U.S. supplies of crude oil and petroleum products rose to the highest level for which the DOE provides weekly data. On top of this, demand fell off of the proverbial cliff.
But, it just doesn’t matter – supplies are high and rising while demand is low and falling – but it just doesn’t matter… stock markets are rising and the dollar is falling. As we have maintained in recent issues of The Schork Report, this market is rising not because of fundamentals. It is rising because a bunch of wannabe Gordon Gekkos are just pushing paper around.
Do we need to worry about another super spike in prices? Have we been lulled into a false sense of security with low oil prices? Is gas headed back up to prices that will crimp Americans' behavior? Is this just about the dollar or is there something else going on?
Stephen Schork will be a guest today at 10:30amEST on CNBC's SQUAWK ON THE STREET with Mark Haines and Erin Burnettto discuss these recent dynamics and will provide projections for market direction.
Carbon Update Cap-and-what? A climate bill may be getting a lot of attention on Capitol Hill but most Americans have no idea what the fuss is all about. Global warming, pollution—those ideas they get. But mention cap-and-trade and watch eyes on Main street glaze over. A new Rasmussen poll reports that very few voters know what the proposed legislation is all about. Given a choice of three options, just 24% of voters can correctly identify the cap-and-trade proposal as something that deals with environmental issues. A slightly higher number (29%) believe the proposal has something to do with regulating Wall Street while 17% think the term applies to health care reform. A plurality (30%) have no idea.
Back on the Hill, Henry Waxman (D-Calif), Chairman of the House Energy and Commerce Committee, says progress is being made to get a climate change bill out of his committee before the Memorial Day recess. He will have to overcome resistance in his own party to make that happen. Many members come from coal producing states and fear voter backlash because of expected higher utility costs associated with the legislation.
The battle for climate change regulation appears to be hinged on carbon permits or allowances. The Obama administration wants to auction off the permits to businesses that have emissions that exceed the cap on carbon. The move would raise much needed cash for federal coffers for deficit relief. But business trade groups are, not surprisingly, pushing back. Members of the U.S. Climate Action Partnership (USCAP) testified before House Energy and Commerce Committee last week. Jim Rogers of Duke Energy, a founding member of USCAP, said the allowances should be free to the big utilities during a transition phase as to not put the squeeze on utility customers.
Opposition to free allowances has been centered on potential windfall profits for the utilities that get the free permits then sell them on the open market for a profit. Rogers suggested that could be avoided if the allocation of the allowances was conducted by a local distribution companies (LDCs). Rogers said, “State regulators, who oversee these companies, will assure consumer costs are kept as low as possible. While the cap preserves the environmental integrity of the new regulatory program, the allowance allocation ensures cost impacts are mitigated for end-use energy customers.”The National Association of Regulated Utility Commissioners has also endorsed this plan. Separately, Duke Energy dropped out of the National Association of Manufacturers due to a difference of opinion over cap-and-trade. NAM is fighting cap-and-trade.
Stephen Schork is the Editor of, "The Schork Report"and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.