Why Gas Prices Should Be Lower Soon

Oil markets were roiled today when the United States and the International Energy Agency jointly announced that they would release a combined 60 million barrels of oil into international markets over the coming month.
Where is the oil coming from?
The U.S. said it will sell 30 million barrels from the Strategic Petroleum Reserve, while other countries that are members of the International Energy Administration will provide the rest from their reserves.
But didn't President Obama tell you just a couple of weeks ago that he wasn't planning to do this?
Indeed he did. At a meeting with finance journalists on June 8, I specifically asked whether he was considering releasing oil from the SPR.  His response:

"I won't make any news on that today. I will say that my general view is that the SPR is to be used where you don't have just short-term fluctuations in the market, but a significant disruption event. Libya has taken 1.25 m barrels per day off the market. We're examining broadly what that means in terms of the oil market."

So what's changed in the past two weeks?
A couple of things. First, the administration has apparently concluded that the situation in Libya isn't going to improve in the short term. As Energy Secretary Steven Chu put it today: "We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries, and their impact on the global economic recovery," said Energy Secretary Steven Chu. While Libya accounts for only a tiny portion of global oil production, its oil is the most cherished (and easy to process) light, sweet crude.
Second, an OPEC meeting two weeks ago ended in disarray, with members disagreeing about higher production. That suggests that the production we're losing from Libya won't be replaced anytime soon.
But why release the oil now? After all, oil prices have been falling since May.
It's true that oil prices have been falling. Since peaking at $114 per barrel in May, oil prices had fallen about 16.7 percent before today's announcement.  (For a longer term chart, go here) Meanwhile, gasoline prices have fallen in the last two weeks, from a nationwide average of $3.78 per gallon to $3.65 per gallon. But that's still up 91 cents per gallon from a year ago, and the peak summer driving season is about to begin. Simply put, higher gas prices hurt the economy more in the summer than they do in the spring.
Cynics would say that politics are also coming into play.
As I discuss with my colleagues Aaron Task and Jeff Macke in the accompanying video, you don't have to be cynical to think that. While the economy is slowing, there seems to be little hope of further aid or stimulus. In his press conference yesterday, Federal Reserve Chairman Ben Bernanke indicated that the central bank was pretty much done with its efforts to boost demand.  On Capitol Hill, talks are centering on anti-stimulative spending cuts and tax increases. And so releasing oil from the SPR is one way President Obama can stimulate the economy without action from the Fed or Congress. In theory, greater supplies of oil bring down the price. And cheaper oil functions as a tax cut for businesses and consumers.

Will gas prices come down as a result?
Yes. Crude oil prices have fallen more than 20 percent from their May peak. But don't expect a sharp decline in the price at the pump in the next few weeks. Gasoline station owners buy new supplies every couple of days. So when their costs rise, they feel compelled to pass along the higher prices to consumers instantly — as a matter of survival. The opposite dynamic takes hold when oil prices are falling.  As wholesale gas falls in price, profit margins expand, and station owners are in no rush to ratchet down the price at the pump.
Of course, in the scheme of things, 60 million barrels isn't much. In 2010, the U.S. consumed about  19.15 million barrels per day, and the world ran through about 85.3 million barrels per day. Put another way, this 60 million barrels is about what the U.S. consumes in three days, or what the world consumes in 17 hours.
Even though it's a small amount, it seemed to have a big market impact. Why?
Right after the announcement, the price of oil fell about five percent, to below $90 per barrel.That's a pretty dramatic move. And it can be explained by a few factors. This represents new supply and takes away some of the worries about disruptions. In addition, speculation has played a role in keeping oil prices high. And some investors and analysts believe that this may be part of a concerted effort to fight speculators. The 30 million barrels the U.S. is releasing is equal to 4.2 percent of the total in the SPR, so there could be more to come. In addition, other economic news — the Fed ratcheting down its projection for economic growth in the second half of 2011 yesterday, and general concerns about a slowdown in China — point to lower prices.
Is this unprecedented?
No. When there are disruptions — a barge accident, a refinery explosion — the SPR lends out small amounts of oil to refineries, as it did in 2006. After Hurricane Katrina in the fall of 2005, the SPR offered to sell up to 30 million barrels to help keep the industry supplied. Ultimately, 11 million barrels were sold.
Will this move alone bring oil prices back to earth?
All things being equal, additional supply should lead to lower prices. But in the oil market, all things are never equal. The strength of the dollar, the pace of growth in China, politics in Iran, instability in the Middle East, new finds, OPEC decisions and more play into the ultimate price of oil.
Subscribe to Daniel Gross's RSS feed here.
Follow him on Twitter: @grossdm. Email him at grossdaniel11@yahoo.com
You can find his columns here.
His most recent book is Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation.

FDA Unveils Graphic Images for Cigarette Packs

TUESDAY, June 21 (HealthDay News) -- In a dramatic bid to get more Americans to quit smoking, the U.S. Food and Drug Administration on Tuesday released nine graphic warning labels that will appear on all packs of cigarettes by no later than September 2012.
One image shows a man's face and a lighted cigarette in his hand, with smoke escaping from a hole in his neck -- the result of a tracheotomy. The caption reads "Cigarettes are addictive." Another image shows a mother holding a baby as smoke swirls about them, with the warning: "Tobacco smoke can harm your children."
A third images depicts a distraught woman with the caption: "Warning: Smoking causes fatal lung disease in nonsmokers."
A fourth picture shows a mouth with smoked-stained teeth and an open sore on the lower lip. "Cigarettes cause cancer," the caption reads.
In addition to the images, the label on packs of cigarettes will include a phone number -- 1-800-QUIT-NOW -- so smokers will know where to go for help quitting.
By law, the labels must appear on every pack of cigarettes sold in the United States and on all cartons and in all cigarette advertising. The campaign marks the first major change to cigarette packaging in the last 25 years, the FDA said.
"President Obama is committed to protecting our nation's children and the American people from the dangers of tobacco use. These labels are frank, honest and powerful depictions of the health risks of smoking and they will help," U.S. Health and Human Services Secretary Kathleen Sebelius said in a news release. "These labels will encourage smokers to quit, and prevent children from smoking. President Obama wants to make tobacco-related death and disease part of the nation's past, and not our future."
Matthew L. Myers, president of the Campaign for Tobacco-Free Kids, called the new warnings the "most dramatic change in cigarette warnings in the history of the United States. For the first time the warnings are large enough to be seen and graphic enough to catch the attention of consumers."
The labels will fill the top half of all cigarette packs.
Myers said the images on the labels are exactly the kind of measure that has been shown to be effective in encouraging children not to smoke and getting adults to quit. But, to keep the message vibrant, the images need to be changed regularly because as people get used to them, the impact of the warning weakens, he added.
"For the first time we have labels that not only tell people that smoking is dangerous, but provide them the kind of information they need to now how dangerous it is," he said. "The warning labels have the potential to dramatically reduce the number of our kids who start, but they will be most effective if they are complemented by comprehensive tobacco-control programs in every state."
Many such programs have been curtailed in recent years as cash-strapped states have diverted funding from tobacco-control efforts to pay for constituent services or to hold down tax increases. In states that have maintained funding, the number of smokers continues to drop, Myers said.
The new labels are a part of the requirements of the new Family Smoking Prevention and Tobacco Control Act, signed into law in 2009 by President Barack Obama, who has struggled for many years to quit smoking. For the first time, the law gave the FDA significant control over tobacco products.
The FDA hopes these new warnings will have a "significant public health impact by decreasing the number of smokers, resulting in lives saved, increased life expectancy, and improved health status."
The agency said it chose the nine images from 36 originally proposed. The agency also said it reviewed the relevant scientific literature, analyzed the results from an 18,000-person study and reviewed more than 1,700 comments from a variety of groups, including the tobacco industry, retailers, health professionals, public health and other advocacy groups, state and local public health agencies, medical organizations and consumers.
Dr. Jonathan Whiteson, director of the Cardiac and Pulmonary Wellness and Rehabilitation Program at NYU Langone Medical Center in New York City, is concerned that the images may be too graphic.
"The 'fear factor' of the negative message can lose its potency -- we become immune to the negative warnings over time, and if too graphic, we often hide behind the denial wall stating, 'This just can't possibly happen to me.' The more graphic the image, the more likely the message will become marginalized and thrown out as too wild and extreme a possibility for the smoker," he said in a statement."
Whiteson thinks that to get kids not to take up smoking, messages have to convey the idea that smoking isn't cool.
Smoking is the leading cause of early and preventable death in the United States, resulting in some 443,000 fatalities each year, according to the U.S. Centers for Disease Control and Prevention, and costs almost $200 billion every year in medical costs and lost productivity.
Over the last decade, countries as varied as Canada, Australia, Chile, Brazil, Iran and Singapore, among others, have adopted graphic warnings on tobacco products. Some are downright disturbing: in Brazil, cigarette packages come with pictures of dead babies and a gangrened foot with blackened toes.
Currently, the United States has some of the weakest requirements for cigarette package warnings in the world, David Hammond, an assistant professor in the department of health studies at the University of Waterloo in Ontario, Canada, told HealthDay. The text-only warnings on packages have changed little since 1984.
Elsewhere, graphic warnings seem to be helping to drive down smoking rates. In Canada, about 13 percent of the population smokes daily, a 5 percent drop since graphic warnings were adopted in 2000, according to Hammond.
More information
For more on the warning labels and to see the images, visit this FDA website.

U.S. intensifying covert war in Yemen: report

WASHINGTON (Reuters) – The Obama administration has intensified air strikes on suspected militants in Yemen in a bid to keep them from consolidating power as the government in Sanaa teeters, The New York Times reported on Wednesday.
A U.S. official confirmed to Reuters that a U.S. strike last Friday killed Abu Ali al-Harithi, a midlevel al Qaeda operative, which followed last month's attempted strike against Anwar al-Awlaki, the leader of al Qaeda in the Arabian Peninsula.
Citing U.S. officials, the Times said a U.S. campaign using armed drones and fighter jets had accelerated in recent weeks as U.S. officials see the strikes as one of the few options to contain al Qaeda in the Arabian Peninsula.
With the country in violent conflict, Yemeni troops that had been battling militants linked to al Qaeda in the south have been pulled back to Sanaa, the newspaper said.
Yemen's authoritarian president, Ali Abdullah Saleh, was wounded on Friday and is being treated in the Saudi capital, Riyadh. He appears to have been wounded by a bombing at a mosque inside his palace, not a rocket attack as first thought, U.S. and Arab officials told Reuters.
There were conflicting reports about his condition -- ranging from fairly minor, to life-threatening 40 percent burns.
There had been nearly a yearlong pause in U.S. airstrikes after concerns that poor intelligence had resulted in civilian deaths that undercut goals of the secret campaign.
U.S. and Saudi spy services have been receiving more information from electronic eavesdropping and informants about possible locations of militants, the newspaper said, citing officials in Washington. But there were concerns that with the wider conflict in Yemen, factions might feed information to trigger air strikes against rival groups.
The operations were further complicated by al Qaeda operatives' mingling with other rebel and anti-government militants, the newspaper said, citing a senior Pentagon official.
The U.S. ambassador in Yemen met recently with opposition leaders, partly to make the case for continuing operations in case Saleh's government falls, the newspaper said.
Opposition leaders have told the ambassador that operations against al Qaeda in Yemen should continue regardless of who wins the power struggle in the capital, the Times said, citing officials in Washington.
Al Qaeda's affiliate in Yemen has been linked to the attempt to blow up a transatlantic jetliner on Christmas Day 2009 and a plot last year to blow up cargo planes with bombs hidden in printer cartridges.
(Additional reporting by Phil Stewart; Writing by Vicki Allen; Editing by Peter Cooney)

Plessy and Ferguson: Descendants of a divisive Supreme Court decision unite

By Robert Barnes | The Washington Post – Mon, Jun 6, 2011

When Keith Plessy and Phoebe Ferguson decided to start a new civil rights education organization that would bear their famous names, they sealed the deal in a fitting local spot: Cafe Reconcile.
They represent the opposing principals in one of the Supreme Court’s landmark decisions, Plessy v. Ferguson , which upheld the constitutionality of Jim Crow laws mandating segregation under the “separate but equal” doctrine. It stood from 1896 until the court’s historic Brown v. Board of Education ruling in 1954.
The descendent of the man who tested Louisiana’s law requiring separate railroad cars for whites and blacks and the great-great-granddaughter of the judge who upheld it met in 2004.
The truth is, no reconciliation was required.
“The first thing I said to her,” recalled Plessy, “was, ‘Hey, it’s no longer Plessy versus Ferguson. It’s Plessy and Ferguson.’ ”
Her first reaction was to apologize.
“I don’t know why,” she said in an interview. “It’s just that I felt the burden of it, this great injustice.”
Plessy’s response?
“I said, ‘You weren’t alive during that time. I wasn’t either. It’s time for us to change that whole image.’ ”
So the Plessy & Ferguson Foundation was born, and on Tuesday it will celebrate another anniversary of Homer Adolph Plessy’s decision to buy a railroad ticket for the June 7, 1892, train trip from New Orleans to Covington, on the other side of Lake Pontchartrain.
The organization seeks to highlight the historic moments in New Orleans’s struggle for racial equality and hopes to remind the public of the story behind the famous case. It was, Plessy and Ferguson said, a forerunner of the legal strategies and civil disobedience that took root in the civil rights struggles of the 20th century.
(PHOTOS: Freedom riders recently observed the 50th anniversary of their historic rides)
It was a setup from the start. New Orleans historian Keith Weldon Medley, in his book “We as Freemen,” describes how the Comite des Citoyens (Committee of Citizens), an organization of freemen of color, planned the legal strategy for more than a year. They meant to challenge the segregation law using the post-Civil War 14th Amendment’s equal-protection clause.
Plessy, a shoemaker from the Treme neighborhood, volunteered for the job and was the perfect candidate. Seven-eighths white, he was “colored” in the eyes of the law. He bought a first-class ticket, sat in the white rail car, answered that he was colored when asked, refused to leave and was arrested by a private detective. It had all been worked out in advance.
John Howard Ferguson was a carpetbagger from New England, schooled by an abolitionist lawyer in the north and married into an abolitionist New Orleans family. He had been on the bench only months when the Plessy case arrived on his docket.
Despite his background, Ferguson upheld the segregation law. Plessy wasn’t deprived of equal accommodations, Ferguson wrote, but “simply deprived of the liberty of doing as he pleased.”
(SCHOOL CHOICE: Some African Americans are split on the issue)
The Louisiana Supreme Court agreed, and so eventually did the U.S. Supreme Court, 7 to 1.
“We consider the underlying fallacy of the plaintiff’s argument to consist in the assumption that the enforced separation of the two races stamps the colored race with a badge of inferiority,” wrote Justice Henry Billings Brown. “If this be so, it is not by reason of anything found in the act, but solely because the colored race chooses to put that construction upon it.”
The lone objection came from Justice John Marshall Harlan, whose “Great Dissent” predicted the decision would join the infamy of the court’s Dred Scott ruling.
“Our Constitution is color-blind, and neither knows nor tolerates classes among citizens,” Harlan famously wrote.
The Comite des Citoyens closed shop; Plessy paid a $25 fine in lieu of jail time.
Phoebe Ferguson and Keith Plessy were both born in New Orleans generations later, in the year Brown was decided.
The daughter of a conservative Tulane-grad father and a “radical feminist” Sarah Lawrence mother, Ferguson said she had no idea she was connected to the case.
“If my mother had known, she certainly would have talked about it,” said Ferguson, who moved north and got the news years later when a man who had bought John Ferguson’s house tracked her down.
(FAST FIX: Herman Cain is on the rise in the Republican primary)
She returned to New Orleans from New York “after the storm” — Hurricane Katrina — first with a 17-foot truckload of supplies and then later for good. She completed a film about the city’s oldest African American social club called “Member of the Club” and lately has become involved in the city’s schools.
“I’m a completely different person than I was in New York,” she said.
Plessy, whose great-grandfather was Homer Plessy’s first cousin, knew of his connection because of his fairly rare French name. He remembers grade school teachers calling him to the front of the class during a discussion of the case.
And his name has attracted attention from visiting civil rights luminaries who have passed through the downtown New Orleans hotel where he has made a career. He spoke with Muhammad Ali and was once called upstairs to meet Rosa Parks.
Plessy recalls rushing in to find Parks sitting in a chair, and he knelt before her.
“She said, ‘Get up, boy. Your name is Plessy. You got work to do,’ ” he said.
He said he found that work after meeting Medley, and because of the revival of interest around the centennial of the Plessy decision. The city and state first recognized “Homer A. Plessy Day” in 2005.
“I was not a great leader or a great scholar or any of those things,” Keith Plessy said. “I’ve been a 30-year employee of Marriott as a bellman and happy with that job.
“But I have an obligation and a privilege to keep my ancestor’s history alive. What my ancestors dreamt about, I’m able to live.”

More from the Washington Post:

Women are enthusiastic about Sarah Palin and Michele Bachmann.

The African-American garments that are slated for the National Museum of African American History and Culture.

Unearthing African American history in Timbuctoo.

Full coverage of the 150th anniversary of the Civil War.