Archive for the ‘production’ Category

Economic Recovery: Try No Stimulus and Wait

February 9, 2009

As we wait to see how the politicians in Washington will alter the stimulus package the Obama administration is pushing, many questions are being raised about the measure’s contents and efficacy. Should it include money for the National Endowment for the Arts, Amtrak, and child care? Is it big enough to get the economy moving again? Does it spend money fast enough? Hardly anyone, however, is asking the most important question: Should the federal government be doing any of this?

By  Robert Higgs
Christian Science Monitor

In raising this question, one risks immediate dismissal as someone hopelessly out of touch with the modern realities of economics and government. Yet the United States managed to navigate the first century and a half of its past – a time of phenomenal growth – without any substantial federal intervention to moderate economic booms and busts. Indeed, when the government did intervene actively, under Herbert Hoover and Franklin D. Roosevelt, the result was the Great Depression.

Until the 1930s, the Constitution served as a major constraint on federal economic interventionism. The government’s powers were understood to be just as the framers intended: few and explicitly enumerated in our founding document and its amendments. Search the Constitution as long as you like, and you will find no specific authority conveyed for the government to spend money on global-warming research, urban mass transit, food stamps, unemployment insurance, Medicaid, or countless other items in the stimulus package and, even without it, in the regular federal budget.

This Constitutional constraint still operated as late as the 1930s, when federal courts issued some 1,600 injunctions to restrain officials from carrying out acts of Congress, and the Supreme Court overturned the New Deal‘s centerpieces, the National Industrial Recovery Act and the Agricultural Adjustment Act, and other statutes. This judicial action outraged President Roosevelt, who fumed that “we have been relegated to the horse-and-buggy definition of interstate commerce.” Early in 1937, he responded with his court-packing plan.

Although Roosevelt lost this battle, he soon won the war. As the older, more conservative justices retired, the president replaced them with ardent New Dealers such as Hugo Black, Stanley Reed, Felix Frankfurter, and William O. Douglas. The newly constituted court proceeded between 1937 and 1941 to overturn its anti-New Deal rulings, abandoning its traditional, narrow view of interstate commerce and giving the federal government carte blanche to spend, tax, and regulate virtually without limit.

After World War II, the government enacted the Employment Act of 1946, codifying the government’s declared responsibility for managing the economy “to promote maximum employment, production, and purchasing power,” and it has actively intervened ever since, purportedly to attain these declared ends. Its shots have often misfired, however, and we have endured booms and busts, a decade of stagflation, bouts of rapid inflation, and stock-market crashes. The present recession may become the worst since the passage of the Employment Act.

Federal intervention rests on the presumption that officials know how to manage the economy and will use this knowledge effectively. This presumption always had a shaky foundation, and we have recently witnessed even more compelling evidence that the government simply does not know what it’s doing. The big bailout bill enacted last October; the Federal Reserve‘s massive, frantic lending for many different purposes; and now the huge stimulus package all look like wild flailing – doing something mainly for the sake of being seen to be doing something – and, of course, enriching politically connected interests in the process.

Our greatest need at present is for the government to go in the opposite direction, to do much less, rather than much more. As recently as the major recession of 1920-21, the government took a hands-off position, and the downturn, though sharp, quickly reversed itself into full recovery. In contrast, Hoover responded to the downturn of 1929 by raising tariffs, propping up wage rates, bailing out farmers, banks, and other businesses, and financing state relief efforts. Roosevelt moved even more vigorously in the same activist direction, and the outcome was a protracted period of depression (and wartime privation) from which complete recovery did not come until 1946.

The US government has shown repeatedly that as an economic manager it is not to be trusted. What we need most are authorities wise enough to follow the dictum, “First, do no harm.” The stimulus package will do enormous harm. The huge debt burden it entails, by itself, ought to condemn the measure. America is already drowning in debt. But the measure will also wreak harm in countless other directions by effectively reallocating resources on a grand scale according to political priorities, rather than according to individual preferences and economic rationality. As our history shows, the economy can recover strongly on its own, if only the politicians will stay out of the way.

Robert Higgs is senior fellow in political economy for The Independent Institute, editor of The Independent Review, and author of “Depression, War, and Cold War.”

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OPEC Cuts Production 2.2 Million Barrels Per Day

December 17, 2008

OPEC says it is cutting 2.2 million barrels a day from its output — the largest ever at one time — to stem crude prices that have plummeted over 70 percent from summer highs of nearly $150.

An OPEC statement says its latest announcements means it is taking 4.2 million barrels a day off the market compared to September levels. The 4.2 million figure includes more than 500,000 barrels of overproduction OPEC said in September it would eliminate and a formal cut of 1.5 million barrels a day that it agreed on last month.

That amounts to a new reduction of 2.2 million barrels announced Wednesday.

In practice, “it’s 2.2” said OPEC President Chakib Khelil.

Members among the 13-nation organization were officially producing a daily 29.045 million barrels in September.

–Associated Press

Wednesday: OPEC Likely to OK 2 Million-Barrel Oil Cut; Your Price Will Go Up

December 17, 2008

OPEC oil ministers say they will likely approve a cut of 2 million barrels a day from their output as of early next year. And major non-OPEC producers will likely take hundreds of thousands more barrels off the market.

Saudi Arabia and other major OPEC producers are saying ahead of their meeting Wednesday that a cut of that magnitude is in the offing, as early as January.

Additionally, Russian media are quoting Deputy Premier Igor Sechin as saying Moscow is ready to take 300,000 barrels off the market. And the oil minister of Azerbaijan tells The Associated Press that his country is willing to cut back by the same amount.

A 2-million barrel cut would be the largest single reduction ever by OPEC.

–Associated Press

The Molikpaq offshore oil platform off Sakhalin island in far ... 
The Molikpaq offshore oil platform off Sakhalin island in far eastern Russia. OPEC is set to announce a significant cut in oil output as the cartel seeks to support plummeting crude prices and producers’ incomes, while non-OPEC oil exporter Russia may also slice production.(AFP/File/Ursula Hyzy)

OPEC Could Make Biggest Production Cut Ever This Week To Raise Prices

December 15, 2008

OPEC ministers could make their deepest oil supply cut ever when they meet on Wednesday to combat shrinking demand, bulging stocks and a $100 collapse in prices.

By Barbara Lewis and William Maclean
Reuters

File photo shows the OPEC logo in Vienna, Austria. OPEC Secretary ...

For many in the Organization of the Petroleum Exporting Countries, up to 2 million barrels per day (bpd) must be removed to keep up with a slump in consumption that has knocked two-thirds off prices since July.

“We have to act — we see a very sizeable reduction,” OPEC Secretary-General Abdullah al-Badri told reporters on his arrival on Monday in this western Algerian city.

OPEC President Chakib Khelil agreed.

“Everybody is supporting a cut — I don’t have any doubt about it.”

Oil rigs extract petroleum in the Los Angeles area community ... 
Oil rigs extract petroleum in the Los Angeles area community of Culver City, California. World oil prices have rebounded on expectations that crude exporters’ cartel OPEC will cut production at a key meeting in Algeria this week, dealers said.(AFP/Getty Images/File/David McNew)

Benchmark U.S. crude rose more than $2 a barrel toward $49 in early trade — still far from the “fair” price of $75 a barrel identified by Saudi Arabia, the world’s biggest crude exporter, at the end of November.

After slashing a combined two million barrels daily, 7.3 percent of its output at two previous meetings, OPEC was on course to chop at least another five percent off a world market that burns 86 million barrels of oil each day.

Saudi Arabia, had yet to make public comment on its position, but OPEC chief Khelil said Riyadh had already cut back in anticipation of further supply curbs.

Read the rest:
http://biz.yahoo.com/rb/081215/business_us_opec.html?.v=1

Oil Prices Soar as Russia Announces Output Cut

December 12, 2008

Crude oil prices jumped more than 10 percent Thursday after Russia said it was ready to join forces with OPEC and cut output.

Traders shrugged off a forecast of the first decline in oil demand in 25 years, instead anticipating joint efforts by the Organization of the Petroleum Exporting Countries and Russia to slash production in an effort to bolster prices.

Oil rigs extract petroleum in the Los Angeles area community ... 
Oil rigs extract petroleum in the Los Angeles area community of Culver City, California. Crude oil prices jumped more than 10 percent Thursday after Russia said it was ready to join forces with OPEC and cut output.(AFP/Getty Images/File/David McNew)

Light sweet crude for delivery in January closed at 47.98 dollars a barrel on the New York Mercantile Exchange, a gain of 4.46 dollars, or 10.25 percent, from Wednesday’s close.

In London, Brent North Sea crude for January jumped 4.99 dollars, or 11.77 percent, to settle at 47.39 dollars a barrel on the InterContinental Exchange.

AFP

After the benchmark New York contract closed Friday at a four-year low of 40.50 dollars, the market has increasingly focus on next week’s OPEC meeting in Oran, Algeria.

Russia is ready to join forces with OPEC to stem the plunge in crude prices and could even become part of the oil cartel if membership were in Moscow’s interests, Russia President Dmitry Medvedev said Thursday.

“Our partners, colleagues from the oil club (OPEC) are asking us to have a coordinated policy and whoever I meet, they are asking quite actively,” he said in remarks broadcast on state television.

Read the rest:
http://news.yahoo.com/s/afp/20081211/bs_afp
/commoditiesenergyoilprice_081211214936

Russia Will Join OPEC’s Plan to Cut Output

December 10, 2008

Faced with falling oil prices, Russia is preparing to announce that it will work with OPEC in coordinating a reduction in output, the minister of energy said Wednesday.

Earlier this fall, a Russian official floated the idea of storing oil, rather than exporting it, to help the Organization of the Petroleum Exporting Countries stabilize prices, but this is the first time that the Kremlin has offered to reduce output.

By Andrew Kramer
The New York Times 

Workers weld a first juncture of the Eastern Siberia-Pacific ...
Workers weld a first juncture of the Eastern Siberia-Pacific Ocean pipeline in Siberia’s Tynda-Skovorodino region, eastern Russia, October 2006. Russia said Wednesday it would announce proposals to reduce its oil output by December 17, signalling the energy superpower’s readiness to cooperate with OPEC to prop up falling crude prices.(AFP/File/Str)

World oil prices, which have been slumping around $40 a barrel, rose in response to the comments by the minister of energy, Sergei I. Shmatko, in early trading in New York Friday. Oil settled at $43.10 a barrel, up $1.03.

Mr. Shmatko said that by Dec. 17, the date of the next scheduled OPEC meeting, Russia will announce a plan to reduce the country’s oil production, the Interfax news agency reported. The minister offered no details of how this would be done, or how much oil might be taken off the market. Mr. Shmatko said Russia would also seek to persuade other non-OPEC producers to reduce output. A spokeswoman for the ministry declined to elaborate.

While formally at arms length, Russia and OPEC have flirted over some form of cooperation through the fall.

It is development sure to alarm consumers, who where just breathing a sigh of relief as American gasoline prices dipped below $2 a gallon. It is unclear, however, how much effect Russia’s increasingly anti-Western government might have on prices.

The Russian oil sector is a blend state-owned and private companies including a major joint venture with BP, the British oil giant, that would have to answer to stockholders for a reduction in revenue caused by a drop in output. Producing and transporting oil is costly in Russia and idling pipelines and fields could severely damage the industry.

Typically in oil price slumps, Russia and the Soviet Union before it has continued to pump oil freely, benefiting from the support for world oil prices provided by OPEC’s members, while not sharing in the financial loss of cutbacks. Norway and Mexico also benefit from OPEC while not belonging to it.

Other non-OPEC countries, meanwhile, have rejected any cooperation with OPEC. A spokesman for the ministry of petroleum and energy in Norway, the world’s fifth-largest oil exporter, said Wednesday that his country would not cooperate with the cartel, regardless of Russia’s decision, Bloomberg news reported.

In this fall’s steep drop off in oil prices, Saudi Arabia had been pressuring non-OPEC countries, particularly Russia, to cooperate. Russia pumps about 9.8 million barrels of oil a day, the second-greatest output in the world after the Saudis, and exports about seven million barrels of crude oil and refined products, mostly to Europe.

Read the rest:
http://www.nytimes.com/2008/12/11/business/worldbu
siness/11oil.html?_r=1&scp=1&sq=opec,%20russia&st=cse

Iran: Nuclear? Rich With Oil? A Threat? Some Dubious Ideas Linger….

December 5, 2008

The incoming Barack Obama administration has already been inundated with reports, policy recommendations and position papers vying for the president-elect’s attention on the Iran nuclear issue. Although nicely wrapped in the semantics of a “fresh” or “game-changing” approach, the majority are familiar and lack novelty, and this should come as no surprise as many were penned by old US foreign policy hands like Dennis Ross and Martin Indyk.

As a result, even when they seem to be suggesting a reasonable “new thinking” in the US’s Iran policy, wedded to the idea of “engagement” and or “dialogue without preconditions”, these noble efforts are, however, undermined by their reliance on dubious assumptions. Not to mention their restrictive methodologies, which ultimately veer them back towards the same old plans for “coercive diplomacy”.

By Kaveh L Afrasiabi 
Asia Times 

There are also the limits to the “dialogue without preconditions” logic put forth by, among others, the president of Council on Foreign Relations, Richard Haass, in a new collaborative report with Indyk published by the Brookings Institution. Although positive in many respects and apparently earning the disapproval of Israel, the Haass-Indyk call for engaging Iran in dialogue without preconditions falls short of what is really necessary and lacking in Washington today, that is, dialogue without false assumptions.

One such false assumption that has been adopted like an article of faith by nearly all the pundits and nuclear experts in the US today, is that Iran is fast approaching a “nuclear breakout capability” – in light of Iran’s double process of mastering the nuclear fuel cycle and advancing its missile technology. This has warranted the word “crisis”, to quote US Senator Jon Kyl. [1] Not to be outdone by politicians, a number of nuclear experts, such as David Albright, have echoed the sentiment.

Read the rest:
http://atimes.com/atimes/Middle_East/JL06Ak01
.html

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Ahmadinejad, Iran Worry Oil’s Price Shrinks Thier Importance

Iran’s President Mahmoud Ahmadinejad has for the first time admitted that the fall in world oil prices will affect the economic projects of his government, local media reported on Thursday.

“If we fix the oil price at 30 dollars a barrel in the budget, we will have to abandon much of our economic projects … We have to set it at 30 to 35 dollars as we don’t determine the oil price on international markets,” he said.

He acknowledged that “oil prices will be low for some time” because of the global recession.

Iran, which is OPEC’s second largest producer, has an official oil output of 4.2 million barrels a day, with half of the country’s budget dependent on its crude exports.

Iranian President Mahmoud Ahmadinejad (left) Foreign Minister ... 
Iranian President Mahmoud Ahmadinejad (left) Foreign Minister Manouchehr Mottaki in Tehran on December 1, 2008. Ahmadinejad has for the first time admitted that the fall in world oil prices will affect the economic projects of his government, local media reported.(AFP/File/Atta Kenare)

Ahmadinejad boasted only last month that his government could run the country “with a barrel of oil priced at between eight and five dollars.”

“Even if we reach the point where the enemies do not buy our oil any more, we can manage the country. Thanks God, fluctuations in oil prices will have no effect on the next budget,” he said.

From:  AFP

Read the rest:
http://news.yahoo.com/s/afp/20081204/wl_midea
st_afp/iranpoliticseconomy_081204163303