Oil speculation hurting Americans and raising the price at the pump

Today, House Minority Leader Nancy Pelosi and the House Democratic Steering and Policy Committee are holding a hearing on oil speculation and its impact on high gas prices. This February, Forbes, using Goldman Sachs analysis, found that Wall Street speculation was adding more than $23 to the price of crude or as much as $0.56 per gallon at the pump. ExxonMobil’s CEO Rex Tillerson stated that there was no issue with supply in demand and cited Iran rhetoric and market response as reason for the run-up.

Checks and Balances Project Co-Director Matt Garrington had this to say on Leader Pelosi’s hearing:

It’s high time that Congress crack down on oil speculation and how it drives up the price at the pump. Leader Pelosi should be commended for taking on Big Oil and Wall Street on behalf of American families.

The American Petroleum Institute, Western Energy Alliance, and the politicians bought-and-paid-for by oil companies continue to lie to the public about the cause of high gas prices. Those accusations haven’t been able to survive the light of day. An Associated Press study showed that oil production has no effect on gas prices. In fact, some refineries are actually cutting back on production arguing that today’s high prices are not enough to make additional production profitable.

Four years ago we saw Wall Street’s greed decimate the housing market and our economy. When it comes to oil speculation, we need more accountability to prevent Wall Street gamblers from raising energy prices and hurting the pocketbooks of Americans.

Cracking down on Wall Street gamblers is an important step to addressing high energy costs.

Key facts regarding American oil production:

All of the above means we have to go beyond oil

As gas prices top $4/gallon in an election year, Americans are fed up with empty promises and cheap gimmicks. Who in their right mind buys Newt Gingrich’s claim that he can lower gas prices to $2.50/gallon?

So, who or what is to blame for high gasoline prices?

The Big Oil spin machine and the Republicans who received 88% of Big Oil campaign contributions would have you believe it’s the President’s conservation policies which aim to balance responsible energy development and the protection of our Great Outdoors.

The truth is that energy development and conservation is not a zero sum game. Under the Obama Administration, domestic oil drilling hit a record high, American oil production hit an eight-year high, domestic demand is at its lowest point in 17 years, and America stands as a net exporter of petroleum products.

The simplistic view of “drill here, drill now” has no credibility as a means to bring down the price of a gallon of gas. In fact, the Associated Press just reported that increased oil drilling has never brought down gas prices.

When I studied Economics, one of the first things they taught was the Law of Supply and Demand and how it should affect price in a free market. This year, the price at the pump seemingly defies that law. Demand for oil and gas in America is down and production is up. But that hasn’t prevented prices from surging, and oil industry profits surging right along with them.

To be clear, supply and demand is one factor at play – but on a global level. The economic progress of China and India, as well as the swelling appetite for oil that comes with that growth, adds to an increase in oil prices. Clearly supply and demand are not the whole story though.

As one expert at Oppenheimer & Co recently noted, “Speculation is now part of the DNA of oil prices.”

That sentiment is echoed by some unlikely sources. ExxonMobil CEO Rex Tillerson recently stated that oil speculation and uncertainty over Iran are driving up the current price at the pump. Citing Goldman Sachs, Forbes reported this past February that oil speculation was adding $0.56 to the price at the pump.

Something else that seems fishy is that while global demand is going up and gas prices surging, Big Oil’s refineries in the United States are cutting back.

So while Americans struggle to pay for the cost of these high energy prices, the oil and gas industry made nearly $137 billion in profits last year. Make no mistake. Oil companies don’t want lower gas prices because it means less profit.

So what is there to do?

President Obama is correct when he says there is no “quick fix” to gas prices. Congress needs to end taxpayer handouts to big oil and reinvest those funds in American energy innovation and clean energy solutions. We need to make our cars and trucks more fuel efficient, so American families can cut energy costs and travel farther on less oil. Congress and the Commodity Futures Trading Commission should crack down on Wall Street speculators to stop their gambling from artificially inflating the price at the pump.

We need an all of the above energy strategy that goes beyond oil. Unless we truly end our dependence on oil, foreign or domestic, we will continue to be vulnerable to global events and market manipulation by Big Oil and their friends on Wall Street.

Originally published on the National Journal Energy Expert Blog

Wall Street rings in the New Year for oil speculators

Matt Garrington

Wall Street started 2012 by ringing in the New Year for oil and gas speculators.  On Tuesday, Ralph Hill, the CEO of WPX Energy Inc., rang the opening bell for the first day of trading on the New York Stock Exchange (NYSE).

The evidence of speculation’s effect on the price at the pump has piled up over the last couple of years. In 2011 especially, as gas prices hit near-record highs in the first half of the year, analysts and financial reporters explained how price increases had less to do with supply and demand than Wall Street trading.

Commissioner Bart Chilton of the Commodity Futures Trading Commission endorsed this view in a speech to the High Frequency Trading World in Amsterdam.  Chilton told a room full of traders, “Researchers at Oxford, Princeton, and many other private researchers say that speculators have had an impact on prices—oil prices and food prices most notably.”

Even Goldman Sach acknowledged the impact of speculation on energy prices. In a little-publicized study conducted issued last year, the investment world’s flagship firm estimated oil prices to be $20 higher per barrel as a result of speculation.

When you consider the effect this speculation has had on the checkbooks of American families, it’s telling that the NYSE still chose an oil and gas CEO to open the new year. It can be viewed as an admission that speculators understand the role they’ve played in energy costs, and are looking forward to another banner year.

Unfortunately, that prosperity won’t be passed down to American consumers. After all, in just the first three quarters of 2011 oil and gas companies reported over $101 billion in profits. They passed cost of speculation directly on to the consumer, even though many of those companies were engaged in speculation themselves.

Meanwhile, Big Oil executives and the politicians they support fought tooth and nail to protect the billions in government handouts oil companies receive every year. For the record, many of those same politicians were far less vocal in protecting the 2 percent payroll tax cut that House Republicans held hostage at the end of the year.

If you’re looking for an explanation for their actions, you need look no further than Ralph Hill, the CEO who opened the NYSE. Before WPX Energy split off from Williams, Hill was that company’s President of Exploration and Production. During his time there, Hill gave thousands of dollars to the company’s political action committee.

That PAC turned around and funded the election campaigns of many of the politicians who over the past year have protected corporate welfare to oil companies, especially some of the key players on the House Natural Resources Committee.

No wonder these same Congressmen voted time and time again to protect special tax breaks on oil and gas subsidies, and we still don’t have legislation cracking down on oil speculators.

Wall Street continues to prove it is politically tone deaf by bringing in the very example of the 1 percent to kick-off the New Year – an oil and gas CEO whose company gets bigger profits when America’s working families are forced to pay more at the pump.

ThinkProgress blogs on Tipton’s field hearing

The team over at ThinkProgress posted a well researched, thoughtful article on Rep. Tipton’s field hearing today to review drilling standards. It turns out there is evidence that drilling near groundwater supplies can have negative effects on people’s health.

Click to read the full story.

Barrasso and Hastings turn energy discussion into a pro-industry spin zone

The energy debate continued to get more contentious when wildly illogical arguments were tossed out during roundtable discussion hosted by Politico.

The voices, from all sides of the energy debate, included Sen. John Barrasso (R-Wyo.), Rep. Doc Hastings (R-Wash.), Rep. Dianne DeGette (D-Colo.), former head of the EPA Carol Browner and Doug Holtz-Eakin formerly of John McCain’s presidential campaign.

While DeGette and Browner pushed back on pro-industry, energy policies, Barrasso and Hastings mostly defended the dirty energy sources that fund their campaigns. Not surprisingly, the discussion took a heated turn when both were asked to vote against energy subsidies.

A time to kill subsidies?

Carol Browner wasn’t going to let Hastings and Barrasso get away with flip-flopping on their feelings over government handouts. Barrasso, who earlier in the debate made the claim that green job created in America come at the expense of two non-green jobs, got oddly squeamish when Browner asked him why he wouldn’t eliminate the subsidies to the oil industry. Barrasso who has been pushing pro-industry legislation over the past six months said Congress needed to revisit the whole tax code before focusing on just a portion of it.

The hypocrisy was immediately pointed out: “So your okay with focusing on just ethanol subsidies, but when it comes to oil subsidies you simply say you want to deal with the entire tax code? If that’s your argument, I happy to have it with the American people,” said Browner.

Hastings got dizzy on his own spin when he tried to address the issue. “Subsidies should be eliminated over time. The question is when is that time? When the market plays its role,” said Hastings to a surprised audience. If Hastings is willing to let the market decide then the record profits posted by Big Oil in the first quarter should be a clear indicator to get rid of oil and gas subsidies.

Spinning the high gas prices

While the subsidies debate was a ‘he said, she said,’ the panel appeared to run amok with solutions to high gas prices. It was even suggested that the United States should drill its way out of the problem. “It is short sided to ignore the abundance of oil in the Western lands,” he the industry-backed Chairman of the House Natural Resources Committee. Since assuming the role (and collecting nearly $100 thousand in oil and gas campaign contributions during the 2010 cycle) has tried several times to open up land for drilling. It would also be short sided for the oil and gas industry to continue to let the 21 million leased acres go undeveloped.

Hastings’ solution was undercut by Holz-Eakin, who acknowledged that gas prices are set on a global market and that getting more fuel into the market won’t have any affect on prices in the short term. Holz-Eakin used this logic to lampoon President Obama’s deployment of the strategic oil reserve, but drifted away from the idea when compromised on Hastings spin.

Fuzzy economic memory

During a brief question and answer session from the audience Brooks Yeager of the Clean Air Cool Planet pressed Holtz-Eakin why he was not focused on reducing demand when America produces five percent of the oil and uses 25 percent of the global supply. Holtz-Eakin simply replied that he wants to get more energy out there but added no analysis to Yeager’s economic inquiry.

“He seemed to forget about economics all of a sudden, funny how that works,” said Yeager when asked by The Checks and Balances Project if he was satisfied with Holtz-Eakin’s answer.


A job over clean air

Among the most unsatisfying answers was Barrasso’s job attack against climate change policies. “I’d rather have a job than clean air,” he said when discussing the economics of cleaning up the atmosphere. Still no clarity on how that supports the clean energy debate. One thing is clear: During the 2012 election the GOP’s stance is to push jobs at the cost of everything else.

Connecting the dots between gas industry tycoons and the NAT GAS Act requires ink by the barrel load.

A recent investigation by DeSmogBlog and PRWatch exposes just who stands to benefit from the NAT GAS Act and the expensive tactics being used to ensure it flies through congress. The most recent tactic is a public relations campaign by Chesapeake Energy, which included the gas giant’s “Declaration of Energy Independence.”

Chesapeake Energy’s CEO, Aubrey McClendon, is joined by T. Boone Pickens, when it comes to who will benefit from NAT GAS Act. The legislation calls for the government to cut checks to any company that transfers its fleet of vehicles to methane gas and to have citizens shell out their taxes so that methane gas fueling stations can be constructed throughout the country.

According to the DeSmog report, Chesapeake, “will pour $150 million into Clean Energy Fuels Corporation (CEF). Energy tycoon and hedge fund manager T. Boone Pickens sits on CEF’s Board of Directors and owns a 41 percent stake, according to the company’s March, 2011 10-Q filing. That money will go toward funding methane gas fueling stations along federal highways spanning the country.

The timing of Chesapeake’s launch of the “Declaration of Energy Dependence” is no coincidence. The NAT GAS Act is at a critical stage. It currently has 183 co-sponsors, but it is also being considered at a time when the United States is trying to reduce handouts from America’s taxpayers. But with the help a public relations army that even includes a methane gas funded television network, McClendon and Pickens are betting they can buy another handout for the fossil fuel industry.

THE BALANCE SHEET | July 26, 2011

Our weekly update to unravel the industry and political spin around the energy debate



Last Thursday, Sen. John Barrasso (R-WY) started his birthday by filing pro-oil and gas amendments to S.917 at the Senate Energy and Natural Resources Committee markup. Then it was on to lunch with the United Technologies (UT) PAC, which already has already given him $3,500 this cycle. Interestingly, one of UT’s subsidiaries is Sikorsky Aircraft Corp., whose spokesman once said, “Offshore oil has been the big driver of commercial helicopter business in general and for us in particular.”


Wednesday, The Wilderness Society released an analysis revealing that the same oil and gas companies trying to blame the government for high gas prices have failed to develop 6,573 federal drilling permits issued to them by the Bureau of Land Management. Over 97 percent of those permits are located in the Rocky Mountain region. Those permits mean the holders have a green light to drill, so we’re confident Rep. Doc Hastings and Rep. Doug Lamborn will be calling CEO’s to the carpet any day now to explain why they’re not using those permits.


In an op-ed for The Hill, Checks and Balances Project Deputy Director Matt Garrington explains how Sen. Barrasso is more concerned about keeping his Big Oil contributors happy than keeping American families safe. Sen. Barrasso has repeatedly demonstrated his priorities though several attempts to dismantle the Interior Department’s drilling protections, which are meant to keep Americans safe from reckless practices.



According to the Public Campaign Action Fund, “a whopping 94% of House oil PAC money recipients in the first 6 months of 2011 voted to keep these wasteful subsidies.” Big Oil donated a total of $1.2 million to members of Congress through registered PACs



The big five oil companies are expected to announce another profitable quarter for 2011. Look for the strategic messaging from these corporations and their congressional investments as they try to explain needing billions in taxpayer handouts while collecting billions in profits


Twitter: @checksandbals | Email: tips@checksandbalances.org


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