01 June 2009

Quick Hits

Oil & Gas: Oil prices are up almost 60% this year. Here are some of the reasons/excuses:

(1) “It’s the summer driving season.” Yeah, yeah. We hear this every year. It’s a bogus excuse given the consistent reporting that Americans are driving less and less.

(2) “OPEC has cut back production.” Well, if you believe this, I’ll sell you a Dairy Queen in the Mohave desert. OPEC member country economies are wholly dependent on oil revenues. For them to actually cut back and sell less makes a bad economic situation even worse. Many countries agree to the cuts, which get publicized, and then they fail to recognize them, continuing to produce and sell as much oil as possible - which often goes unreported.

(3) “Refineries are switching to Summer blends.” The fact is that most refiners plan outages for changeovers in which products are produced well in advance. It’s not enough to say that mere changes in production schedules have a dramatic impact on prices.

So, why the dramatic increase in oil and prices at the pump? Well, it is often said that the two are directly related when it comes to increases. But then when there are decreases, there’s a “lag” in prices. Whatever.

Oil and gas price increases are being driven again by speculation – pure and simple. Why do I say this? Well, last summer, when oil prices were going up, it was primarily due to investors hedging their bets in a struggling stock market by getting into more stable commodities. Oil is a commodity of relatively consistent value. When the dollar is strong, people get into stocks. When it is weak, they look to oil because it is traded in US Dollars and that makes it less expensive and a good hedge.

This year is no different in that regard. However, the underlying reasons are much different. While the Obama administration may say that they do not look to the market for economic signals, they may want to start understanding the effects their regressive policies are having on consumers. We are borrowing money at record levels. We are spending staggering amounts of money we don’t have. As a result, Washington has cranked up the printing press to make more money available for it to spend. As a result, the dollar becomes less valuable because there are more of them floating around. It’s the basic tenet of supply and demand – and yes, it applies to currency. Thus, investors are looking for places to park their dollars for the most value. Hence, they get into oil contracts and gas futures… and we all pay for that security with higher prices driven by currency speculation, and not commodity market fundamentals.

So, when you are filling up your soon-to-be-abolished SUV, think of all the money the government is spending and therein you will find the culprit for this year’s oil and gas price spikes.

Baseball: Earlier this season, Manny Ramirez was suspended 50 games for violation of the MLB drug policy. He was cited for taking a banned substance – HCG, a drug used to stimulate natural steroid production that is lowered when someone stops a course of steroids. Under baseball’s drug testing policy, the substance is banned. Ramirez and his doctor would know this if they just picked up the phone and played by the rules.

Well, good for baseball and sports in general. Let’s ensure that those who break the rules are held accountable… by allowing them to play in the All-Star Game.

WHAT?! Are you kidding me?! That’s right. MLB in its infinite wisdom appears ready to allow Ramirez to play in the All-Star Game. However, it must be pointed out that it is the moronic fans that are driving this charade. He should not even be on the ballot.

With this pitch, baseball has brushed back its drug policy and has hit a new low. I suppose with the bankruptcy of GM, all other traditional American institutions must also fail (That means you too, marriage!).

Side Note: I hope someone returns the favor of a 37-6 beatdown Florida State handed to Ohio State in the NCAA's yesterday. Running up the score was simply uncalled for and shows a complete lack of sportsmanship on the Seminoles part. With a 32-run lead in the 5th inning, unless the ball just goes out of the park, runners could be held, balls could be taken. This was another black eye to the unofficial farm system for MLB.

Now, for a sport with integrity…Hockey: The Dallas Stars are taking the right steps to right the once proud Stanley Cup champion organization. Upper management, having begun the process with shipping out notorious hockey moron and Vogue-intern Sean Avery, continued the cleanup by removing Brett Hull and Les Jackson as co-GM’s (a stupid concept in any sport above little league). They made the brilliant choice of replacing this brain-sharing duo with Joe Nieuwendyk as the new GM. Nieuwendyk is a three-time Stanley Cup champion as well as up-and-coming hockey executive. I think he will thrive in this role and will continue the positive changes within the Stars organization.


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