Cornerstone’s Rothman: Obama’s Misplaced Energy Policies Won’t Lower Fuel Prices

Friday, 02 Nov 2012 02:08 PM

By Forrest Jones and David Nelson

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President Barack Obama’s policies to curb speculation in energy markets and to tap emergency stockpiles won’t lower prices at the pump, said Mike Rothman, president and founder of Cornerstone Analytics.

Global demand for oil and energy has been growing, though supplies aren’t keeping pace, and short-term policy moves will bring little relief.

“The trend in oil is very, very bullish,” Rothman told Newsmax TV in an exclusive interview.

Watch our exclusive video. Story continues below.

“The basic issues boil down to a lack of growth in supply and continued robust growth in global oil demand. And you have a situation where literally there is very little room for almost anything to go wrong on either production or transportation in the system.”

The problem with the United States is that its government lacks a well-defined energy policy.

Obama has tapped the Strategic Petroleum Reserve (SPR) in the past to combat rising prices, though such measures have very little lasting impact in the global crude market and even less when it comes to U.S. gasoline prices.

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

The stockpile was created for use in the event of an emergency, not to lower persistently high fuel prices

The president also took steps to curb speculative trading in energy markets.

Measures announced earlier this year included requiring oil traders to front more of their own money when conducting transactions to increased monitoring activities, though such measures will do little to stop oil and fuels from gaining in price as long as big emerging markets like China demand more from already strained supplies.

“The White House thinks that prices are high because of speculation and cowboys and people playing games in the market as opposed to fundamental imbalances that are very evident and clear in the data,” Rothman said.

“The problem is if you don’t realize there is a problem then there is nothing you are going to do about solving an actual problem. Trying to scare speculators out and threatening to release oil from the SPR are like parlor tricks.”

U.S. crude futures are currently trading a little over $85 a barrel, while the European blend Brent crude, which holds most sway over gasoline prices, is trading about $110 a barrel.

Prices spiked earlier this year over ongoing fears of military conflict in the Middle East.

The West and Israel accuse Iran of pursuing a nuclear weapons program, a charge Tehran denies.

Talk of conflict and an Iranian response involving closure of the Strait of Hormuz, a narrow waterway connecting oil-rich Persian Gulf countries with the world, has sent prices rising this year.

Fears the global economy is cooling, however, have sent prices falling as well, though when factoring in longer-term supply and demand dynamics, prices are low.

“If you look at prices now, some argue that prices at say $110-$115 for Brent — which is the correct barometer to assess pressures — that they are high for a war premium,” Rothman noted.

“The argument we have been making is that prices are actually lower than they should be, and it reflects a discount because of concerns about the global economy and particularly about Europe and the debt situation.”

Editor's Note: 'It’s Curtains for the US' — Hear Unapologetic Warning from Prophetic Economist.

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