Is ECB's Mario Draghi upbeat because markets believe he can be trusted to be a greater fool?

Sir, I refer to Claire Jones “Upbeat Draghi says landmark €1.1tn ECB bond-buying starts on Monday” March 6.

So what is Draghi upbeat about? “The QE plan… had eased borrowing conditions before a single government bond had been bought”? That to me sounds like the market having been convinced there’s a greater fool behind them. Is that it?

Or is Draghi upbeat because he feels the ECB has been able to fend of the danger that oil prices would trigger a deflationary spiral? That to me seems like strangely indicating that lower oil prices had been a damned nuisance for Europe and for the ECB.

Sir, honestly, I think many, all over Europe, have lost screws.

And I just know that anyone launching a huge QE, without making sure its liquidity can reach where it is most needed, like by means of bank credits to the risky SMEs and entrepreneurs, surely must be one of those missing at least one of those missing screws.

Just another case of managers running their personal agenda.

Sir Daniel Gros writes that “it is no mystery that oil supply has not reacted to higher prices. Producers are just waiting for even higher prices tomorrow”, “The China bubble fuelling record oil prices” July 10 and this is far from the whole truth.

The problem lies in that in the many countries where the oil belongs to the State, the current oil revenues exceed their respective governments’ capabilities to use them rationally, and their respective leaders’ most immediate personal needs, and so there is not a lot of incentives for them to produce more.

If on the other hand in all these countries, where the population still suffers many unsatisfied needs, the oil revenue was to be shared out directly to the citizens, the true shareholders, you would see more supply. Again it is all another case where the management run their personal agenda.

Gros quotes King Abdullah of Saudi Arabia that if additional oil were to be found in his country he would advise leaving it in the ground because “with the grace of God our children might have a better use of it” and this he can say only because the current children of his land have no say on it.

But the citizens of the oil exporting countries would love to consume…if given a chance.

Sir Martin Wolf says in “How to manage the world economy through two crises” June 25 that the ongoing transfer of wealth from oil-importing countries to oil-exporting countries… from those who spend to those inclined to save… will curb the rise of global demand” and he is right, but it should not have to be that way. The reason for him being right is that the wealth transfers goes into sovereign funds or other government pockets and not to the citizens of the oil-exporting countries who would also gladly step up their consumption.

Today, in Venezuela, I am publishing a fictitious letter from Arnold Schwarzenegger in which he offers to buy on a rolling five years average price 2 million of oil barrels per day to satisfy the needs of his constituency and take the worst volatility out of the market. To stimulate Venezuela entering into such a country he is offering to pay an equal share of the proceeds, to each one of the 26 million citizens of Venezuela, in the currency and in the individual account each one of them would like.

http://opinion.eluniversal.com/2008/06/26/opi_769_art_de-arnold-para-venez_26A1723279.shtml

Why can’t you have sensible long term contracts in oil?

Just the sheer possibility of losing a tenure based on no particular fault of their own, could do wonders for the educational system, infusing it with a minimum required dose of uncertainty, and thereby allowing tenured professors to at least to understand the concept of anxiety.

Sir in “Double, or quit?” June 10, you say that “Volatile prices get in the way of sensible medium-term contracts to produce or deliver oil-intensive goods and services” June 10 and you are right but why on earth you cannot extrapolate that into the need for sensible medium-term or even long term contracts for oil itself, to bring down that uncertainty that hinders more investment is indeed very hard to understand.

When it comes to oil FT does not write without fear and favour.

Sir once again, when it comes to oil, I feel that what is most valid about FT’s “Without fear and without favour” are the quotation signs. In your “Pumped up”, May 28, you refer to a study that finds that “UK duty was 20% higher in real terms in 2000” and you therefore happily conclude that “it is not the cause or rising fuel prices” Why did you not compare it to a year when petrol duties really started to increased, like for instance 1980?

You talk about that driving is getting costly, but you do not dare to specify the components of that cost, could that be because the taxman still gets more than the oil man?

Many of the consumers have had oil at $130 for decades!

Sir may I congratulate on placing the current price of oil in its true perspective saying "When oil was $10 a barrel, the idea that the stuff was running out seemed demented", "Solving the $130 oil conundrum, May 21.

It is exactly in that "dementia" during the last oil bust-boom (where you place yourself depends on whether you are an extractor or a consumer) that we find the origin of the current boom-bust, and so let us hope that a similar dementia is not present this time. This requires being sincere with the facts.

Among the little acknowledged oil facts is that for instance that the European consumer and many others have already for decades been living with oil in the $130, only that instead of the extractor getting that value it was the taxman. While oil prices were nudging down to the $10 you mention, taxmen were stealthily increasing their take...will they now reduce it?

Oil was at almost 10$... and heading south!

Sir, why are you distorting the truth? In a "Time to convene a summit on oil" May 16 you refer to the inexorable rise in the oil price from below 20$ to 126$ in less than a decade. If that had happened we would probably not seeing the current conditions but the fact is that late 1998 the price of oil got close to 10$ creating havoc for producers and investors alike (and for Venezuela bringing us chávez) and you know that as late as April 1999 even The Economist published an article arguing it was going for 5$ and FT must have echoed the same beliefs.

If an oil summit between the consumers and the oil extractors is to succeed then it has to build on the truth. And the truth should be spelled out without fear and without favour. Don't you think so?

But we did what the market told us to do not long ago!

Sir Martin Wolf tells us that “The market sets high oil prices to tell us what to do” May 14, but we should not forget that the same market, less than a decade ago, priced the barrel of oil under 10$, and according to some pundits it was heading for 5$, and that in fact many of our current problems are derived from doing exactly what those low prices told us to do.

Martin Wolf also quotes the International Energy Agency in order to establish a case for extremely tight oil markets but what was this agency saying just a few years ago? Why are they to be more credible now?

What Martin Wolf does not mention are the alternatives to the short term markets in oil and that some long term take up contracts between producing and consuming countries, based on some reasonable in between prices, could create stability and reduce volatility in the oil markets for the benefit of all...less the short term speculators of course.

Please give us a New Oil Deal!

Sir less than ten years ago the price of oil was less than ten dollars per barrel, the Economist wrote in "The next shock?" March 1999, that "in today's condition the price would head down towards $5" and Sheikh Yamani was the toast of the town with his cute ''The Stone Age didn't end for lack of stone, and the oil age will end long before the world runs out of oil.'' Of course all that set us up for low investments in oil exploration and as a consequence the current high prices of oil.

It should therefore be quite clear that when now "Opec seeks assurances on oil demand from consumer nations", FT front page November 12, so that they can invest, it behoves the consumers all over the world to come up with some constructive proposals. The world needs urgently a New Oil Deal and the only ones standing in between consumers and producers to reach it are those who just want that deal for themselves.

Sack some in the IEA!

Sir, Martin Wolf in his “Why the energy revolution will continue to power ahead”, June 28, concludes “anybody who thinks it will be easy to reduce global energy consumption is simply dreaming” and asks “where might all this energy come from?”, and he promises to tackle this monumental upcoming crash of trains in future columns. Nonetheless, though thankful for Mr. Wolf’s efforts, we should remember that is exactly why the OECD countries set up the International Energy Agency (IEA), that intergovernmental body that describes its mission on the Web as “advancing security of energy supply, economic growth and environmental sustainability through energy policy co-operation”.

Since we so recently could read in the world press about oil heading down towards $5 and the end of the oil age, and never heard an IEA representative forcefully negating such predictions, may I advance the idea that the first thing to be done, specially in times when we preach the worth of accountability, is to publicly sack some IEA bureaucrats, as incompetent lazybones, or worse, for misrepresenting the facts. This is no joking matter as hundreds of millions of persons around the globe will suffer if IEA, and others like them, do not get their act together.

IEA

It’s an oil boom stupid!

Sent to The Economist, August 30, 2005, destiny unknown

Sir, In March 1999, in “The next shock?” The Economist wrote that “in today’s conditions the price [of oil] would head down towards $5 [per barrel]” Now again, for the umpteenth time, The Economist, so serious and clearheaded in most issues, loses it all when it comes to oil. In “Counting the Cost” of August 27 and even while assisted by a clear chart of the real prices of oil in 1980 terms, your editorial staff insist on labeling an oil crisis when the index is getting close to 100 and not when that index in 1998 dropped to only 20. That was the real oil crisis, and that is what the world is paying for today!

To top it up, The Economist seems also to be preparing the terrain to blame oil for the collapse of the high property prices that they duly classify as a “boom”, instead of looking at much more plausible culprits. Come on, we expect more from you.