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My first post C&L ever linked to was a May 2007 Op/Ed on how oil companies appeared to be shutting down refineries "for maintenance" to deliberately (IMHO) drive up gas prices the same way Enron drove up electricity prices in California in 2000, the year before they collapsed in scandal. You might recall that back in the Spring of 2000, California was plagued by rolling blackouts because of electricity plants closed "due to maintenance". Most people still remember those secret audio recordings (NSFW) on the news of two young Enron Energy Traders joking about having to repay the money they stole from "Grandma Millie" in California, or CEO Jeff Skilling comparing California to the Titanic.

Fast forward 12 years (though I HIGHLY doubt the practice ever ceased) to last May & October. Reports were all over the news of gas prices spiking well over $4/gal in California, despite the fact gas & oil supplies were UP and gas prices were DOWN in the rest of the country. The reason for the 50cent/gallon spike in California? Several large oil refineries supposedly had to be "shutdown for maintenance" (according to McClatchy, May's West Coast spike was partly blamed on a Feb. 18 fire at BP's Cherry Point refinery in Washington. October's California spike was explained as partly a market reaction to an Aug. 6 fire at Chevron's Richmond refinery... both spikes taking place MONTHS after those fires and independent of the "closures" that supposedly interrupted supply.)

A McClatchy News investigation has found evidence that during the refinery closures in May that were behind the spike in gas prices, the plants were actually up & running at least part of that time... perhaps even the entire time... and producing gasoline. So why the spike in prices?

In response to this information, Democratic Senators in Congress (THIS is why Dem majorities are so important) led by Sen. Maria Cantwell have called for a formal investigation into whether oil companies have been deliberately closing... or even entirely falsely claiming the closure of... oil refineries for the sole purpose of market manipulation and driving gas prices up.

Just as we saw with Enron in 2000, and just as I reported back in 2007, the practice of artificially limiting the supply of energy just to push up prices by greedy energy executives is nothing new, but unlike in 2000 and 2007, Democrats now control both the White House and part of Congress, making a serious investigation with tangible consequences that much more likely. A Credit Suisse report last February claims every one-penny increase in the price of gasoline sucks one-Billion dollars annually out of the economy (I'd argue the number is FAR higher, because higher fuel costs means higher transportation costs for stores, increasing prices, doubling the impact. While slower sales mean layoffs that contract the economy still further.)

Tell me again GOP how "deregulation" helps the economy? Please. I really want to hear your answer on this one.

The big news this week on the financial front was the Independent’s claim that Gulf Arabs and France, Japan, Russia and Japan were planning to move from buying oil in dollars to buying it in a basket of currencies, including gold and a new universal currency shared by the Gulf nations.

Buying oil in dollars is one of the foundations of the dollar’s role as the world’s primary reserve currency. Because the the dollar is the world’s primary reserve currency Americans have been able to borrow money for significantly less than other countries are able to. This has both made America more prosperous, and through the perverse incentives of cheap money, helped lead to the high indebtedness of American citizens and the financial crisis.

In addition, buying oil in dollars is one of the things which allowed strong dollar policies to drive the price of oil down. Making dollars extremely scarce in the 80’s and nineties was one key factor leading to a price per barrel under $20. Oil prices started their rise upwards after Greenspan’s Federal Reserve let loose the money spigot in the Asian crisis and the Long Term Capital fiasco. Greenspan essentially never took his foot off the pedal from that point onwards, and oil prices soared, until last year at one point they were over $150/barrel.

So one consequence of going off the dollar is that a major benefit of the strong dollar play is taken off the table, and the US loses its ability to control the price of oil. Since at this time, contrary to what the Feds are saying, a strong dollar play isn’t in the cards (the US needs to borrow way too much money) that’s not a big deal in the short run—in the long run it is.

But buying oil in dollars isn’t the only thing that underpins the dollar as the world’s reserve currency and to understand what buying oil in something other than dollars would mean we need to understand what else makes, or perhaps more accurately, made, the dollar so important.

Continue reading »

I've been following this for a while, and it's encouraging news if the commodities regulators follow through. These guys have been driving up the cost of oil with the same sort of shady tactics used in the financial markets. Good for the Obama administration if they take this aggressive approach:

WASHINGTON — Reacting to the violent swings in oil prices in recent months, federal regulators announced on Tuesday that they were considering new restrictions on “speculative” traders in markets for oil, natural gas and other energy products.

The move is a big departure from the hands-off approach to market regulation of the last two decades. It also highlights a broader shift toward tougher government oversight under President Obama.

Since Mr. Obama took office, the Justice Department has stepped up antitrust enforcement activities, abandoning many legal doctrines adopted by the Bush administration.

The Obama administration is also proposing an overhaul of financial regulation that would include tougher capital requirements for big banks, tighter regulation of hedge funds and a new consumer protection agency with broad power to regulate credit cards, mortgages and other consumer lending.

In the case of oil and gas trading, regulators made it clear that they were willing to move, without waiting for Congress to act on Mr. Obama’s overhaul, invoking their existing powers.

Have you noticed that every person suddenly knows everything there is to know about how the economy works? Wow, it's all so simple. Activists now know all there is about the dollar and oil prices and mortgages. I wonder why they never chimed in before...I started asking people for their stock tips since they are all experts now. We will all get rich quick. Right?

Our Future: How to celebrate Labor Day? Support the Empoyee Free Choice Act

about.com: How GM derailed public transportation to sell more cars

The Brad Blog: Over 16,000 votes "unaccounted for" in Palm Beach county primary election 'recount'. "Severe repercussions, dire consequences for Novemeber elections and all elections" says Broward County election supervisor candidate.

Calculated Risk: Gustav takes aim at NOLA, oil prices

Philosoraptor: McCain's actual choice for V.P.

The Opinion Mill's Sunday Bookchat: Harold Moore and Joe Galloway return to Vietnam to lay old ghosts to rest -- and deplore the creation of new ones in Iraq. Sidney Blumenthal on the self-destruction of the GOP. Plus: How American workers are getting squeezed, how a unique ecosystem is being threatened, and how publishing thinks small.

Nate over at fivethirtyeight.com has a great post about a proposed energy plan that he argues -- quite persuasively -- Barack Obama would be wise to sign on to. The bipartisan legislation includes:

* Opens additional drilling areas in the Gulf of Mexico, and allows Virginia, North Carolina, South Carolina and Georgia to elect to permit drilling off their coasts. Existing bans on drilling off the West Coast, including in the ANWR, would be preserved.

* Dedicates $20 billion to R&D on alternative fuels for motor vehicles.

* Extends a series of tax credits and incentives, such as for the purchase of hybrid vehicles.

* Funds the above -- at total cost of about $84 billion -- by closing tax loopholes for petroleum companies, in conjunction with licensing fees.

This is a compromise I would definitely be willing to consider. Although I am strongly opposed to offshore drilling because of its limited short-term impact and failure to address the larger issue of dependence on fossil fuels, the tax incentives, investment in alternative fuels, and closure of tax loopholes for oil companies are well worth the trade off. As Nate notes, McCain opposes the bill because of those tax loopholes. By supporting the legislation, Obama can show he is willing to tackle the energy crisis in a bipartisan fashion that ensures investment in future technologies, all the while showing how McCain is beholden to Big Oil. Sounds like a winning strategy to me.

Be sure to read the entire post, as it breaks down precisely why this would be a huge, perhaps election-sealing, gain for Obama, and catastrophic loss for McCain.

Benen adds his thoughts.

After all the stupidity and charade surrounding the GOP's attack on Obama --including this lampooning by Stephen Colbert -- for proposing a common sense approach to increasing fuel efficiency, McCain is forced to admit that it's a pretty good idea.

Reuters:

The surprise came during a telephone town hall meeting McCain held on Tuesday with voters in Pennsylvania.

“Obama said a couple of days ago says we all should inflate our tires. I don’t disagree with that. The American Automobile Association strongly recommends it,” McCain said.

But he kept up his broad criticism of Obama on energy: "I ... don't think that that (inflating tires) is a way to become energy independent."

Would that be another flip-flop, McSame? Contrary to the Team McCain attacks, Obama never suggested that properly inflating your tires and keeping your engine tuned alone will make us energy independent. But as is always true with the Republican distortion machine, facts and context never get in the way of a good smear... even when the attacker admits that the target of the smear was right all along.

There are more Colbert/Stewart videos on the campaign available at Indecision '08.

Who knew Nancy Pelosi was such a straight-shooter? When Wolf Blitzer tries to pin part of the blame for the current energy crisis on the Democratic Congress, Pelosi shoots back by saying her House did everything it could to institute a sensible energy policy, only to have "run into a brick wall" in the form of Senate Republicans -- you know, the ones who broke the filibuster record for a full term last year.

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"The price of oil is... is attributed to two oil men in the White House and their protectors in the United States Senate."

While it might be easy (and typically accurate) to blame everything on President Bush and Vice President Cheney, I don't think it's unreasonable to lay the current crisis at the White House's doorstep. Sure, there are some uncontrollable market forces at work, but both Cheney and Bush are oil patch guys; it would be the height of naivete to assume that they would have an energy policy that didn't benefit Big Oil.

From Day One, Dick Cheney was plotting how to take over Iraq oil fields. Before the war, it was obvious to everyone that the invasion or Iraq, and the instability it would caused in the region, would only drive prices up further. For all the lip service President Bush pays to his commitment to renewable energy, the fact is spending has been on the stagnant since the mid-1990's.

What we really need is a leader with the wisdom to acknowledge the magnitude of the problem and the courage to tackle it head on. "Green Screen" John McCain is clearly not that leader.

American Civil Liberties Union: The Senate passed an unconstitutional spying bill and granted sweeping immunity to phone companies. Obama had promised to filibuster this measure. He didn't. Let's do something!

Freewayblogger: Gas pump blogging

Mugsy's Rap Sheet: High gas prices may prove to be just another tool for stealing elections.

Consortiumnews: Mukaskey is Bush's new Mr. Coverup. He acts more like a crime family consigliere than the chief law enforcement officer of the US.

Where's the Outrage? For everyone over the age of 25, we've been here before. In late 1970s, as oil prices began to skyrocket, we had a debate in this country over oil and energy independence.

Blue Jersey: More confirmation that the GOP and cohort aren't merely insensitive to overt racism when lauding Helms. It's a defining characteristic of the party.

John McCain admits that his energy policy consists of nothing other than mind games.

"I don’t see an immediate relief,. But I do see that exploitation of existing reserves that may exist, and in the view of many experts that do exist off our coasts, is also a way that we need to provide relief. Even though it may take some years, the fact that we are exploiting those reserves would have a psychological impact that I think is beneficial."

McCain's argument is that speculators will magically drive the price of oil down when they learn that the federal government has opened up ANWR and other offshore drilling sites; in other words, treat the market like a crap shoot and hope things fix themselves. Here's an idea: Why don't we go after these irresponsible crooks and bring the price of oil down to it's legitimate supply and demand level? In fact, according to experts, these people are directly responsible for artificially inflating gas prices to the extent that it's costing Americans a half trillion dollars a year.

Salt Lake Tribune:

Gasoline should cost about $2.25 a gallon, and everything above that is ''funny money'' largely tacked on by and manipulation, testified Mark Cooper of the Consumer Federation of America.

''The speculative bubble in energy commodities has cost households about $1,500 over the past two years in increased costs for gasoline and natural gas,'' said Cooper, estimating that the total cost to the U.S. economy has been more than half a trillion dollars.

$500,000,000,000 and all John McCain has to offer is "psychological" relief.