Oil etc.

I have been wonder what the facts and figures are about a few energy issues. I can't believe that most of what I hear or read is true, or if it is, it's by accident. So many people just don't know what they are talking about. I was happy to find a report, which I do not totally agree with, but which has figures based upon sound research and economic reasoning. CNN Money article of yesterday: "Curb oil speculation? Why that's folly!" by Jon Birger, http://money.cnn.com/2009/07/28/news/economy/oil_prices_speculators.fortune/index.htm?postversion=2009072816 cited a link to:
http://www.ucei.berkeley.edu/PDF/csemwp177.pdf
(The paper title is: Cost, Conflict and Climate: U.S. challenges in the World Oil Market, Severin Borenstein; June 2008; SSEM WP 177)

1) The author shows that market forces and not speculation were the most plausible cause of last years drastic oil price increases. Basically, since speculators are neither the buyers nor sellers of oil, the prices of future contracts are not artificial. Trades take place on a daily basis at those prices. It would not be practical to hoard the actual oil, which would be necessary to "manipulate" prices. (He gives a detailed and more complete analysis.) The author does not deal with the economic argument for the benefit of speculation, which is basically in providing information to the market, thereby reducing volatility.

2) Although U.S. policies probably cannot reduce world oil prices in the short run, and not much in the long run, we can adopt policies for energy security. These should include: providing a diverse set of energy sources and technologies; vehicle fuel economy improvements (Cash for Clunkers might actually be viewed as helpful in this regard, as it increases the fleet turn-over rate.); and less reliance on petroleum based transportation fuels. Such policies would have the advantage of lowering our transfer of dollars to petroleum producing countries. The author also argues that coal-to-liquid, tar sands, and oil shales could be cost effective if not for global warming. If you don't believe in man made global warming (I DO NOT), those would be desirable technologies also. Also, he believes that nuclear and domestic exploration would not be especially helpful due 1) costs of nuclear, including insurance against accidents and 2) relatively small amounts of known domestic oil. Solar, wind, etc. are not economically viable now but government should spend a lot more on research in these areas.

I believe that all of this could be accomplished by the market without the government. Also nuclear and domestic oil exploration (possibly gas and ethanol also) could make a helpful contribution to domestic wealth generation, a slight world oil price decrease, and domestic security. I also believe that the market, rather than government, can be relied upon to find the best avenues of investment in emerging technologies.