Dr. Daniel Yergin testifies in front of Congress today on Oil

Implications: After listening to Pulitzer Prize winner Dr. Daniel Yergin, Chairman of Cambridge Energy Research Associates (CERA) tell the Senate, nothing less than development of a joint, comprehensive energy policy will fail to solve our current energy crises; it simply confirms my fears that any solution is beyond the abilities of our current Congress.  

Analysis:  Daniel Yergin, a highly respected authority on energy, international politics and economics, is a Pulitzer Prize winner and recipient of the United States Energy Award for “lifelong achievements in energy and the promotion of international understanding.” Dr. Yergin received the Pulitzer Prize for his work The Prize: The Epic Quest for Oil, Money and Power, which became a number one best seller and was made into an eight-hour PBS/BBC series seen by 20 million people in the United States.  

In testimony to the US Senate today, Dr. Yergin acknowledged that speculative traders (did not condemn all forms of speculation, acknowledged the importance of corporate Americas ability to hedge fuel) have played a role in today’s high price of crude, but that it's more complicated than that and the cause is multi-faceted. A credit crisis, a weaker dollar and fear of tightening supplies have been factors as well. “Financial markets are today playing an increasingly important role in price formation - responding to, accentuating, and exaggerating supply and demand, geopolitics and other trends," said Yergin.

Markets have helped fuel a "shortage psychology" that the world is "running out of oil" and "as prices go up, this psychology becomes self-reinforcing - at least until the market turns;" further amplified by the subprime mortgage meltdown leading to interest rate cuts and a weaker dollar - propelling the price increases, said Yergin.

In discussing peak oil, Dr. Yergin felt that the problems were more of peak demand and peak price and that newly-discovered oil supplies, as well as greater fuel efficiency would have to be utilized until alternatives and renewables can play a more important role in our energy economy. "A great deal of effort is going into innovation, and the impact will be significant, but the timing and scale remain uncertain."

Sen. Charles Schumer, D-N.Y., chairman of the committee, convened Wednesday's hearing to determine whether skyrocketing oil prices were a new reality or a bubble. “I think everyone would like to believe that high oil prices are a bubble, but they might not be,” said Schumer. "Many would also like to believe that there is a silver bullet that can pop the bubble," but there isn’t.  

Although a glimmer of hope was heard when Schumer said that raising margin requirements and strengthening regulations may eliminate some of the problem with speculation, "but they may not solve the problem in the long-term, particularly if we think these are the only things that should be done."

And bipartisanship was championed for a moment, while acknowledging that everything must be on the table if a successful energy policy were to be developed.

1.)    Total transparency must be brought to the transaction process, if for no other reason than to restore trust. If speculation is not a problem, then show us.
2.)    New oil supplies must be developed and everything and everywhere (short of the Grand Canyon and the Everglades) must be on the table. It makes since to develop the most promising locations first.
3.)    Nuclear, geo-thermal and all alternative and renewables must be expanded. No opinions should be suppressed and success must be determined by market forces.
4.)    Conservation, mass transit, high speed rail and new transportation initiatives must be examined and possibly legislated.

But that glimmer of hope was short lived when everyone started blaming everyone else at the end of the hearing. You see, when you run for political office, you must run against somebody. And with politics in full campaign mode, successful gerrymandering in the past and the 50% of red states unable to work with the 50% of blue states, I find little chance that Congress will be able to place everything on the table.

Too many in Congress really are out of touch and see merit in an artificially induced recession through high fuel prices.