening, high cost shale oil fields might be recognised if we follow this path.

Many economic commentators are failing to see the benefits of lower oil prices. Virtually all businesses will benefit from lower transportation costs by expanding their profit margins or passing the benefit to consumers at lower prices. The lower income groups, who spend a higher proportion of their incomes on transport, will see their disposable incomes rise, benefiting retailers who serve their needs and thereby increasing demand in the economy. Food prices are also likely to fall, as food production, processing and sales distribution are energy intensive activities, thereby benefiting lower income groups further. Increased consumption will stimulate aggregate demand, creating investment opportunities and economic growth. Governments in the west may also have the opportunity to increase fuel taxes to cover the real cost of the negative externalities of carbon emissions, or raise revenue to improve public transportation systems. Furthermore, governments in the Middle East and Asia will reduce spending on their fuel subsidies and may take the opportunity to improve the workings of market forces, which the IMF and Western powers have been seeking for them to do.

As many Western economies are seemingly slowing down again, with most of them still struggling with stubbornly high unemployment levels, they will only benefit from the current sharp drop in oil prices which will stimulate the global economy. Moreover, countries now have the opportunity to replenish stocks and protect themselves against future price hikes. Stockpiling begs the question: how long will prices remain relatively low compared to recent years? Will they fall further? $60 would certainly kick start substantial economic activity or will supply be rained back?
In the past, we have seen the US and its Western partners put pressure on OPEC, and the world’s only swing producer Saudi Arabia, to increase supply so as to lower prices or maintain price stability. Are we about to see them create further price fixing market imperfections by asking the Saudis to cut production so as to create a return to higher prices? Much of the Western economic commentaries are suggesting the Middle East will fall apart as falling oil revenues will create unaffordable budget deficits, cuts in government spending, and political uprisings amongst their populations and ultimately scare Middle Eastern governments into considering cutting back on OPEC supply.

The recent period of high but stable oil prices has induced an economic recovery in the US based on lower oil and energy prices, propped up Putin’s government and economy which has become more heavily dependent upon its oil revenues, and increased the sovereign wealth funds of the GCC countries of the Middle East. Meanwhile, the rest of the world has suffered economic malaise consigning a generation to a life of unemployment and it appears that some commentators may want to maintain this status quo. Lower oil prices would likely benefit all via economic growth, and not just a few nations self-interests. This brings us to ask: have we been sacrificing economic efficiency for US energy self-sufficiency?

If we can enjoy a period of sustained low oil prices where consumer disposable incomes rise and increase world aggregate demand, we may witness recovery in Europe and rising growth rates again in Asia. This would fuel economic activity at a time when a generation has been lost to unemployment, and maybe allow them to regain for a better future. In this case oil prices will either recover, or rise in demand may equally bring about a rise in supply, ultimately increasing the revenues of oil produces.

Economic theory suggests that a lower price delivered by lowest cost producers is economically efficient. The lower prices will either force high cost producers out of the market or encourage them to seek lower cost technological solutions to stay in the market. The economic solution to our energy requirements is to invest in low cost producers instead of preventing them from reaching the market by financing chaos in the Middle East and Africa. Instead, supporting the development of low cost oil reserves in the Middle East and Africa would benefit these populations. The wealth created from oil revenues could be used to develop infrastructure, education, and health systems, rather than being frittered away by corruption and cronyism. However, this requires international oil and gas companies as well as the US government to rethink their geopolitical strategies and adopt the capitalist model of economic efficiency, rather than supporting a model of imperfect competition and short term self-interest. As the world’s largest open economy, the US would benefit more in the long run from encouraging world economic growth, rather than trying to protect its high oil price by fair means or foul.

Liberal Lurch: Both Parties Find Progressive Jesus In Dying Moments Of Campaign

WASHINGTON — While the GOP has effectively locked down the campaign for the House and is in a good place to win control of the Senate, the contours of the midterm election have taken on a decidedly liberal edge as candidates make their closing arguments.

From the Deep South to the frontiers of Alaska, candidates from both parties are one-upping each other in support of entitlement programs such as Medicare and Social Security, positioning themselves as populists, and standing up for the minimum wage, renewable fuels and, at least rhetorically, some modicum of reproductive freedom.

In North Carolina, GOP Senate candidate Thom Tillis, whose victory in the Republican primary rested on his ardent opposition to expanding Medicaid, is now saying he would “encourage” the Republican-controlled state legislature and Gov. Pat McCrory (R) to consider expanding the program.

In Georgia, Republican Senate candidate David Perdue has seen his political fortunes stumble as the focus of the race has turned to his history of outsourcing and offshoring jobs, while Democratic rival Michelle Nunn has campaigned more as a populist than as a conservative Democrat. Nunn spokesman Nathan Click argued that Perdue “said it himself, he said he spent most of his career outsourcing.” Click added, “Georgians are rejecting that.”

Megan Whittemore, a spokeswoman for Perdue, said that Nunn is launching “false and personal attacks” on Perdue’s successful business record because she is out of touch with what matters to Georgians. “Michelle Nunn’s allegiance to Barack Obama and Harry Reid continues to hold her back with Georgia voters who want a new direction in Washington,” Whittemore added.

In Alaska, Democratic Sen. Mark Begich is pushing for an increase in Social Security benefits, while in Louisiana, embattled Democratic Sen. Mary Landrieu has become the program’s staunchest defender.

Begich “gets that running on expanding Social Security has real value to his constituents. Being for something matters, giving people a clear choice when they’re voting,” said Matt Morrison, political director for the labor nonprofit Working America.

Meanwhile, Republicans across the country are changing their tune on the old-age and disability insurance program that was the heart of the New Deal. As The Washington Post put it:

Cutting federal health and retirement spending has long been at the top of the GOP agenda. But with Republicans in striking distance of winning the Senate, they are suddenly blasting the idea of trimming Social Security benefits.

How it could come to pass that Republicans would best Democrats in a contest fought on such a liberal playing field says much about our political system, in which elections often serve as a referendum on the direction of the country more than a choice between competing visions. And few Americans think things are headed in the right direction.

To win a midterm election with an unpopular president in office, the other party’s first task is to yoke its opponents to the president. It is only the second — or third or fourth — task to spell out an agenda. Brad Dayspring, spokesman for the National Republican Senatorial Committee, disputed the notion that GOP candidates had gone liberal in their rhetoric, but argued that the defining issue is how close a candidate is to President Obama.

“The defining issue in this election is the fact that Democratic senators who promised to be independent voices for their states have voted in lockstep with Barack Obama, whose policies are overwhelmingly unpopular within their home states,” Dayspring said. “If there were even the slightest ‘liberal lurch,’ as you suggest, Democratic candidates would be embracing Barack Obama rather than pretending they’ve never heard of him.”

Dayspring highlights a central challenge for Democrats: namely, how to affirm support for a broad Democratic agenda without embracing the leader of the party — or, in the case of Kentucky Democrat Alison Lundergan Grimes, even admitting that one has voted for him.

Democrats are not helped along by their own controversial efforts to trim Social Security and hike the retirement and Medicare eligibility ages as part of a “grand bargain,” in which they offered spending cuts in exchange for Republicans’ agreeing to tax hikes. No bargain was struck, and now Democrats are being hammered by Republicans for proposing the entitlement cuts.

From the outside, it might seem strange that Republicans could beat Democrats by running on liberal issues. It may be, however, that the popularity of those issues is the only thing standing between the GOP and a wave election. After all, Obama’s approval rating is at landslide-loss levels, yet the race for the Senate remains a nail-biter and voters may well end up casting more ballots for Democrats in the House than for Republicans — though the latter will retain control of the lower chamber due to the last redrawing of congressional districts.

It has all led to the spectacle of Karl Rove and other national Republicans attacking Democrats for wanting to cut spending.

The dynamic allows the National Republican Congressional Committee to run an ad that hits Georgia Rep. John Barrow, a Democrat, for backing a plan that could raise the Social Security retirement age to 69 and criticizes his Obamacare vote by arguing it cut Medicare by hundreds of billions of dollars. While thus attacking Barrow for being too conservative on Social Security and Medicare, the GOP is also drilling him for backing “taxpayer funded abortions” and wasteful spending.

Republicans, of course, are not unique in seizing opposition turf if there’s political advantage. Daniel Scarpinato, national press secretary for the NRCC, noted that some Democrats have been similarly masquerading as Republicans. He sent The Huffington Post a dozen campaign ads to demonstrate his point. One is from Montana Democratic House candidate John Lewis, who brags about his high National Rifle Association approval rating and attacks his Republican opponent for supporting gun control. Another shows Rep. Nick Rahall (D-W.Va.) denouncing the Environmental Protection Agency. Democrats in red districts, Scarpinato noted, have been quite willing to bash the “war on coal” or call for tax cuts.

But in red states, plenty of blue messages are being trotted out. An ad from Rove’s Crossroads GPS batters Sen. Mark Pryor (D-Ark.) for proposing to “overhaul” Medicare and Social Security, noting that he floated an increase in the retirement age. Pryor’s challenger, GOP Rep. Tom Cotton, who supports repealing Obamacare, ran a campaign ad promising that “every vote I’ve cast and will cast on Social Security and Medicare protects and preserves benefits for seniors.”

Democrats are on safer ground with the minimum wage, as Republicans have taken flak for stonewalling recent attempts to raise the federal minimum. But in battleground states, GOP candidates are nonetheless trying to soften their rhetoric.

In September, Cotton said he would vote for a ballot initiative to raise the Arkansas minimum wage, distancing himself from his own opposition to a federal wage hike. GOP Alaska Senate candidate Dan Sullivan has spoken up in support of a state minimum wage increase as well, despite opposing it during his primary campaign, The Wall Street Journal reported. And Republican Iowa Senate candidate Joni Ernst denied ever calling for abolishing the minimum wage, even though she previously said, “I do not support a federal minimum wage.”

Some Republicans in tight races have gone green, too. Colorado Rep. Cory Gardner, who denies that humanity is causing climate change, still produced an ad in front of a wind farm.

In addition to flipping on Medicaid, North Carolina candidate Tillis, who had previously vowed to repeal renewable energy standards and voted to defund biofuels, is championing both in his campaign.

Republicans have also tried to appeal to female voters on health issues, an area in which Democrats usually reign. Gardner, Tillis, Mike McFadden in Minnesota, Rob Maness in Louisiana and Ed Gillespie in Virginia all have said they support making birth control pills available over the counter, a position that’s mostly political posturing since that decision is up to the Food and Drug Administration. Other Republicans have tamped down their language when talking about abortion. For example, in response to a question about abortion access, Colorado GOP gubernatorial candidate Bob Beauprez told Colorado Public Radio last week, “I respect people’s opinion, women’s right to that choice.” But Beauprez’s voting record is staunchly anti-abortion.

“It’s a sweet irony,” said Working America’s Morrison, referring to Republican candidates who once opposed Medicaid expansion now either supporting it or refusing to take a position. “Once people hear about expanding Medicaid, it’s kind of a no-brainer. If you talk to people about the issues and get around the chatter, they hear it, they see the substance of the candidates’ stances, and it makes a difference.”

Sadie Weiner, a spokeswoman for Sen. Kay Hagan (D-N.C.), told The Huffington Post that North Carolinians “won’t be fooled” by Tillis’ change of heart. “Speaker Tillis is desperate to cover up his record in North Carolina that includes cutting education by $500 million and rejecting health care for 500,000 people,” she said.

Weiner’s hope that voters won’t be fooled aside, the race for the Senate is still up for grabs. Whatever happens, it’ll be hard for voters to know what they’re going to get once the candidates take office.

Scarpinato, the NRCC spokesman, said that candidates who betray their principles ought to be ashamed of themselves. “Clearly these Democrats are so callous and opportunistic that they’d rather sell out their true beliefs just to get elected than stand beside their principles,” he said. “The last thing Congress needs are a bunch of politicians who say one thing in TV ads and do another thing when no one is looking.”

Samantha Lachman contributed reporting.

AeroMobile 3.0 flying car prototype debuts

aero-1Flying cars are something that many have dreamed about for generations. A car that can drive on the road, park in the garage, yet take to the skies when the driver/pilot wants is something that is undeniably appealing to many of us. A company called Aeromobile has unveiled the AeroMobile 3.0 prototype flying car in Vienna this week. The prototype … Continue reading

CAT brings super rugged B15Q, S50 smartphones to the US

cat-b15qRemember CAT? No, not our feline overlords but the makers of rugged manufacturing equipment and machines. Unless you haven’t been tracking our smartphone coverage, you will probably be aware that it also makes equally rugged smartphones to match the extreme working environment they put their products through. Now the company is bringing its latest model, the 4-inch B15Q and the … Continue reading

Sony Xperia Z3 arrives at T-Mobile

xperia-z3-camera-600x337Earlier this month T-Mobile revealed that the Sony Xperia Z3 smartphone would be arriving on its shelves October 29, and as promised the handset went live on the carrier’s site yesterday. As with most phones, subscribers have the option to buy it outright from the carrier or shell out in piecemeal fashion via monthly payments (for those who qualify). In … Continue reading

Nintendo Is Developing a Non-Wearable to Track Sleep and Fatigue

Nintendo Is Developing a Non-Wearable to Track Sleep and Fatigue

While the world and his dog builds wearables of all kinds, Nintendo seems to be headed in a different direction. The ccompany’s CEO, Satoru Iwata, tells Reuters that a newly created healthcare division is building a sleep and fatigue tracker—that you won’t wear.

Read more…



London police raise privacy hackles with gang violence software

London’s Metropolitan Police Service (MPS) has completed a 20-week study in a bid to more accurately predict whether specific gang members are likely to commit violence. The software, developed by Accenture, pulls data together from systems already…

Google releases its souped-up bookmarks manager for Chrome… again

We’ve caught glimpses of Google’s new image-rich bookmarks system for Chrome a couple of times in the past, and now it’s back with a new name, but not much in the way of new features. The extension formerly known as Google Stars is now simply (and…

BITalino’s Next-Gen Sensors Squeeze The Costs of Building Connected Health Apps

BITalino Developers wanting to build apps that monitor and respond to human bio-signals should point their eyes at this Kickstarter project. BITalino (r)evolution is the follow up to last year’s modular kit of bio-signal sensors from the same Portuguese team — but with a lower price-tag, improved electronics, smaller sensor blocks and individual sensors broken out on their own so… Read More

Microsoft Band Is Official, Priced At $199

Microsoft Band Hero 2 640x463It was just recently that thanks to a leak across multiple app stores that the Microsoft Band wearable device was leaked. Well it looks like Microsoft has since not wasted anymore time and has made the Microsoft Band official. The device looks just like the photos and based on its design, reminds us a bit of the Samung Gear Fit with its rectangular horizontal display.

While this is a wearable device from Microsoft, it will not be competing with the likes of the Apple Watch or the other Android Wear devices out there. Instead if it had to compete, it would most likely go up against other fitness devices like the Nike FuelBand SE which would be a more accurate and closer competitor.

The Microsoft Band will feature heart rate sensing, calorie counter, pedometer, and a GPS which will help track your run so that you can leave your smartphone at home. It will also be able to measure your skin’s temperature and will also come with a built-in microphone that will allow Windows Phone users to use Cortana with it.

It will also play nicely with multiple platforms such as iOS, Android, and of course Windows Phone, as long as your devices have Bluetooth connectivity. Apart from the fitness-related features, the Microsoft Band will also be able to display notifications such as incoming calls and messages.

The Microsoft Band will also play nicely with the recently launched Microsoft Health app. As far as battery is concerned, it will sport a pair of 100mAh batteries that Microsoft claims will give it as much as 48 hours of battery life. Priced at $199, the Microsoft Band will be going on sale today and only in the US for now.

Microsoft Band Is Official, Priced At $199

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