Tag Archives: Oil

Has the California Fracking Debate Been Mooted?

South Belridge Oil Fields, Highway 33Federal government decreases recoverable Monterey Shale oil estimates by 96%

by Brian Leubitz

Many in government were expecting there to be something of a North Dakota style oil boom in California. Perhaps we best not rely on that for all of our future revenues:

Federal energy authorities have slashed by 96% the estimated amount of recoverable oil buried in California’s vast Monterey Shale deposits, deflating its potential as a national “black gold mine” of petroleum.

Just 600 million barrels of oil can be extracted with existing technology, far below the 13.7 billion barrels once thought recoverable from the jumbled layers of subterranean rock spread across much of Central California, the U.S. Energy Information Administration said. The new estimate, expected to be released publicly next month, is a blow to the nation’s oil future and to projections that an oil boom would bring as many as 2.8 million new jobs to California and boost tax revenue by $24.6 billion annually. (LA Times)

Now, this doesn’t mean that there aren’t billions of barrels of oil under California, but it is simply too difficult to access, even using the latest technologies. Some will certainly continue to explore here, and maybe with future technologies more will be unlocked. However, for the time being, the boom won’t be coming.

I suppose my headline is a bit provocative, because there will still be fracking in the state to access some of that 600 million barrels. And we still need to learn more about the fracking process before we go gung-ho on our shale with a bunch of questionable chemicals and our increasingly precious water. But the incentive for large scale fracking operations has just been drastically diminished.

Student-led Campaign for Oil Extraction Tax Announces Strategic Resubmission, New Partnerships

The student-led campaign to pass an oil extraction tax in California via ballot initiative entered a new phase this week. The initiative, titled the California Modernization and Economic Development Act (CMED, for short), began gathering signatures in April and hit the signature gathering deadline set by the Secretary of State today. However, Californians for Responsible Economic Development, the student-led group that drafted the initiative, is announcing plans to strategically resubmit a revised measure: “This Summer has been busy for the CMED team,” said Aaron Thule, Grassroots Coordinator for the campaign, “after a lot of hard work, we have built a signature gathering coalition for Fall and Winter that will be ready to activate and qualify this initiative come November.”

The revised initiative will still utilize a tax on oil extracted from California to make investments in education and energy affordability, and authors have kept the same title. However, the authors made several key changes to the initiative. First, CMED will now feature a sliding scale tax of 2% to 8%, which proponents argue will protect small business owners and jobs. Proponents of the initiative predict that the oil tax would bring in 1 billion dollars a year in revenue for the state. Second, revenue in the revised initiative would be allocated as follows:

– 50% would be placed in a special 30-year endowment for education. After 3 years, the endowment would begin to payout in four equal parts toward K-12, Community Colleges, Cal State Universities and University of California. After 30 years of collecting interest, proponents predict it would bring in as much as 3.5 billion dollars a year (in today’s dollars) for California’s education system.

– 25% would be used to provide families and businesses with subsidies to help them switch to cleaner, less costly forms of energy

– 25% would be allocated toward rolling back the gas tax increase enacted last July, to make gas more affordable for working class Californians.

The growing coalition, which set signature gathering goals to qualify the measure by early Spring, includes the University of California Student Association (UCSA), groups at San Francisco State University, Sonoma State University, CSU Bakersfield and several community colleges. California College Democrats and Young Democrats, which have both endorsed an extraction tax for education and clean energy, are also lending support. “It’s hard to believe that California is the only state that practically gives away our energy – especially when, as a state, our schools and colleges continue to struggle and we have yet to provide adequate funding to meet our own renewable energy standards,” said Erik Taylor, president of the College Democrats, who added: “Cal College Dems aren’t the only ones focused on the problem. At the Democratic convention in April, the state party endorsed an extraction tax policy for California. At the Democratic eboard meeting in July, the Young Democrats took it a step further and endorsed an extraction tax for education, renewable energy and community development.”

The UCSA, which represents hundreds of thousands of students in the UC system, plans to organize across several campuses in order to ensure benefits for students. Kareem Aref, the President of the UCSA, commented, “Affordability and funding are critical issues at the UC and Prop 30 simply is not the solution in itself that we need. Our campaigns for this year are designed to ensure a stable and long term funding stream for the UC. We are excited to push CMED to the next level and see this initiative implemented.”

More information and updates from the campaign can be found at http://www.cmedact.org

Why should you take a moment to support CMED?

by Kevin Singer, Communications Coordinator, Californians for Responsible Economic Development

In 2011 alone, California produced a grand total of approximately 200 million barrels of oil and 230 billion cubic feet of natural gas, making our state the fourth largest producer of oil and the tenth largest producer of natural gas in the country. Yet, despite this, California does not get a dime for the resources that are extracted from our state and sold on the global market. This is because, unlike every other major oil and natural gas producing state in the nation, California has not enacted an extraction fee on the energy that is taken right from under our feet.

Let’s think about this for a moment. California, the ninth largest economy in the world, is ranked 43rd in the country in terms of K-12 spending per pupil. The University of California, the flagship public university system of the nation, has seen a 14% decrease in funding since 2010. And at a time when a quality college education has never been more important, tuition is skyrocketing, making a diploma unaffordable for an increasing number of young Californians. Meanwhile, at 9.8% unemployment, even those who have graduated from college find themselves without work or working at jobs they are tremendously over-qualified for. The appalling disrepair of our municipal infrastructure only discourages employers from bringing more jobs to our state. But our state government has its hands tied behind its back. The $250 billion dollar state debt all but assures that there will be no additional funding for education and infrastructure in the near future.

And we are giving away our oil and natural gas. We have the wealth to fund the investments that California needs and deserves and we are giving it away. This is to say nothing of that fact that by not charging an extraction fee on oil and natural gas, our state, which prides itself as a leader of reducing CO2 emissions, is not putting a price on the CO2 that eventually makes its way into the atmosphere. To say this is ridiculous would be an understatement. It is an outrage.

The California Modernization and Economic Development Act (or CMED) would put an end to it. By implementing a modest 9.5% extraction fee on oil and natural gas (Alaska, hardly an enemy of big oil, has implemented a fee of 24% on oil and natural gas that’s extracted from the state), CMED would raise between 2 and 2.5 billion dollars in revenue for California. A little more than half, 1.2 billion dollars, would be allocated in four equal parts for K-12, California Community Colleges, Cal State Universities, and the University of California for the purposes of increasing quality and restoring tuition to 2010 levels. 400 million dollars will be used to support small businesses by aiding their transition to cheaper, carbon-free and carbon-reduced forms of energy, which would in turn empower them to expand, hire additional workers, and reinvest. An additional 300 million dollars would be apportioned to the general funds of California County Governments for the purpose of upgrading and better maintaining municipal infrastructure, funding the conservation of regional park land and providing a multitude of other public services.

These are more than investments, they constitute a complete vision for responsible economic development in California. Making that vision a reality is as easy as ending the giveaway of our oil and natural gas, but it’ll take a popular movement if we truly want to realign the policies in Sacramento with the wishes and desires of Californians. Simply by taking a few moments, right now, and visiting www.cmedact.org, liking our Facebook, following us on Twitter, telling your friends or donating anything you can, even $5, you can provide the crucial grassroots support we need. It’s that easy. You could be the difference between failing to qualify and qualifying CMED on the 2014 ballot, so that Californians can have a chance to pass it democratically.

We can do this California, but not without your support. If you think it’s ridiculous that we are giving away our oil and natural gas at a time when California is more cash-strapped than ever, join our cause. It won’t be easy, but together we will qualify and pass the California Modernization and Economic Development Act and put our state back on the right track.

If the President Wants Cleaner, Safer Gas and Oil, Give Consumers Knowledge and Power

Fracking Pond

It was a relief to hear more than a passing reference to climate change in President Obama’s State of the Union Speech, including promises of more support for wind and solar power. But the oil industry heard nothing to even cause even a smidgen of concern.

Asking Congress to “get together to pursue a bipartisan, market-based solution to climate change” should have been marked in the transcript as a laugh line.  And the presidential promise to “keep cutting red tape and speeding up new oil and gas permits” was an emergency alert for communities under siege from natural gas fracking and states–particularly California–whose dwindling supply of clean water is being sucked away by both oil companies and climate change.

While the president pledged support for “research and technology that helps natural gas burn even cleaner and protects our air and our water,” technology is only as good as the corporations willing to pay for it as well as put safety above profit. What citizens want is information and a say in the process. Right now they have precious little of either.

So the citizen’s challenge to President Obama and Congress has to be this:

  • We want knowledge and the oil industry demands secrecy about its drilling, its safety procedures, the toxic chemicals it injects into wells and the effects of drilling on land, water and air.
  • We want responsibility and the oil industry wants deniability about chemical and methane seepage (to protect it from liability for the damage it causes, from poisoning our water to killing farm stock after leaks from wastewater ponds like the one pictured above).
  • We want advance information about new drilling and the industry wants no discussion with communities before the drill bits hit the soil; dangerous fracking gets far less advance scrutiny than solar and wind projects.
  • We want the environmental and quality of life effects of drilling measured and balanced before deep new fracking and injection wells go up next door; the industry calls such requests “job killers.

Judy DuganPresident Obama rightly praised the growth of cleaner cars and called for more conservation and greener buildings. He left no wiggle room in his speech for climate-change deniers, not with American coastal communities being submerged by rising seas and ever-more-frequent giant storms like Sandy. Yet that firmness doesn’t track with his praise for clean-burning natural gas. Any clean-air benefit in combustion has to be balanced against the high volumes of methane–which is a far more potent greenhouse gas than carbon dioxide–in the gas fracking process.

He praised growing North American energy independence–yet such “independence,” in a global market like oil, will do exactly nothing to reduce U.S. gasoline prices. And the worse cost is the acceptance of filthy tar sands oil from Canada, which pollutes at every stage from extraction to refining.

Everything in politics is a tradeoff, and President Obama has at least put energy conservation and climate change back on the national radar. What we need to see now is a commitment to saving our air, land and water for generations to come, rather than accepting the false “job killer” mantra of industry and its empty promises to put safety over profit.


Posted by Judy Dugan, former research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Confirmation puts focus on California’s toxic waste…

Ever wonder if your water is contaminated with toxic runoff from local industry? What about if your kids are safe playing in the dirt at home or at school?  California regulators should be able to eliminate that fear.  We’re at the confirmation hearing for the new director of the CA Dept. of Toxic Control to make sure she answers the tough questions and outlines her plans to hold companies accountable if their hazardous waste and manufacturing facilities are spewing toxins into our air and water.

And just this morning, the Sacramento Bee published an opinion piece that further illustrated the need for regulations that have teeth and for regulators who are strong enough to stand up to industry power brokers.

The underbelly of industry in California is toxic waste, from the arcane chemicals used to manufacture computers to contaminated engine oil left behind after an an oil change at a service station. The state has strict rules and regulations on how such waste can be disposed of or recycled – governing storage, transportation and reprocessing to protect air, soil and water…Yet too many middle- and working-class families in this position are plagued by odors, toxic dust, fiery accidents and worries about their drinking water.” -Judy Dugan & Doug Heller, Special to the Sacramento Bee 4/11/2012

Read more of the Sacramento Bee opinion piece here

“Gas Pain” At Pump And Smokestack

A California license plate seen recently that said, “Gas Pain,” might be the sly joke of a gastroenterologist, but it’s not on a Mercedes. So let’s stipulate that it means pain at the pump, with a gallon of regular gas stuck for months  at around $4.40. This kind of price is as usual fueled by investor speculation and an oil industry that cuts supply to drive up profit. But the license plate could just as well be about a different kind of gas-a  big increase in greenhouse gas emissions by the state’s oil refineries.

A California license plate seen recently that said, “Gas Pain,” might be the sly joke of a gastroenterologist, but it’s not on a Mercedes. So let’s stipulate that it means pain at the pump, with a gallon of regular gas stuck for months  at around $4.40. This kind of price is as usual fueled by investor speculation and an oil industry that cuts supply to drive up profit. But the license plate could just as well be about a different kind of gas-a  big increase in greenhouse gas emissions by the state’s oil refineries.

California refineries “emit 19-33% more greenhouse gases (GHG) per  barrel [of crude oil] refined than those in any other major U.S.  refining region,” according to a recent report for  the Union of Concerned Scientists. The reason is a corresponding increase in the amount of heavier, dirtier crude oil processed,  including dark, sticky tar sands oil from Canada. The gasoline produced at the end of the process is no dirtier-but the gases that could otherwise come from your tailpipe are going up the refinery smokestack instead.

A story in Inside Climate Today points  to requirements that refiners remove sulfur pollutants from gasoline and diesel fuels. Such scrubbing is harder to do with the cheaper, dirtier tar oil, and refiners may emit more carbon pollutants during a longer refining process, especially as they try to squeeze out more fuel from every barrel of oil.

California isn’t yet capping refiinery pollution, and this week delayed putting financial teeth in planned emission caps. Pardon us for thinking oil industry lobbying could have had something to do with it.

No one is forcing refiners to buy Canadian tar oil-refiners want because it’s cheaper than lighter oils and produces a bigger profit.  It’s the same reason oil companies are demanding their high-volume Keystone XL pipeline from Canada to Texas, which could make California  refinery pollution look like a clear day in spring. Exxon Mobil officials won’t even admit that the tar oil is dirtier to refine. From a Texas story on the pipeline:

An ExxonMobil spokesperson refused to specify how much heavy crude the company’s refineries are already processing in Texas or might process if the pipeline is completed. Nor would the company respond to questions about how refining tar sands oil affects the amount of air pollution created by the plants.

Extra profit also comes from U.S. refiners exporting gasoline and diesel fuel at record rates. Fuel is now America’s top export, even as refiners import the dirtiest oil to make it.  Domestic pump prices go up and the refinery pollution burden on Americans goes up while other nations reap the clean fuel.

Californians are already buying and driving cleaner cars and cutting consumption. All families prize clean air, but those who live near  refineries are suffering more, not less, pollution. There’s “gas pain” for everyone except the oil industry and its servants in government, as in a Congress that won’t even trim the industry’s billions in corporate welfare.


Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Big Oil’s Dirty Fingerprints

You don’t have to be a detective to find Dirty Energy’s oily fingerprints all over our current national political debate on expanding oil drilling. But it helps that there are still investigative journalists who look into these things every now and again.

Yesterday, the U.S. House of Representatives passed the “Restarting American Offshore Leasing Now Act” by a 266 to 149 margin. Today, the Huffington Post reveals that the sponsors of the bill, which would expand oil drilling in the Gulf of Mexico and open the coastal waters of Virginia for exploration, received $8.8 million in contributions from Big Oil.

I’m sure you join me in believing fervently that the industry’s millions have absolutely zero influence on the motivations of the bill’s sponsors. Not.

According to the Huffington Post:

“The oil and gas industry is one of the most politically active interests groups in Washington. In the 2010 mid-term election cycle alone it spent $30 million in contributions to federal candidates… And those figures pale in comparison to the amount the industry spends on lobbying. In 2010, oil and gas companies spent just under $146 million employing the service of nearly 800 lobbyists.”

The “Restarting American Offshore Leasing Now Act” passed by Big Oil’s friends in the House is just the first of a series of largely GOP-supported, fast-tracked bills intended to loosen restrictions on offshore drilling. The three bills passed the House Committee on Natural Resources in April.

Closer to home for Californians, one of the next steps is to put to a House vote HR 1231, or “Reversing President Obama’s Offshore Moratorium Act,” which would require that each five-year offshore leasing plan include lease sales in the areas containing the greatest known oil and natural gas reserves. Every five years, the federal government would be required to lease at least 50% of available unleased acreage off the West Coast, Alaska, the Gulf of Mexico and much of the East Coast.

It’s been called the “Law of Eventually Drilling Everything” by Richard Charter, senior policy adviser for Defenders of Wildlife. A vote on the House floor is expected next week.

According to California Watch:

“Under existing law, the government decides which areas to lease. This new law would effectively double the current level of offshore drilling. And states, such as California, would have no say in the matter. ‘Earlier versions of bills like this generally allowed a state to veto projects,’ said Regan Nelson of the Natural Resources Defense Council. ‘Californians have consistently made it clear that they oppose new offshore drilling off their coast. This bill is so out of sync of what people want. They’re willing to put oil production over all other considerations.'”

Considerations like the clear environmental hazards of drilling, and risks to the public’s health and safety. It was only a year ago that the BP Deepwater Horizon oil rig exploded in the Gulf of Mexico, creating one of the largest environmental catastrophes ever.

It’s mind-boggling that in light of that very recent disaster, federal lawmakers including those that represent California are considering encouraging more drilling off the West Coast.

California Congressman Jeff Dunham claims that he supports the series of bills allowing more drilling in part because domestic energy production will “bring relief at the pump.” Rep. Denham is joined by fellow Californians Rep. Tom McClintock and Rep. Jim Costa in supporting the bills.

But a study conducted by the federal government’s Energy Information Administration showed that new drilling off the country’s coasts would only reduce gas prices by a few cents. (Oops! So much for that argument.)

Compare those pennies to the millions of dollars in contributions being doled out by the oil industry, and suddenly certain lawmakers’ urgent calls to allow more risky offshore drilling makes more than enough “cents.”

Speaking of something that makes no sense (or cents) for us taxpayers… Americans are still paying for billions of dollars in oil industry tax breaks, despite record oil industry profits and despite the fact that a recent poll found that 74 percent of voters support eliminating tax breaks to oil companies.

According to the national League of Conservation Voters, ExxonMobil recently announced nearly $11 billion in profits; BP announced $5.5 billion profits; and ConocoPhillips announced $3 billion in profits-all in the first three months of 2011. Obscene is the word that comes to mind.

Next week, Senate Majority Leader Harry Reid is expected to bring to the floor a bill, authored by Senator Max Baucus, that would end the billions of dollars in tax breaks for large oil producers–estimated to cost taxpayers $5 billion each year–and increase breaks for clean-energy producers.

As national League of Conservation Voters President Gene Karpinski says of the handouts to Big Oil:

“And as ire over gas prices grows, so will frustration with Members of Congress who remain close to Big Oil. So while Speaker Boehner and others may be confused about where they stand on the issue, the choice is clear: end the Big Oil handouts now or see what the voters think in eighteen months.”

California voters made it clear what they thought of Dirty Energy’s election meddling last fall by overwhelmingly defeating an oil industry-funded attempt to repeal our landmark clean energy law. I expect we’ll once again make it clear in the 2012 elections what we think of elected officials covered in Big Oil’s fingerprints–in other words, those who put oil industry profits above the needs of the Californians they claim to represent.

Darrell Issa’s Big Oil Road Show

Sign the petition telling Darrell Issa Frack No! before his hearing on Friday.

There seems to be a bit of confusion at Oversight Headquarters as to what Friday’s field hearing in Bakersfield is going to be about. Last Friday, the hearing was “Pathways To Energy Independence: Hydraulic Fracturing And Other New Technologies.” By Monday, it had changed to “Can New And Safe Oil Extraction Technologies Help Address Gas Prices?” And yesterday, it was back to “Pathways To Energy Independence: Hydraulic Fracturing And Other New Technologies.” The renewed focus comes with word that the witness lineup for Issa’s hearing will be Bakersfield’s Republican state assemblymember and four representatives from oil and gas companies, including major Republican donors and representatives from Big Oil front groups.

Back in December, Darrell Issa sent his now-infamous letter to corporate lobbyists and industry groups asking them to recommend hearings for the Oversight Committee. Among the recipients were Big Oil groups with benign names representing a wide range of notorious organizations. For example, the Independent Petroleum Association of America. In its response, the IPAA focused on rolling back EPA regulations and streamlining the permitting process for both offshore and onshore drilling. Who is the IPAA?

The IPAA receives funding from a wide range of oil companies, including major funding (tens of thousands dating back to at least 1991) from Larry Nichols, the Chairman and CEO of Devon Energy. Larry Nichols is a leading GOP moneyman in Oklahoma, personally donating out of his own pocket more than $380,000 over the years to fund Republican candidates, candidate committees, and affiliated PACs across the country. Separately, Devon Energy’s PAC last cycle contributed more than $300,000 to Republican campaigns and campaign committees, including $11,000 directly to Oversight Committee members.

And testifying at Darrell Issa’s hearing on increased oil drilling and fracking this Friday will be William Whitsitt, Devon Energy’s Executive Vice President for Public Affairs.

Next up on the witness list is Tupper Hull, a Vice President at the Western States Petroleum Association. Members of the WSPA include heavy hitters like BP, Chevron, ConocoPhillips, ExxonMobil, Occidental, Shell, Tesoro and Venoco. It’s a pretty definitive who’s who list of Big Oil power players, not to mention a group that dropped more than $6 million combined on Prop 23 last year. It’s also a group that really likes writing checks to Darrell Issa, year over year, including:

Chevron $23,500

ConocoPhillips $5,500

ExxonMobil $22,000

Occidental $7,000

Valero $19,500

And that’s not even beginning to explore the money they’ve sunk into other committee members.

Taking the same dais will be Steve Layton, president of Bakersfield-based E&B Natural Resources Management Corp, an oil and gas drilling company operating in several states. According to its website, E&B is owned by the New York-based Galesi Group, whose principal and CEO is Francesco Galesi. Aside from the obvious vested interest for E&B in expanding drilling, Galesi is a major political donor who has leaned significantly Republican as time has gone by in several decades of political contributions, including support for Bob Dole, George W. Bush, and disgraced former Congressman John Sweeney.

Finally, Rock Zierman, Chief Executive Officer of the California Independent Petroleum Association. Last cycle, CIPA, which lists fracking as its top federal priority, was good for a $2,500 check to Issa and nearly $240,000 to California state candidates — 86% to Republicans, including $4,000 to fellow witness Asm. Shannon Grove.

Helping to organize Issa’s field hearing and scheduled to attend himself is California Republican Congressman Kevin McCarthy. McCarthy is the Majority Whip for the Republicans in the House, and a huge friend of Big Oil. His campaign collected more than $100,000 from the Energy and Natural Resources sector last cycle, including big checks from Koch Industries, Chevron, ConocoPhillips, ExxonMobil, Halliburton, IPAA, Marathon Oil, Occidental Petroleum, Tesoro, and Valero. He’s also cashed $15,000 from CIPA.

There are also less direct ways that Big Oil is influencing Issa and the Oversight Committee. The National Petrochemical & Refiners Association also received Issa’s letter in December. Another umbrella group for a wide range of oil companies, the National Petrochemical & Refiners Association has deeper pockets thanks to major backers. Founded before the 2006 cycle, the organization functions largely as a mouthpiece for Koch Industries and major oil companies like Valero and Tesoro who provide major funding each year. We know very well that these groups have a major vested interest in opening up the process for more oil drilling and rolling back environmental protections because just those three combined spent more than $6.5 million last cycle trying to pass Proposition 23 in California. The so-called “Dirty Energy” proposition sought to indefinitely suspend landmark environmental protections passed in 2006. Prop 23 lost by a 23% margin despite the efforts of these groups, but Big Oil isn’t giving up that easily.

Speaking of Koch Industries, they’ve been dutifully funding the Republican members of the Oversight Committee ahead of this Congress. Just in this past cycle, the Koch machine helped fund a dozen Republicans on the committee, including a combined $15,000 to Issa’s campaign. Other committee members receiving funding from the Kochtopus last cycle:

Patrick McHenry $10,000 (PAC)

John Mica $2,500

Connie Mack $7,500

Tim Walberg $10,000

Jim Lankford $5,000

Pat Meehan $7,500

Trey Gowdy $5,000

Dennis Ross $10,000

Frank Guinta $5,000

Blake Farenthold $5,000

Mike Kelly $5,000

But in fairness, it wasn’t just the Kochs who were busy funding committee members. Last year Valero dropped $10,000 into Darrell Issa’s campaign and spread another $10,000 between other committee Republicans.

Issa also last year sent a copy of his letter to the grandaddy of Big Oil lobbyist shops — The American Petroleum Institute — which also targeted an easier permitting process for oil drilling, complaints about the Endangered Species Act, EPA enforcement of existing environmental protections, and concern that climate change worries will get in the way of more drilling. API has been lobbying for the oil industry for more than 90 years, and has foregrounded the promotion of fracking as a policy priority. API has spent at least $3 million annually lobbying Congress since 2003, including $21.5 million since just 2008.

What doesn’t currently appear on the witness list is anyone who might speak to the risks involved in fracking, or mention that there has yet to be a comprehensive study of the potential environmental impacts. Nobody who will look at the major fracking spill last month in Pennsylvania as a warning, just like Darrell Issa still thinks the Gulf Oil Spill is an indication that we should increase offshore oil drilling. None of it makes any objective sense, but after collecting hundreds of thousands from Big Oil and the Koch Brothers, maybe it doesn’t matter anymore if what you say makes any sense.

I manage IssaWatch.com for the Courage Campaign. You can join us on Facebook and Twitter.

$4 Gasoline and the Price of Silver: Yeah, There’s a Connection

U.S. gas prices have hit their highest level ever for springtime, at $3.96 a gallon for regular on average. Yep, higher even than the record surge in 2008, as oil companies reap near-record profits. So what does that have to do with the price of silver?

U.S. gas prices have hit their highest level ever for springtime, at $3.96 a gallon for regular on average. Yep, higher even than the record surge in 2008, as oil companies reap near-record profits. So what does that have to do with the price of silver?

The speculative price of silver is dropping, maybe crashing, from its high around $50 an ounce largely because of one move: the New York Mercantile Exchange, where silver is traded, increased how much of the price of a trade has to be paid up front. Instead of a few cents on the dollar, it’s now several cents on the dollar.

Oil futures are sold even more cheaply–with speculators still putting up only around 6 cents on the dollar to trade hundreds or thousands of barrels of oil. That makes it too easy to gamble and encourages trades that are intended to push the price up further, to the detriment of your personal wallet. Just as with silver, most of the traders don’t produce oil and never intend to take delivery of a barrel of oil on their Manhattan doorsteps. Just as with silver, oil is attractive to speculators looking for a commodity that’s protected from any drop in the value of the dollar–even if their activity ends up hurting the value of the dollar, as shown in a 2009 Rice University study on energy speculation.

There are some differences, including the fact that oil markets are too vast to be cornered by one or a few traders, unlike silver. But the similarities are more numerous.

So why not raise the margin–the amount that pure speculators have to pay up front–on oil futures trading? Sens. Bill Nelson of Florida and Maria Cantwell of Washington recently asked the Commodity Futures Trading Commission to do just that–and quickly. But the CFTC hasn’t lifted a finger and won’t even comment on the Nelson letter–which is evidence of the power of the financial industry’s lobbying power in Washington.

The White House appoints the members of the CFTC. If its chairman, Obama appointee Gary Gensler, won’t exercise his power to protect consumers and the economy, President Obama should be all over him.

If you’re interested in raising the price of speculation to lower the price of gasoline, why not give the president a call and tell him to give the CFTC a kick in the pants? White House e-mail is here (put “oil speculation”) in the subject line).  Comment line is 202-456-1111, and live switchboard is 202-456-1414. Every call is logged.


Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

Is There a ‘Gashole’ in Your Tank?

It’s as though we had another Hurricane Katrina furiously driving up the price of fuel, but without the storm. Which makes it interesting that an indie documentary called “Gas Hole,” (trailer), examining the reasons for our high gas prices in the post-Katrina world and oil company influence on the gas-guzzling engines in our cars, is now getting wider release. You can be sure that Exxon didn’t provide the funding for this funny/weird/disturbing doc. (I love the old desert-rat types with faded sedans that get 100 mpg, and their stories of disappearing clean-car patents.)

The national average price of plain old regular gasoline is up a dollar a gallon over the past week to $3.83, according to AAA. California, which alerts the rest of the nation to where pump prices are going, is at $4.20. And nationwide, the diesel fuel that drives our trucks and trains is $4.14 a gallon, even though diesel is cheaper to make than gasoline. No wonder food prices are spiking.

It’s as though we had another Hurricane Katrina furiously driving up the price of fuel, but without the storm. Which makes it interesting that an indie documentary called “Gas Hole,” (trailer), examining the reasons for our high gas prices in the post-Katrina world and oil company influence on the gas-guzzling engines in our cars, is now getting wider release. You can be sure that Exxon didn’t provide the funding for this funny/weird/disturbing doc. (I love the old desert-rat types with faded sedans that get 100 mpg, and their stories of disappearing clean-car patents.)

We find out why there’s no supply and demand in any real sense driving the price of gas today. Oil prices are spiked upward by speculation in futures markets, not by physical shortage on the market. Gasoline is driven upward not just by oil prices, but by refining companies’ restrictions on their output, and overall supplies. Then the price of gasoline pushes up oil prices some more. We’re all at the mercy of greed, not supply and demand.

Some of the serious points covered in “Gas Hole” track OilWatchdog’s studies and reports over the years, which are covered in my colleague Jamie Court’s book, “The Progressive’s Guide to Raising Hell.” (video). (Full disclosure: Jamie was interviewed for the movie.)

Some of the most eye-opening points from the book:

Remarkably, the idea that oil companies have control over the price at the pump is controversial in Washington, D.C. Oil company executives point to geopolitical instability, future predictions of crude oil scarcity, OPEC, and other forces beyond their control as the culprits.

The public knows the scoop, and its instincts track the research. Oil companies know they can make more money by making less gasoline, so they do.

I have studied the issue of high gasoline prices for more than a decade.

Here’s what I have learned about how the big five oil companies control gasoline prices by making the commodity scarce and keeping the price high. This knowledge is critical to opposing the industry’s anticonsumer behavior and pushing Americans toward real energy change.

• Rather than compete with each other to provide more and cheaper gasoline, oil companies cheat together to withhold needed gasoline supply from the market. Consistently, the companies artificially pull back refinery production of gasoline in order to reduce supply coming in during periods of peak demand so they can increase prices. … This behavior has been documented by government agencies like the Federal Trade Commission, which found, for example, in an investigation of Midwest gasoline price spikes, that one refiner admitted keeping supply out of a region in need because it would boost prices.

• Oil companies failed to build ample refining capacity to meet demand. Over the last twenty years,America’s demand for gasoline increased 30 percent and refinery capacity at existing refineries increased only 10 percent. No new American refinery has come on line during the last thirty years. Internal memos and documents from the big oil companies show they deliberately shut down refining capacity in order to have a greater command over the market.

• The big oil companies have their own crude oil production operations and control substantial foreign production of crude oil. They profit wildly when the price of crude oil skyrockets, so they have an interest in driving up the price, despite the fact that they blame OPEC for those crude oil increases.The crude oil producers can even drive up the price of crude by restricting gasoline production and trading crude oil among their own subsidiaries to drive up the price paid for crude by others. Traders with connections to the oil companies can also make big bets on the opaque crude oil futures market to drive up the price and also drive up the value of their Exxon shares.

• The crude oil that big integrated oil companies use in their own refineries is mostly bought on long-term contracts or through their own production, so the oil companies don’t pay the world price for crude oil when it’s high. Their raw material costs are much lower than they would like us to believe. So when the companies raise the price of gasoline in tandem with the run-up in crude oil prices, they are making big profits because Exxon’s crude oil unit is charging its own refining unit a higher price for crude than is necessary.The accounting shenanigans result in an overall windfall profit but show the companies’ gasoline refineries making little profit.

“Gas Hole” also pays close attention to oil companies’ long history of influencing markets and government to boost their profits and protect their business model. It pays impressive tribute to the inventor of modern investigative reporting (and one of my personal heroes), Ida Tarbell, whose 1904 history of Standard Oil laid bare a price-fixing national monopoly with tentacles everywhere in government.

Gee, does that sound familiar today? “Gas Hole” has too much sense of the absurd–even a clip from “Reefer Madness”–to be pedantic. But knowledge is power. In the end, it’s a lot more useful than boycotting the Exxon station.


Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.