There’s no one harder hit by fuel prices than the nation’s truckers, and they’re going bankrupt at near record rates. The price of diesel jumped a nickel a gallon nationwide today, to $4.649, which is $1.72 a gallon above the price a year ago. In California, diesel is on average just three cents a gallon shy of $5.00, up $1.82 over the year, according to AAA. (the data changes daily) Who’s going to transport Americans’ stuff?
The trade publication Oil Express (subscription only) today said that "the first quarter of 2008 brought the highest rate of trucking industry bankruptcy filings in seven years, and the second quarter is shaping up to be even worse."
Too bad they can’t all go to Mexico for fillups. News reports put the price of Mexican diesel, as of May 13, at $2.10 a gallon, in part because of national subsidies. Some who’ve tried to do this, though, have run into trouble with U.S. Customs. Is our government, which has only come awake to the fuel-price damage in the last few weeks, in the business of protecting U.S. refiners’ market share?]]>
Watching the same pack of oil executives troop to the House of Representatives today and the Senate yesterday was mostly a deja vu experience. The execs’ canned testimony was from the same outline they used earlier this year and in 2005 and 2006
hearings–high prices aren’t our fault; everything will be better if
you let us drill in the Arctic and off the California coast; don’t you
dare touch our tax breaks. Only the numbers change, continuously for
the worse. Today brought the added nonentertainment of a House hearing
to question federal Energy Secretary Samuel Bodman, arguably
the most boring and inactive member of President Bush’s cabinet. He
hewed straight to the oil company line: prices are just supply and
demand; there’s no speculation driving the price of oil; there’s no
reason to sell oil from the federal reserve, even though Bill Clinton
did it in 2000 and prices fell. Bodman’s statement about the
"globalization of energy" sounded straight from a Chevron ad.
most unexpected statement in the two days of hearings came from Shell
President John Hofmeister, who allowed that his company could turn a
profit on oil at $35 to $65 a barrel. Here’s the Senate exchange:
With light, sweet crude for July delivery soaring $4.19 a barrel
Wednesday to close at a breathtaking $133.17 on the New York Mercantile
Exchange, and gas prices — according to AAA — averaging nearly $3.81 a
gallon nationwide for regular, lawmakers wanted to know where the oil
executives thought oil prices should be.
Shell’s Hofmeister said a price range of $35 to $65 a barrel would be consistent with "our ability to run a successful company."
But Chevron Vice Chairman Peter Robertson argued a company can’t
produce oil from the kind of areas now available to them for that kind
of price. And ConocoPhillips’ Lowe argued that price would be north of
$90 a barrel.
Hofmeister, the first to answer, spoke an insiders’ truth. After
all, the same companies made record profits in 2005 and 2006, when oil
was exactly within that range.
Consumer Groups Criticize Oil Industry Resistance to Fixing
Hidden Charge at Pump That Costs U.S. Drivers Close to $3 Billion Yearly
Washington, D.C. — As Memorial Day kicks off the summer driving season
and gas prices scrape and sometimes exceed $4 per gallon, U.S. auto and
truck drivers are paying $3 billion a year in hidden charges at the
pump for fuel that expands and loses value as it heats up. (For
information on audio news conference at 11:30 a.m. see note at end of
"A ‘hot fuel’ surcharge of up to a dime a gallon is concealed from
motorists because they have no way to tell if the fuel they’re buying
is 60 degrees, 90 degrees or more," said Judy Dugan, research director
of the nonprofit, nonpartisan Consumer Watchdog. "Fuel at gas stations
across the street from one another can vary by 10 or 15 degrees, so
drivers have no way to judge the actual value of what they’re buying,
no matter what the posted price."
The nation’s leading advocate for independent truckers, the Owner
Operator Independent Drivers Association (OOIDA), is also protesting
the failure of national regulators to fix this rip-off in the face of
oil industry lobbying. A number of individual truckers are pursuing a
national lawsuit against the deceptive practice.
"The hot fuel scam costs our members at least hundreds of dollars per
year," said John Siebert of OOIDA. "Fuel prices are adjusted for
temperature at every point in the sales chain except the final one to
consumers. It’s high time to end this hidden oil industry subsidy."
Gasoline is sold by volume, and it expands as the temperature rises,
a bit more than 1% for every 15 degree Fahrenheit increase in
temperature. A century-old oil industry standard fixes the assumed
temperature at point of sale at 60 degrees. Yet the average year-round
temperature of gasoline sold in the U.S. today is near 65 degrees.
Summertime temperatures are often drastically higher, especially in
warm states. At 90 degrees, a 20-gallon fill-up costs a driver $1.60
more than it should, because the expanded "hot fuel" loses energy.
A comprehensive investigation by the Kansas City Star published in
August 2006 estimated that U.S. consumers are shorted about 760 million
gallons of gas and diesel per year by hot fuel sales. At the current
average national price of $3.81/gallon, (for today’s prices see www.fuelgaugereport.com), that’s $2.88 billion per year. As U.S. prices increasingly cross the $4 barrier, the hot fuel tab will exceed $3 billion.
At current prices, in hot months in Western and Southern states, car
drivers pay an extra 7 cents to 9 cents per gallon. Even in the
unlikely event that the 18.4 cent a gallon federal gas tax was
suspended for the summer, drivers would be paying half their savings
back to oil companies for hot fuel that has been robbed of its full
"Adjusting fuel price to temperature is a matter of simple fairness,"
said Joan Claybrook, President of Public Citizen. "Sending customers
away with less than they paid for is unacceptable in any industry."
Simple, moderately priced technology that adjusts the price at the pump
to account for temperature has existed for decades. In Canada, where
average gasoline temperatures are lower than 60 degrees, the oil
industry lobbied for, and obtained, the right to adjust price to
temperature so consumers wouldn’t benefit from "cold gas." In the U.S.,
however, the industry has lobbied successfully against state
legislation or national regulations mandating temperature-adjusted
"The oil industry has taken a classic "heads-we-win-tails-you-lose"
position when it comes to temperature-based differences in fuel value,"
said Judy Dugan, research director of the nonprofit, nonpartisan
Consumer Watchdog (formerly the Foundation for Taxpayer and Consumer
Rights). "In the U.S., oil companies and gasoline marketers argue that
retail temperature-adjusted pricing is unnecessary, even though the
dealers buy wholesale gasoline with a temperature adjustment. In
Canada, they have been more than willing to install retail temperature
adjustment, prompted only by their own profit calculations."
In February, a Federal District Judge in Kansas City denied a motion to
dismiss the national "hot fuel" lawsuit. Sen. Claire McCaskill of
Missouri is sponsoring legislation that would require retail
temperature adjustment over a period of several years.
Independent truckers are hit hardest by the hot fuel premium (large
trucking companies buy their own fuel in bulk and demand that it be
temperature adjusted). The Owner Operator Independent Drivers
Association, based in Missouri, supports the hot fuel lawsuit.
– 30 –]]>
Just as the White House grudgingly agreed to stop buying record-priced oil for the federal Strategic Petroleum Reserve and Saudi Arabia grudgingly agreed to put 300,000 more barrels a day of oil into the market, the investment bank Goldman Sachs made another self-serving prediction. It called Friday for $141-a-barrel oil for the next several months. Oil prices promptly spiked above $126.00.
Everyone else gets to pay Goldman Sachs and its investors. Gasoline prices roared Sunday to above $3.75 a gallon for regular nationwide and Connecticut had the painful distinction of an average price for regular above $4.00 a gallon. Diesel hit $4.80 in some areas, adding to inflation across the board, to say nothing of the truckers barely able to stay in business.
The only sure thing about such a prediction is that Goldman Sachs will make money as speculative investors rush to make it come true. Many "commodity funds," like those that Goldman sells, have a majority investment in energy futures. But they also blend in agricultural commodities, like wheat, corn and soybeans. So investors rushing to get in on the gusher are also continuing to drive up food prices.
Not everyone is on the Goldman wagon, as a chief Canadian news outlet, the Globe and Mail, reported yesterday:
Lehman Brothers analysts are as exceptional in their bearish sentiment as Goldman is for its bullish forecast. Lehman forecasts the oil prices will peak this year, then slump to as low as $70 (U.S.) by the final quarter of 2009.
In an interview yesterday, Lehman energy analyst James Crandall said his bank believes Chinese demand is artificially inflated as the country stockpiles supplies to avoid shortages during this summer’s Olympics.
He said Lehman is also more optimistic that Saudi Arabia will succeed in boosting supplies, in defiance of more hawkish OPEC members like Iran.
But Mr. Crandall noted that the Saudis have a massive capital expenditure plan designed to boost output from 10 million barrels per day to 12.5 million by 2012.
"Many of our competitors don’t believe it. But we think there are reasons to believe it will occur," he said.
And finally, Lehman Brothers suggest that exploration and production costs have flattened out, after rising for several years, a fact that will encourage more non-OPEC production to come on stream.
Goldman Sachs sees $150 and up next year. Lehman sees $70. The gap mocks any idea of a competitive market. Even if Lehman is right, billions of dollars of damage have been done, to families and the staggering economy. Getting a regulatory handle on purely financial energy trading (Goldman and hedge funds obviously aren’t selling or buying real oil) has to be the top priority for a new Congress and and new president.
Consumer Watchdog Calls for Sales from Reserve, Warning to Refineries, Swift Action on Oil Trading Curbs
Santa Monica, CA — The Energy Department’s announcement that it will
cap taxpayer-funded additions to the federal Strategic Oil Reserve is a
small first step, and a late one, said Consumer Watchdog. Even so, it
is a symbolic move that could drop gasoline prices by several cents
President Bush, in an abrupt about-face, was forced to act by
Congressional votes to cap purchases for the reserve, and by oil prices
that leaped today above $127 a barrel.
Even with this first step, motorists nationwide are likely headed
toward $4.00 a gallon gasoline nationwide this summer, said Consumer
Watchdog. If refineries continue on a path of cutting back production
to increase gasoline prices, any effect from capping the reserve would
be canceled out at the pump.
“Both parties in Congress were forced to hear drivers’ anger at both
unaffordable pump prices and the ‘oil tax’ that consumers are paying on
everything from groceries to air travel,” said Judy Dugan, research
director of Consumer Watchdog. “Now Congress has forced the White House
to listen, too. Capping the reserve will signal at least awareness of
the magnitude of the economic problems caused by oil and fuel prices.”
It will also save taxpayers at least $90 million over six months, given
the program’s $187 million budget for this year, said Consumer
Watchdog. The actual savings would probably be much larger, given that
the budget was decided long before the rise to even $100 a barrel oil.
The effectiveness of this first belated move will depend on whether
government keeps pushing to get speculative markets under control and
prevent refinery profits from eating up any savings from lower oil
prices, said Consumer Watchdog.
“At a minimum, the White House should also state its willingness to
“loan” some of the reserve into the market as it did after Hurricane
Katrina, which effectively dampened oil prices,” said Dugan. “Congress
and the White House must also put newly enacted regulation of
speculative trading on a fast track, and hire the financial cops to
– 30 –
Consumer Watchdog is California’s leading non-profit and non-partisan consumer policy advocacy group.
For more information visit us on the web at: www.ConsumerWatchdog.org and www.oilwatchdog.org
5-16-08 by simpson
Chevron Corp. just gave $100,000 to Gov. Schwarzenegger’s Dream Team Committee making the oil giant the 14th biggest contributor to Arnold since 2003. Chevron has given his various committees a total of $765,800. The most recent infusion of cash came on May 5 just before the Public Utilities Commission signed off on a whopping 89.7 percent rate increase for the Chevron-owned water company serving the tiny hamlet of Casmalia.
Susan Kennedy, the governor’s chief of staff, used to be a PUC commisioner and still retains huge clout at the agency. So, was there a quid pro quo when the commission approved the rate increase May 15, the same day the gift was made public?
More likely Chevron was just routinely greasing the wheels of government, ensuring access as usual. After all, the oil giant had asked for a 138 percent increase in Casmalia. But Chevron’s big-money status in the Schwarzenegger administration and Kennedy’s PUC access, make suspicion come easy.
Folks in the Central Coast town, who say the soaring water rates may kill their community, will see average monthly rates rise from $115 to $148 immediately. They’re set to hit $216 a month in 2010. That’s in a place where the average median household income is around $30,000. Nearly 9 percent of median household income would ultimately go to pay Chevron’s water bill.
The old adage you get what you pay for seems to hold true for Chevron, though not for customers of its water company. If you live in Casmalia, then Chevron shafts you at the gas pump and then a second time when you drink a glass of water.
Early adopters of the Prius and other gas-electric hybrids weren’t
doing it for the money, since the extra cost would take five or
more years to make up with gasoline savings. Not so now. At current gas
prices, at least some models really are both cheaper and cleaner. For
instance, a hybrid Toyota Camry takes only 1.6 years to make up in
gasoline savings the $889 premium cost over a gasoline Camry, according to a study commissioned by USA Today. The Prius takes 2.6 years and the hybrid Nissan Altima 3.4 years over the gasoline Altima.
time frame would be even shorter if gasoline prices hadn’t driven up
demand for hybrids, so it’s not possible right now to make deals on
them. But as more hybrids hit the market, they’ll get back into
Of course, as LA Times auto poet Dan Neil recently wrote, there are some great-handling gasoline cars, like the Honda Fit, that get mileage in hybrid territory for actual subcompact car prices.
a Prius driver, I’ll admit that its greatest satisfaction is driving
past the gas station, over and over and over. But when I do buy
gasoline, I see more folks all but spooning a couple of careful gallons
into the tank of an older sedan, enough to get to the store or to work
or, as a recent "La Cucaracha" cartoon strip put it, "to the next gas station." It’s a constant reminder of why cleaner also has to be cheaper.
The sweeping farm bill that passed the Senate today and is headed for President Bush’s desk is more pork than policy, but I’m still celebrating. OilWatchdog’s most-wanted bill to curb energy speculation was tucked into the farm legislation. The measure, now almost certain to become law, will close the so-called Enron Loophole, regulating electronic and over-the-counter energy trading that helped bring us $125-a-barrel oil. Lack of regulation made oil and natural gas trading open to price manipulation, and lack of oversight made shenanigans impossible to find. Sen. Dianne Feinstein of California, who has tried to close the loophole for years, talked to the San Francisco Chronicle about the farm bill and her victory:
Feinstein said she does not
support the $2.5 million annual income limit the bill sets for cutting
off crop subsidies to farm couples but that the bill was supported by
all agriculture groups in California.
Feinstein was thrilled about a provision she added that closes what
she called the "Enron loophole" in energy trading on electronic
platforms. The new measure extends federal regulatory oversight to
electronic energy trading and requires record keeping that would end
what she called excessive speculation.
Feinstein said she has fought for the measure since California’s
electricity crisis in 2001. "This has been a long, hard road and this
is a major legislative victory," Feinstein said.
Getting a handle on unregulated, Wild West energy trading, and the resulting $125-a-barrel oil prices, won’t be fast or easy. Part of the problem is that the regulators at the Commodity Futures Trading Commission have been short on staff, funding and authority under the current administration. The Enron Loophole bill will also boost the CFTC budget, so Feinstein deserves major credit for her tenacity and wiliness in gettng the measure passed.
I had wondered about the wisdom of tucking the energy trading measure into the farm bill, and worried that it might be traded away for somebody’s pork. But the bill as a whole now has a veto-proof majority in Congress, so the Enron loophole is toast, no matter what the oil and hedge fund buddies at the White House think. For some details on what Feinstein’s measure will do, click here. And for more on OilWatchdog’s analysis of the loophole, click here.
State PUC Grants Oil Giant’s Water Company 89.7 Percent Rate Increase; Chevron Wanted 138 Percent
Santa Monica, CA — A decision today by the California Public
Utilities Commission to grant a whopping 89.7 percent water rate
increase to a tiny water company owned by oil giant Chevron means three
years of increasing fiscal agony for the hamlet of Casmalia, Consumer
Watchdog said. The increase will be phased in over that period.
Chevron, which just posted record first-quarter profits of $5.17
billion, had originally sought a water rate increase of 138 percent.
The average monthly water bill in Casmalia is $115 compared to $40 to
$60 for the same amount of water provided by other agencies in Santa
Barbara County. Under the new rates, Casmalia’s average monthly bill
would soar to $148 immediately. In 2009 it would rise to $183 and in
2010 to $217. Under Chevron’s initial plan the average monthly rate
would have been $272.
“Folks in Casmalia are in a special class,” said John M. Simpson, an
advocate with Consumer Watchdog. “All Californians get shafted by
Chevron when they go to the gas pump. Only residents of Casmalia get
shafted a second time when they go home and drink a glass of water.”
In a letter to the Public Utilities Commission before today’s meeting,
Casmalia Community Services District President Bill Ostini wrote, “If
this increase is granted, it will signal the beginning of the end for
Village officials estimate the median household income for the town is
around $30,000. The final Chevron water bill would swallow nearly 9
percent of that income.
Casmalia is 1.5 miles north of Vandenberg Air Force base. In the early
1900s, the population was 1,500. It’s since dwindled to around 200, and
the town is perhaps best known for the Hitching Post Restaurant. From
1973 to 1989 the notorious Casmalia Resources Hazardous Waste Facility
operated a mile north of town. During the time it was in business, the
toxic dump received more than 4 billion pounds of waste from around the
Golden State. Fumes regularly blew into town and sickened residents.
Those days are over. Now the site is the target of an EPA Superfund
cleanup, and Chevron is involved as a member of the Casmalia Steering
Casmalia gets its water from the Casmite Water Corp., owned by Chevron.
Casmite has provided Casmalia’s water since the 1940s, when it had oil
operations in the area. Unocal acquired Casmite in 1953, and then
Chevron swallowed up Unocal in 2005.
"Oil giant Chevron, needs to harness some of the ‘human energy’ it
touts in a multimillion dollar ad campaign and solve this community’s
problem,” said Simpson, “We’re talking about amounts that aren’t even
pocket change for Chevron, but an 89.7 percent water rate increase on
top of already exorbitant rates will kill Casmalia. PUC regulations may
allow Chevron to do this, but that doesn’t make it right. If I were a
Chevron executive, I would be embarrassed by what’s happened in
Consumer Watchdog said Chevron should follow the example of oil company
Atlantic Richfield when it faced a similar situation in New Cuyama in
1977. The oil company turned over their small water agency along with
$1 million to run it to the Community Services District.
Read an opinion piece in today’s San Francisco Chronicle about the Casmalia water situation.
– 30 –
Consumer Watchdog is California’s leading non-profit and non-partisan consumer watchdog group.]]>
The latest campaign finance reports, from OpenSecrets.org, show Sen. John McCain closing in on the defunct Rudy Giuliani as Big Oil’s bet in the presidential race. Oil money these days is as nasty as tobacco money, and all the candidates ought to be refusing it, though at least the last round of campaign finance lawmaking curbed direct corporate spending on candidates.
Since the last batch of campaign reports, Giuliani’s $6-million-plus total hasn’t budged (for the obvious reason) and a surge of oil industry contributions to McCain nearly doubled his total, to
$515,486. McCain was hardly a blip when Giuliani and Sen. Mitt Romeny dominated in their primary fight, but oil companies appear to be swallowing their doubts about backing a maverick–albeit one who hasn’t threatened oil company profits.
Sen. Hillary Clinton, at
$353,723, is still behind the long-gone Romney, and Barack Obama, who has more or less pledged to kick oil lobbyists out of his office, is at a hedge-bet level of $266,097.
One certainty is that once the presidential race is one-on-one, oil will be putting its money into guaranteeing the industry a voice in the next administration. The test of the winner will be whether he or she actually does some ejecting of oil influence in the White House.]]>