News of the Day (Tuesday, April 25, 2006)

April 25, 2006 at 1:38 pm | Posted in Uncategorized | Leave a comment

There were five words missing from the president’s speech today: ‘Get tough on big oil,’

Those are the words of Senator Shumer of New York to Bush, who stopped the flow of oil to the Strategic Petroleum Reserve, or about 70 thousand barrels a day, in a nation that swallows up 20 million barrels a day! You think that will actually lower the price?

Bush’s Numbers Follow Price of Gas

Interesting how the numbers play, but with gas prices going up, Bush’s numbers go down.

Professor Pollkatz has some pretty awesome graphs showing various ways in which Bush’s numbers are going down the drain.

Scott McClellan’s Non-Answers

Doesn’t Know: Used at Briefings 574 Times

“I don’t know the answers to all of these serious questions that have been raised. I have no reason to believe that at this point. But there are a number of serious questions that have been raised.”

— Sept. 20, 2004, on forged National Guard records, purportedly about Bush, aired by CBS
Cannot Comment on an Ongoing Investigation: 210 Times

“I’m just not going to talk about an ongoing investigation. You’re asking that question in the light of an ongoing investigation; it’s something that continues at this point.”

— Nov. 8, 2005, on the inquiry into the Valerie Plame leak
Doesn’t Have Any Further Information: 160 Times

“I don’t have any update. It’s something that we always continue to look at, and we will continue to do so.”

— Jan. 19, 2006, on the terror threat level
Won’t Speculate: 155 Times

“I appreciate you asking me to speculate. I’ll leave it to our commanders on the ground to talk about the progress that’s being made and talk about the circumstances on the ground.”

— Oct. 19, 2005, on the Iraqi occupation
Hasn’t Heard Anything: 58 Times

“That would be news to everybody in this room. No, I haven’t heard anything — haven’t heard anything like that.”

— Feb. 20, 2004, on capturing Osama bin Laden
Cannot Confirm or Go Into Details: 52 Times

“Well, if you’re asking me to talk about classified programs, I can’t do that. You know that I’m prohibited from doing that.”

— Jan. 3, 2006, on anti-terror executive orders
Ask Someone Else: 50 Times

“I think you’re referring to a specific wording in a memo. You might want to ask the Department of Defense about some of the specific wording in the memo.”

— Dec. 10, 2003, on a military contract
Doesn’t Remember: 19 Times

“Yes, there’s — and I don’t recall off the top of my head — there’s some specific things outlined there.”

— Dec. 18, 2003, on non-citizens in the military
Wants to Be Left Alone: 1 Time

“I wish you would attack yourselves, instead of me.”

— Feb. 18, 2004, on the press corps

Some Humor

George Bush, Dick Cheney and Donald Rumsfeld are flying on Air Force One.

The President looks at the Vice President, chuckles, and says, “You know, I could throw a $1,000 bill out the window right now and make somebody very happy.”

The Vice President shrugs and says, “Well, I could throw 10 $100 bills out the window and make 10 people very happy.”

Not to be outdone, the Secretary of Defense says, “Of course, then, I could throw 100 $10 bills out the window and make a hundred people very happy.”

The pilot rolls his eyes and says to his co-pilot, “Such arrogant asses back there. Hell, I could throw the three of them out the window and make 6 billion people unbelievably happy.”

Oil Companies Price Gouging

Here are some articles that give some good answers on price gouging….

Refineries Profiting From Your Pain

A very troubling part of this reduction of inventory is that there is more than a hint of collusion about it. It seems most unlikely that normal market forces would have caused a group of competitive firms to collectively reduce inventory to the point where it caused a significant transfer of wealth from consumers. In a truly competitive market, refiners will make differing assessments about the amount of inventory they need. It would be a very risky thing for one refiner to reduce its inventory without some confidence that all others will do the same. Otherwise, one or more of its competitors would take advantage of the situation. In a time of shortage, a firm with a larger inventory could, for instance, take market-share away from its competitors. In fact, the whole inventory reduction game would seem to require at least the tacit acquiescence of all.

It is worth noting that in California, where the refining capacity is concentrated in the fewest hands, refining margins are also the highest. In fact, California has the lowest crude oil cost and the highest gasoline prices in the nation. It seems that the amount of competition matters.

So either there is actual illegal collusion in the refining market, or concentration of ownership in refining has reached a point where explicit collusion is not necessary, and the small number of firms can recognize their common interests without actually conspiring with each other. In either case, what we have is a failure of competition in the market, and the Federal Trade Commission and the Justice Department’s Antitrust Division have some explaining to do. The current high concentration of ownership in petroleum refining is largely a result of mergers, all of which were reviewed by the antitrust agencies. At an absolute minimum, one would expect the antitrust agencies to revisit the issues raised by these mergers and at least conduct an investigation. If the president is concerned about gasoline prices, why doesn’t he ask for an investigation?

Taking a Harder Look at Price Gouging

As oil and gasoline prices continue their steady climb, lots of stories are written concluding that the increases are attributable to supply and demand, pure and simple, and that the only solutions –- increasing domestic supply or reducing domestic demand –- are long-term, so we’re simply forced to deal with higher prices in the meantime. And OPEC gets branded as a primary culprit.

But that’s not the whole story.

One of the first things to examine is the relationship between the record profits enjoyed by U.S. oil companies and the higher prices for consumers and American industry. For example, in 2004, ExxonMobil –- the product of the 1999 merger between Exxon and Mobil –- chalked up the world’s biggest-ever profit for a single company: $25.3 billion.

Is it possible that ExxonMobil and other U.S. oil companies are making part of their profits off price gouging? It is possible that, just like Enron constricted supply in California by ordering power plants offline in order to create supply shortage to jack prices up, U.S. oil companies are keeping supplies offline and waiting to release those supplies until prices rise enough to make it worth their while?

The potential is there. According to the Energy Department, the U.S. is the 3rd largest producer of crude oil in the world (only Saudi Arabia and Russia produce more oil than we do), and we are far and away the largest consumer of oil, using 25 percent of the world’s consumption every day. That makes the U.S the largest oil market in the world, and therefore actions in the U.S. help determine world oil prices.

The history is there. The U.S. Federal Trade Commission has in the past found that U.S. oil companies intentionally withheld supplies of gasoline from the market in order to drive prices up. In March 2001, the FTC concluded an investigation into a spike in Midwest gasoline prices and found that one firm chose not to sell its excess supply because that “would have pushed down prices and thereby reduced the profitability” of its exsiting sales. “An executive of this company made clear that he would rather sell less gasoline and earn a higher margin on each gallon sold than sell more gasoline and earn a lower margin.” The FTC didn’t find any violations of antitrust laws because there was no collusion. But, it concluded: “In each instance, the firms chose strategies they thought would maximize their profits.”

And it’s easier now than ever. The consumer group Public Citizen, first in a May 2001 report, then in a March 2004 report, and then in Congressional testimony in May 2004 reported that recent mergers in the U.S. oil industry have greatly consolidated control over refining and marketing in the U.S., making it easier for a smaller group of companies to price-gouge. Don’t believe consumer groups? Perhaps you’ll believe the U.S. Government Accountability Office, which affirmed Public Citizen’s conclusions in a recent report to Congress.

The evidence is in the numbers. The domestic gasoline price spread –- the price of a gallon of gas, minus the cost of crude oil and taxes –- has increased by 30 percent from the mid-1990s to 2004. That spread measures the share of a gallon of gas charged by refiners and marketers. In the mid-to late-1990s, the domestic spread averaged 39 cents per gallon. But during the post-merger period from 2000-2004, the average domestic spread has been 51 cents. (See Fueling Profits, a report by Mark N. Cooper for the Consumer Federation.) This translates to an increase in U.S. gasoline prices of $55 billion, the amount by which U.S. consumers have been price-gouged. It is no coincidence that oil corporation profits are at record highs.

And just like Enron falsely tried to blame California’s environmental laws for causing the 2000-2001 energy crisis, the oil industry is trying to do the same today for higher oil and gas prices. Hopefully we won’t get fooled again.

It’s The Policy, Not The People, Stupid

The administration’s central problem is its policies, not the people executing the policies. Some new players may outperform the old: they may call the right senator at the right time, cope better with unforeseen calamities (Katrina) or provide stronger public defenses of administration actions. But these improvements, should they occur, cannot offset larger failings. These relate to Bush’s agenda—or lack of agenda. If you’re driving in the wrong direction, or not driving at all, changing chauffeurs doesn’t help.

Well said, Mr. Samuelson.

It’s time, I think to talk about the military-industrial complex…..

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