President, Congress offer no immediate help on gas prices

[audtatious]

WASHINGTON (CNN) -- Before departing the White House early Monday for a farewell tour of Europe, President Bush stole a page from his predecessor and suggested he feels American consumers' pain.

Democrats and Republicans are deadlocked over how to address the rising gas prices.

"A lot of Americans are concerned about our economy," Bush said. "I can understand why. Gasoline prices are high, energy prices are high. I do remind them that we have put a stimulus package forward that is expected to help boost the economy. And of course, we'll be monitoring the situation."

Americans are looking for more action, though, than monitoring the situation.

But while gas prices keep soaring, the chances of Washington finding a solution keep dropping because Democrats and Republicans are deadlocked over how to fix the problem.

Bush talks mostly about increasing supply through more oil drilling in places like Alaska's Arctic National Wildlife Refuge.

"I've proposed to the Congress that they open up ANWR, open up the Continental Shelf, and give this country a chance to help us through this difficult period by finding more supplies of crude oil, which will take the pressure off the price of gasoline," Bush said Monday. Watch how Congress could affect gas prices »

But Democrats like House Speaker Nancy Pelosi are vehemently opposed to increasing production on environmental grounds, so the president's plan has virtually no chance of passage in the current Congress.

In turn, Democrats talk mostly about lowering demand for gasoline through research into alternative fuels -- something the president talks about too -- and more funds for mass transit.

"It's got to involve investing in alternative fuels, so that we can have some alternatives to gas and significant investment in public transit," Virginia Gov. Tim Kaine, a key supporter of Barack Obama's presidential bid, said Sunday.

These types of plans will take a long time to implement, so no quick fix there either.

And with the federal government now more than $9 trillion in debt, where would Congress find the money to pour into public transit and research into alternative fuels?

With the parties deeply divided on solutions, it's not surprising that last week a Senate bill requiring major cuts in greenhouse-gas emissions failed.

Only 48 of 100 senators voted for it amid charges by White House press secretary Dana Perino that the bill would have a devastating impact on the economy and thus might not really help cut the price in gasoline.

But six absent senators, including Obama and Republican John McCain, said they would have voted yes to end debate and move forward on the bill. That led some in Congress to declare that Congress will have the momentum to take action next year on reducing America's dependence on foreign oil.

All that means, however, is that there's optimism the next president might be able to find an energy compromise in 2009.

In other words, don't expect any help from Washington any time soon.

[heliochrome85]

it would have helped if we had an actual energy policy. our policy has been deplorable at best, and almost bordering on criminal.

As for ANWAR, I do not understand how drilling would ease tensions in terms of our gas prices. I suspect a good deal of the cost of gas is due to oil company self-sabotage. its funny how just when we start to catch a breakin the price, a pipeline gets attacked? While i am going to vote for obama, either candidate would be better than what we have now.

[wingFeather]

Why is it Bush's responsibility to fix gas prices? If he's gonna do that, then the price of beer and hookers needs to be addressed, too!

[audtatious]

Short term? No. Long term? It would be a positive.

From an environmental perspective on drilling in ANWAR, the impact would be minimal. I heard a good explenation today....Think of ANWAR as a football field with both endzones. Now, put a postage stamp in one corner. That is about how much of ANWAR we would have an impact with.

[HashiriyaS14]

How much oil could actually be extracted from that postage stamp? What percentage of our annual consumption would that be? Didn't I read somewhere that it's like 3% or something like that? (could be wrong)

I don't really have a problem with the drilling there and offshore as a stopgap measure, but I continue to assert that people are deluding themselves if they think it's going to have any material long-term impact.

We need to split more atoms.

EDIT: The markets may also not react the way you expect if they do this additional drilling. Futures traders will STILL be in control of the price of contracts to consumers, and just because there's 3% more supply doesn't mean that they'll see fit to pay 3% less for a contract and have that savings be kindly passed to you.

The bottom line is that gas is never going to be cheap again. Consumption habits will have to change and energy sources will have to be explored.

Stuff like drilling one additional midsize field isn't going to have any material impact. I still say "let them do it", but it isn't going to fix anything. It *might* have a $0.10 impact on gas prices.....at best.

[rn79870]

We could become oil independent if we allowed the exploration and drilling of ALL the available lands within US jurisdiction. We could become oil independent within 5 years if the government would get off their a$$ and push through the needed legislation. unfortunately, we're stuck with worthless t**** skin like Nancy Pelosi who can't seem to get anything done.

In the mean time, I think farm produce needs to respond to the price of oil with like kind increases. Starve those camel clowns to death, then there will be no mid-east problem nor will there be any need for further oil exploration. We'll just drive in and take theirs.

[audtatious]

We import around 14 million barrels a day. ANWAR is estimated to have up to 12 billion barrels of oil, so that is appx 2.5 years worth. Then you have kerogen reserves in the US which is about 2500 gigabarrels worth. Then there is the Bakken Oil Formation which is expected to house 500 billion barrels. The gulf holds another 10-15 billion barrels as well. There are other oil reserves in the arctic region and elsewhere that are not included in the above (like Florida area).

[heliochrome85]

well, i can say, as one of those "camel clowns" the cost of oil has increasingly less to do with companies starving off production. in order to expand production beyond current levels would require companies to shut down refineries and expand capacity. most of these refineries are running AT capacity. what is destroying the cost of oil is the exponential rate at whcih the chinese and indians are taking to the roads. their consumption is increasing rapidly all the while we got caught in the SUV craze. Its simply not an option. PLUS, realize that the current government has alienated many countries that have substantial oil reserves (Venezuela, and increasingly Canada) Boost foreign relations, stop taking to the middle east as if it just is a bunch of nutcases who just showed up. arabs are a proud people with a love for history. Iraqis are still mad about battles that occured 1500 years ago. Treat their sovergntiy with respect and you may find yourself recieveing a bit friendlier relations. i know, with us or against us... thanks GW

[audtatious]

The middle east only suppliess 10% of our oil. Canada supplies 40% of it. Does not mean OPEC does not have a hand in setting prices tho.

Refineries are not running at 100% right now altho I expect they will again soon. The cut over to the 90+ summer gas blends takes production down.

[HashiriyaS14]

We could become oil independent if we allowed the exploration and drilling of ALL the available lands within US jurisdiction. We could become oil independent within 5 years if the government would get off their a$$ and push through the needed legislation.

Is this really the case?

As of 2004, the United States consumed about 7.56 billion barrels of oil per year. Do we really have that kind of capacity available to us?

The ANWAR only holds like 4-6 billion barrels, which is less than a year of domestic usage. Where is the rest of this oil?

Real oil independence would require at least a couple decades of the current annual usage level or more.

[audtatious]

You needs ta sees mi post concerning oil reserves

[rn79870]

well, i can say, as one of those "camel clowns" the cost of oil has increasingly less to do with companies starving off production. in order to expand production beyond current levels would require companies to shut down refineries and expand capacity. most of these refineries are running AT capacity. what is destroying the cost of oil is the exponential rate at whcih the chinese and indians are taking to the roads. their consumption is increasing rapidly all the while we got caught in the SUV craze. Its simply not an option. PLUS, realize that the current government has alienated many countries that have substantial oil reserves (Venezuela, and increasingly Canada) Boost foreign relations, stop taking to the middle east as if it just is a bunch of nutcases who just showed up. arabs are a proud people with a love for history. Iraqis are still mad about battles that occured 1500 years ago. Treat their sovergntiy with respect and you may find yourself recieveing a bit friendlier relations. i know, with us or against us... thanks GW

Sorry, my comment wasn't meant to offend anyone, but to point to my feelings re: a group of people (opec) who deliberately manipulate the supply of petroleum, therefore the price the speculators pay for it, to our detriment. If OPEC opened the spigots, the 130+ dollar a barrel would go down to a sub hundred dollar value overnight. If we did the same with food, we'd get the attention of opec overnight.

[rn79870]

Is this really the case?

As of 2004, the United States consumed about 7.56 billion barrels of oil per year. Do we really have that kind of capacity available to us?

The ANWAR only holds like 4-6 billion barrels, which is less than a year of domestic usage. Where is the rest of this oil?

Real oil independence would require at least a couple decades of the current annual usage level or more.

Yes we do. Not counting oil shale which I understand holds more oil than the middle east. I read in the past that oil shale was not a viable resource because fuel (gas) would rise to $1.50 a gallon if we had to extract it from the shale. We need to get the dems off the alternate fuel bandwagon. The short term need is solved by increased US production. period.

[audtatious]

Shale oil was not a worthwhile proposition when oil was $10/barrel. From what I understand is it would cost in the 40$ range to get a barrel of oil from shale. Today? Very viable solution but the environmentalists are against it (go figure)

[audtatious]

ICE, ICE, Baby

One piece of legislation is why the price of everything is going through the roof

Special to the Star-Telegram"There’s a few hedge fund managers out there who are masters at knowing how to exploit the peak [oil] theories and hot buttons of supply and demand and by making bold predictions of shocking price advancements to come, they only add more fuel to the bullish fire in a sort of self fulfilling prophecy." — National Gas Week, September 5, 2005 as reprinted in the US Senate Permanent Subcommittee on Investigations’ report, "The Role of Market Speculation in Rising Oil and Gas Prices," June 27, 2006

Fiddling While We Burn

There it is in plain sight for everyone to see, exactly what I’ve been reporting for the past few years: Many individuals who are investing in oil and natural gas futures are going out in the media and trying to convince the American public that either we are out of oil or there is a serious supply shortage of crude against worldwide demand. The question is: Does it surprise you to discover that the US Senate investigated the rigging of the oil market by speculators in the summer of 2006 – and concluded that there was no supply and demand problem with oil? Did you know that their conclusion was that speculators were responsible for a 70 percent overcharge in the price of oil in the months leading up to the summer of 2006?

This from page 1 of the Executive Summary of that Senate investigation, there is this one troubling line: "Today, U.S. oil inventories are at an eight-year high, and OECD (Organization for Economic Co-operation and Development) oil inventories are at a 20-year high."

That’s odd because, in 2006, just like today, the media reporting covered the serious international shortage of oil and justified oil’s high price. Even more troubling is that the House of Representatives held a hearing this past December, ominously titled "Energy Speculation and Price Manipulation." How did it pass under the radar that both the Senate and the House studied the issue of price manipulation in our energy markets and both concluded that it was unregulated, massive trading in one futures market that was really driving up the price of oil and natural gas? And given that conclusion, why has Congress done nothing about it?

Investors Make the News, Literally

A week ago Goldman Sachs issued a new investor note, suggesting that somewhere between six months to two years, the price of oil could go into a "super spike" and prices jump as high as $200 per barrel. It became the major story of the night. Ignored in the reporting frenzy was that many legitimate and well-respected oil analysts dismissed Goldman Sachs’ prediction as groundless.

Get ready for the next shock to your system. In the past month we have added 11.9 million barrels of oil into our stock reserves, giving us 32.3 million more barrels of oil than we had on hand January 1. On May 5, we found out that for the second time in as many years, Iran was storing its excess crude oil on tankers in the Persian Gulf, because it had run out of storage space in the desert and was awaiting buyers for its heavy crude. That same day Saudi Arabia cut the discount price for its Arabian Heavy crude to $7.45, hoping to entice more buyers for immediate delivery. We didn’t hear that news, either.

While researching my third article for BusinessWeek online about the world’s oil situation in 2008, I asked for the most current report from Oil Movements. Because the oil industry is not transparent, Oil Movements tracks every tanker at sea, from both OPEC and non-OPEC oil countries, along with their cargoes’ final destinations. Anne O’Shea responded immediately to my request with their report dated May 8, 2008. Just so you will know, oil shipments are up from a year ago in almost every class, including Middle East oil in transit and Non-OPEC in Transit. The only class of oil shipment that has declined is covered on page 3 of that report. That chart is labeled, "4-Week Changes in Westbound Oil at Sea."

That’s right, shipments of oil headed west have shown serious declines during the month of April, down 800,000 barrels per day in the week before the publication of the report. Now, let me give you the first line from under the Westbound Oil shipments chart: "In the west, a big share of any [oil] stock building done this year has happened offshore, out of sight."

Could this be true? Oil Movements, the unimpeachable source for finding the real world situation on oil transits, is saying that oil is being hidden offshore, not declared in inventories? Yes, that is exactly what they are saying.

That same week our refineries cut their production runs back to 85 percent, down from 89 percent a year ago, to trim more gasoline out of our stock reserves, to increase their profits per gallon.

National Short-Term Memory Loss

It’s amazing how quickly we forget our recent history. Congressional hearings in 2001, blasting certain Wall Street executives for using the media to sell the public on stocks in order to bid up the price – so their firm could divest of its shares without taking a beating. Meanwhile, other trusted advisors pushed stocks that were fundamentally worthless, because their affiliated banks had large loan agreements with those companies.

The year before Enron had been caught manipulating the California energy market, even forcing rolling blackouts across the northern part of their state apparently just for effect – to support their claim that there just wasn’t enough electricity to go around. Again, we now know that claim was untrue. It was Enron shutting down certain power generation plants, while placing bets on their unregulated energy futures market. The net cost to California consumers was almost $8 billion.

It didn’t end there. Amaranth Advisors, a hedge fund, literally was cornering the market on natural gas futures, to make it appear that there was a shortage of natural gas, when the Commodities Futures Trading Commission told Amaranth to liquidate its position on the NYMEX because its bidding had already moved natural gas prices far beyond the reasonable limits of supply and demand. Now, remember this name: ICE, short for Intercontinental Exchange – the "dark futures lookalike market."

Once the CFTC told it to back off its natural gas futures contracts, Amaranth simply shifted gears, got out of the NYMEX, placed its massive bets outside of government regulation in ICE and managed to drive natural gas futures to $8.50 per MBtu.

As the Senate investigation into the manipulation of the energy markets showed, "Amaranth – the day before they failed, natural gas was about $8.50; the day after it failed, it went to $4.46 MBtu." That’s right, one major hedge fund managed to double the price of natural gas simply by loading up on futures contracts; when the government told them their bets were unwarranted, they simply moved their monies to a futures exchange that was unregulated. Only when Amaranth failed did natural gas prices fall back to what was considered normal for supply and demand.

Sadly, like oil today, when this was happening we were being told that natural gas supplies were tight worldwide. That statement simply wasn’t true.

Dark Future

Likewise, British Petroleum was busted for manipulating the propane market in the winter of 2004 and fined $373 million. Of course, in Texas, under deregulation of our public utilities, our electric rates can be set using the futures market for natural gas, so the manipulation of the natural gas market spelled trouble for us. Consider this, by 2006, according to http://www.powertochoose.org, electricity rates for us had climbed to 15 cents a kilowatt-hour due to the high cost of natural gas. But, that was the exact same time period that Amaranth was proven to be manipulating the market and sending natural gas futures through the roof. Two months later the hedge fund collapsed and natural gas prices fell. Therefore, most Texans paid higher electric bills for Amaranth’s manipulation of the natural gas market.

Professor Michael Greenberger of the University of Maryland, a former board member of the Commodities Futures Trading Commission, testified in front of the House Committee on Energy and Commerce on December 14 of last year. Under discussion that day was the manipulation of the energy markets and prices, but Professor Greenberger added these comments: "Three, four months from now, you’re going to have a hearing on the subprime meltdown, and you’re going to find that the very same legislation [deregulating energy] deregulated something called collateralized debt obligations, CDOs." That legislation, friends, directly ties the mortgage meltdown to the high price of energy today.

It was called H.R. 5660, the Commodities Futures Modernization Act of 2000. At first this bill went nowhere in the House, not even up for debate. Then, a few months later, late one night a 242-page bill written by Wall Street lawyers, with the exact same name as the former House bill, was quietly added to an 11,000-page appropriations bill, and the Enron loophole was created. The power behind that bill was one Texas Senator, one Texas Congressman and their wives.

Next week: How the unregulated futures market pushes the price of oil, natural gas and gasoline far beyond those commodities’ market value, thanks to the creation of the Intercontinental Exchange. Worse, Congress knows this, but does nothing.

© 2008 Ed Wallace

[audtatious]

ICE, ICE, Baby, conclusion

"Too cold, too cold"

Special to the Star-Telegram "What’s been happening since 2004 is very high prices without record-low [oil] stocks. The relationship between U.S. [oil] inventory levels and prices has been shredded and become irrelevant."

— Jan Stuart, Global Oil Economist, UBS Securities

"What you have on the financial side is a bunch of money being thrown at the energy futures market. It’s just pulling in more and more cash. That’s the side of the market where we have runaway demand, not on the physical side."

— Tim Evans, Senior Oil Analyst, IFR Energy Services [From testimony: U.S. Senate Permanent Subcommittee on Investigations’ report, "The Role of Market Speculation in Rising Oil and Gas Prices," June 27, 2006]

The Love of Money

Record high prices without record low oil inventories, analysts saying that so much money flows into oil commodities that it gives the impression of shortages, when in fact no shortage exists. That mirrors the situation in the commodities market for food, as Bloomberg pointed out in its April 28 article, "Wall Street Grain Hoarding Brings Farmers, Consumers Near Ruin": "Commodity investors control more U.S. crops than ever before, competing with governments and consumers for dwindling food supplies." That’s right; food, oil and gasoline have become an "asset class." No longer are you fighting a neighbor at the supermarket over the last box of Cheerios®; now you’re fighting the futures traders, who are actually determining what you will pay for that cereal.

We started as a society that worships hard labor and the basic business ethic of building value into the goods you create. How’d we get from there to worshiping Wall Street’s billion-dollar boys — who create nothing, build nothing, own nothing and deliver no goods, and yet can throw so much money into products made by others that they determine what we consumers will pay for those goods?

It wasn’t always this way.

In the past, the Commodities Futures Trading Commission acted as the cop on the beat, ensuring that buyers in the market were not distorting or manipulating prices beyond what supply and demand normally dictate. Certainly, if a hard frost hit Florida and cost growers an orange crop, then bidding up the price of the remaining oranges was both a wise investment and allowed under the trading rules. Right now investors know that if they borrow and invest huge amounts in commodities futures, they can create a shortage on paper – which drives prices up just like an actual shortage of any given product would. What kept traders from cornering the market that way in the past were the government’s anti-manipulation rules.

Lay, DeLay, Gramm, Gramm & Clinton

The late, infamous Enron head, Ken Lay, realized in the eighties that he could make more money bidding up energy in the futures market than by actually creating and selling energy. But, under then-current rules, how much you could make swapping paper was limited. Fortuitously, Lay had excellent Texas political connections; and in November of 1992, the head of the Commodities Futures Trading Commission moved to exempt energy-derivative contracts and related swaps from any government oversight.

A vote was hurriedly put together before the Clinton White House would take over, and so Lay could finally start "dark" – unregulated – futures trading. The head of the CFTC was Wendy Gramm, wife of Texas Senator Phil Gramm; five weeks after she left, she became a board member of Enron in Houston.

Fast-forward to late 2000 and H.R. 5660, the Commodity Futures Modernization Act of 2000, sponsored by Republican Congressman Thomas Ewing of Illinois. That bill went nowhere, even though Tom Delay’s wife Christine was then working for a Washington lobbying firm, Alexander Strategies – which Enron had paid $200,000 to push through legislation for permanent energy deregulation in these "dark" markets.

Six months later came Senate Bill 3283, also named the Commodity Futures Modernization Act of 2000. This time around the sponsor was Republican Sen. Richard Lugar of Indiana, and now Phil Gramm was listed as one of the bill’s co-sponsors. Like it had in the House, this bill was destined to go nowhere until, late one night, it was attached as a rider to an 11,000-page appropriations bill – which was signed into law by President Clinton.

Now traders had an officially deregulated market for energy futures. Worse, that bill also deregulated many financial instruments – including the collateralized debt obligations that are at the center of today’s mortgage crisis, which may well cost us more than $1 trillion before it’s over.

Everybody Was Warned!

As USA Today wrote of this fiasco in January of 2002, "But, as a power marketer, [Enron] could buy enough energy-futures contracts in a region to create a virtual monopoly." That’s right: As early as the winter of 2002, it was widely known that the 2000 Commodities Futures Modernization Act had created a monster, capable of running up energy prices outside of the normal law of supply and demand. Worse, our government had been warned this was going to happen. Representatives of the Federal Reserve, the Securities and Exchange Commission and the CFTC had already told Congress not to deregulate energy because "the market was ripe for manipulation." Everybody was warned; that’s why this deregulation bill was stealthily inserted into that appropriations bill without a floor debate.

Phil Gramm’s office denied that he had anything to do with writing the section of that bill that actually deregulated energy. And yet Prof. Michael Greenberger, formerly a CFTC board member himself, said that Gramm’s wife Wendy, along with a few lobbyists and Wall Street attorneys, had rewritten it. When Robert Manor of the Chicago Times wrote about this situation on January 18, 2002, neither Gramm could be reached for comment.

Kill It Before It Multiplies

When Enron failed and took its private, unregulated energy exchange to the grave, another rose to take its place. The Intercontinental Exchange (ICE) was the brainchild of Morgan Stanley, Goldman Sachs, British Petroleum, Deutsche Bank, Dean Witter, Royal Dutch Shell, SG Investment Bank and Totalfina. In 2001 ICE purchased the International Petroleum Exchange in London; renamed ICE Futures, it now operates as an "exempt commercial market" under section 2(H)(3) of the Commodity Exchange Act. As the Senate hearings pointed out in the summer of 2006, "Both markets operate outside of any CFTC oversight."

If you reread the quotes at the start of this story again, you find that many officials in the government warned against what would happen in a deregulated energy market, because it was so easy to manipulate. We already know this to be true thanks to Enron’s California misdeeds. And, as we pointed out last week, British Petroleum was busted for manipulating the propane market and fined over $300 million; and Amaranth Partners was caught manipulating the natural gas market, unconscionably causing the futures price for natural gas to raise every Texan’s electric bills. (It took two years for Amaranth to be exposed.) And yes, the manipulation happened in the new "dark" and unregulated exchanges, making it almost impossible to uncover. So it’s not a question of "if" some "theoretically possible" manipulation and distortion of the market will result from this bill, championed by Phil Gramm, his wife Wendy and Christine Delay’s employer, Alexander Strategies. The reason it is not theoretical is because we keep catching well-known companies doing it on a regular basis.

No Conscience in Congress?

All you hear daily is that the world has a severe shortage of oil, or you can buy only 200 pounds of rice at one time, or we will have a gasoline crisis this summer, etc. But it takes only a minute to find hundreds of quotes from highly respected oil and economic analysts, (not to mention CEOs of the major oil companies), that completely dismiss the claim of oil, gas or food shortages that have been headlining the news.

Even more troubling is that within months of the CFMA’s going into effect, we knew it had enabled easy manipulation of any energy market, but nothing was done to fix it. Nor was anything done when the Senate held its hearings on this matter in 2006, or in the House hearings last December.

Today we call this situation the "Enron Loophole," but that’s untrue. It’s not a loophole: it was a new law passed in 2000 – and far more individuals than Ken Lay have used that law to line their pockets with hundreds of billions of American consumers’ hard-earned dollars. That’s not my opinion, that’s direct testimony by numerous experts before both the House and Senate.

Professor Greenberger warned about our "New American Economy" far better than I could:

"Should we have an economy that’s based on whether people make good or bad bets? Or should we have an economy where people build companies, create manufacturing, do inventions, advance the American society and make it more productive? We are rewarding people for sitting at their computers and punching in bets. That’s not the way our economy is going to be built, and India and China, with their focus on science and industry and building real businesses, are going to eat our lunch, unless the American public wakes up and puts an end to an economy that praises and makes heroes out of speculators."

Greenberger’s statement explains why Detroit and other American manufacturers suffer while Wall Street speculators make a fortune — and your rapidly shrinking checkbook pays for it, every time you buy food, fuel or feed.

All because there is no shortage of these goods, you’re just being told there is because it’s more profitable – for a few – that way.

© 2008 Ed Wallace

[rn79870]

Matt. After reading this, you've convinced me that the government needs to be involved. There is an evil side to free market economics and the few who manipulate it.

Even if we did expand US oil production, and allowed the futures market to become involved, we'd be screwed. We need US oil for US needs, then the excess, could be sold at whatever price the world will pay. Example Venezuela and 14 cent gas.

[mtcookson]

Absolutely sickening... there's nothing else I can say... well, maybe besides "hang them" or something.

[audtatious]

I find it nice how nobody is reporting this either

[ishkabibble]

Do you think if the US had a better rail system, we would be less oil dependent?

[audtatious]

I think a rail system would help lower the number of truckers that do cross country runs if implemented correctly.

[HashiriyaS14]

The US DOES need high-speed rail, preferably electric, to take over more of the freight duty.

I agree that there needs to be some regulation on the traders in regards to energy. I'm not usually for more regulation of anything, but in this case I just think that the traders/hedgies aren't as smart as they think they are and in the end will just cost both themselves and us money.

They'll just create a bust. Why let them?

[audtatious]

I agree with regulation of utilities to ensure someone does not use it to their advantage like Enron did. From an oil perspective, the MSM has helped the price go up as well with their reporting of "peak oil" which is BS.

[AZhitman]

Most rail projects are doomed from the start, for a couple reasons:

One: Asinine lawyers representing supposedly "endangered" sub-species.

Two: Cost-prohibitiveness of steel and oil-intensive environmental impact of building such systems.

We're not Europe - we're too spread out for rail to be worth much (other than transporting certain goods to market).

[audtatious]

The cost to rebuild a bi-directional rail system is the bigger problem. Second are those who wish to crush it.

[audtatious]

GOP nixes Democrat-backed tax on oil companies

By DAVID IVANOVICHCopyright 2008 Houston Chronicle

WASHINGTON — Senate Republicans today successfully blocked a vote on a Democratic-written energy package intended to slap the major oil companies with a new windfall profits tax and roll back other tax breaks the industry now enjoys.

While motorists may be clamoring for relief from gasoline prices now topping $4 a gallon nationwide, Senate Democrats were unable to muster enough votes to move forward with debate on an energy package that contained a number of provisions that already have received veto threats from President Bush.

With the White House threatening a veto of the bill, the Senate voted 51-43 to close debate, well shy of the 60 votes needed to avoid a filibuster.

"Rather than addressing the principal cause of fuel price increases — rising world petroleum demand without a similar increase in supply — (the bill would) undercut U.S. energy security and decrease U.S. energy production, thus exacerbating market tightness and increasing energy prices," the White House's Office of Management and Budget said in a statement.

Calling for "oil company accountability" and "energy price relief," Democrats wanted to hit the five largest oil companies with a new 25 percent windfall profits tax. The oil companies would only be able to lower that tax burden by hiking investments in renewable energy, refining capacity and production capability.

The Democratic plan would hit the oil companies further by gutting $17 billion worth of tax breaks they received back in 2004 and 2005.

The bill also would have tried to rein in speculation in the oil markets by preventing traders from routing transactions through offshore markets and requiring oil traders to put down more money to trade in futures contracts.

The legislation also would have made price gouging a federal crime and branded as illegal efforts by the Organization of the Petroleum Exporting Countries to control world oil prices.

Republicans, who have dismissed the Democratic-led Congress as a "drill nothing Congress," favor a very different approach, calling for oil and gas exploration in areas now off limits, including the Arctic National Wildlife Refuge in Alaska and offshore areas where drilling isn't permitted now.

Sen. Kay Bailey Hutchison, R-Texas, argued that the windfall profits tax would only make the nation more reliant on foreign oil.

Congress tried a similar approach during the Carter administration "It was such an abject failure Congress repealed it," Hutchison said.

Sen. Byron Dorgan, D-N.D., said Democrats are trying to craft a separate package dealing with oil speculation, which he described as a carnival of excess. Many blame speculators, including institutional investors such as pension funds and university endowments, for driving up oil prices.

The vote came as the U.S. Energy Information Administration predicted gasoline prices, which topped $4 a gallon nationwide this week, would peak at $4.15 a gallon in August and average $3.78 for all of 2008.

Diesel fuel, which was selling for $4.71 a gallon June 2, is expected to remain near that price over the next few months as refinery profit margins begin to weaken and offset higher crude prices, the agency said.

[AZhitman]

Let me translate the Democrats' language for the young voters out there:

new windfall profits tax = "You make to much money and we don't like it"

oil company accountability = see above

energy price relief = "We bought too much designer crap and everything Hollywood told us was 'good' and now we can't afford fuel for our Priuses. Waaahhhh!"

hiking investments in renewable energy = "Invest in ethanol. No, we don't know if it'll work, but lots of libbies hold stock in ethanol-producing companies... Just trust us."

requiring oil traders to put down more money to trade in futures contracts = "We know how to invest your money better than you do."

Class dismissed.

[ishkabibble]

Most rail projects are doomed from the start, for a couple reasons:

One: Asinine lawyers representing supposedly "endangered" sub-species.

Two: Cost-prohibitiveness of steel and oil-intensive environmental impact of building such systems.

We're not Europe - we're too spread out for rail to be worth much (other than transporting certain goods to market).

One: Then why aren't highway project doomed from the start? I find it hard to buy that one. Rail seems like it would have less of an environmental impact than, say, highways.

Two: The costs would be recuperated over the long term. We used to have a fairly substantial rail system; I've heard that it was killed by the trucking industry, but I don't know that for a fact.

Actually, the fact that we are so spread out would seem to lend itself to rail rather than trucking. At least stuff going to the major cities.

[Jager]

ish the few railways that are remaining do make money, however they do so with government subsidies and tax breaks, the other reason rail systems are not totally gone is because the government "owned" amtrak passenger system pays railways for access and use. rail is expensive and costly due to diesel trains and the cost of steel. also while roads can be moved and changed quite a bit to "blend" with the landscape rails cannot really, resulting in more of an environmental impact from a geography prospective.

not that any of the above makes it less cost effective as trucking atm, but it makes it a hard sell to investors and the government for lease rights of land etc.

[smockers83]

Oil companies don't make windfall profits. I also used to be one to join in on the theory of speculators and hedge fund people. However, after hearing other economists take on it, I am not of that theory anymore.

Economists say having the speculators in the futures market is actually a good thing. They take a lot of risk out of the market. What happens is is that they buy the futures contract and a company can buy that contract from them or tell them to buy contracts. Companies can pile up these contracts. Contracts traded now I believe are due for July. If a company bought a bunch of July contracts at $130 and the actual price of oil when July comes around is higher than $130, companies can get oil from their contracts at less than full market price. What this does is that it provides stability and an outlook as businesses need to know what's going to happen in the future as best they can. I have also learned that the price paid by these speculators doesn't have much to do with the consumer price of oil. But I will say that since speculators and ourselves expect oil to go up, it will go up. Its kinda like inflation--when a nation thinks its inflation will go up, it will actually go up. Maybe we just need to think its going to go down