ExxonMobil, which is making big bets worldwide on hydraulic fracturing for deeply buried natural gas, is also making big bets on its sincere, earnest advertising about clean, safe natural gas. The ads turn me into a crazy person, yelling at the television during halftimes and seventh-inning stretches.

Their claim that they ensure compliance with all “applicable environmental and safety regulations” is my personal turning point, because in the U.S. those regulation barely exist. It’s easy to comply with nothing, so Exxon can get away with telling us that fracturing bedrock thousands of feet deep, drilling through the aquifers that supply our drinking water, using scarce water supplies spiked with an unidentified slew of toxic chemicals, is as safe as braiding a a daisy chain.

Some other countries, however, are starting to act on their doubts.

France has outlawed this drilling, known as “fracking,” until doubts about what it does to water supplies and how its waste poisons the land are dealt with. Britain’s Advertising Standards Authority banned one of the Exxon ads, stating that its claim on liquefied natural gas as one of the world’s cleanest fuels is misleading.

In the U.S., enviro and consumer groups grumble, and SolarDave has made an on-target spoof of the Exxon ads, but our lawmakers and regulators are still mostly twiddling their thumbs. There isn’t a federal requirement that drillers tell us what chemicals they’re squirting into the ground, or a law to prevent dumping their wastewater into the rivers from which we drink.

After a slew of investigative reporting (special kudos to ProPublica) on the health and environmental fallout from fracking, government is starting to ask questions. This week, Sen. Jeff Bingaman of New Mexico led off a Senate Energy and Commerce hearing on fracking, ticking off the water issues, land poisoning and air pollution issues, and adding on fracking’s release of highly potent climate-change gases, particularly methane. But a show of sympathy is a long, long way from effective regulation. Read the rest of this entry →

If the U.S. ends the coming weekend without national debt limit deal, it won’t just be bond defaults sending the nation back into a deep, ugly recession. A hint came Tuesday as the price of oil rose a little, nearing $100 a barrel once again even as stocks did a mini-tank, with the Dow down 91 points.

So who’s still grinning as most of us curse the absolutists in Congress who see “balance” as treason? Yep, oil companies.

BP jumped back to a $5.6 billion quarterly profit Tuesday after a $17 billion loss a year ago, post-spill. Smaller Occidental Oil was up 71% over last year’s 2nd quarter, to $1.8 billion. And analysts think the party will continue.

From Reuters:

Analysts said it would likely be the oil industry’s biggest second quarter since 2008, when oil prices hit record highs. “We expect almost all the oil and gas companies we cover to report higher earnings than in [2009 and 2010]. The earnings improvements from a year ago reflect higher oil prices of 32% for West Texas Intermediate crude and and 50% for Brent North Sea crude,” said Fadel Gheit, senior energy analyst for Oppenheimer and Co.

Getting oil speculation under control has slipped far from the top of the agenda in Washington. But no matter how the debt crisis turns out, federal regulators have to recognize that the economy can’t ever really recover while Main Street pays for the energy binges on Wall Street and in Houston.

The oil price increase came as the value of the dollar dropped, and speculators hunted for a place to put money coming out of stocks. If the U.S. economy crashed after a debt default, oil would crash partway, because a dead U.S. economy means so much less gasoline and oil consumed. But in a lesser scenario, oil could just keep creeping up, until speculative energy and food prices really do crash the consumer economy again.

No matter what happens, oil will rise long before consumers get out from under their job and other losses–just as happened in the recent recession, putting a drag on any hope of quick recovery.

What to watch? The price of gasoline. Economists see $4.00 gasoline in the U.S. as the tipping point where drivers start feeling pinched and cut back on other expenses. Gasoline is now hovering around a national average of $3.70 a gallon, up 15 cents from a month ago. That’s not much of a cushion; it’s already more than job-hunters can afford. Too bad no one in the Capitol has lost his job and can feel the pain firsthand.
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Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

While skirmishes in Libya and uncertainty in the Middle East are nice cover for outrageous gasoline prices, the fact is the same old suspects are making a killing from sky-high gas prices approaching $4 dollars per gallon in California: big oil companies and greedy speculators.

The speculative market may have driven crude oil prices up, but that’s not the price oil companies pay for the crude oil that goes into our gasoline. America’s big oil companies use crude oil that they have harvested from the ground or bought much cheaper through long term contracts to refine into gasoline. You’ll see the results in next quarter’s profit statements: big profits from both crude oil sales and refineries that make gasoline, what’s called “upstream’ and “downstream” operations in profit reports.

Consumer Watchdog has for years both tried to curb the opaqueness of the volatile speculative market for oil and to regulate supplies at gasoline refineries because oil companies game both systems, creating artificial shortages in the markets to jack up prices or exploiting historical events to justify obscene profits.  Today’s sky high gasoline prices are the result of oil companies shutting down refineries and playing the speculative markets for big gains.

The deafening silence from the White House and groups in DC loyal to the President who know better is the most astonishing thing.

Obama campaigned against oil company greed on the campaign trail but now he seems to have lost his voice on the subject. Republicans are taking the offensive, but the oil industry that has been nourished in their bosoms for decades is at the heart of the crisis. Oil companies have kept the nation running on such short supplies of gasoline that any jolt to the system sends gas prices through the roof and makes the economy pay.

What follows is the five facts of life I have learned from more than a decade fighting oil companies, battles I recount in my new book The Progressive’s Guide To Raising Hell.  It’s about time the White House started educating Americans about these facts of life and fighting back against the real perpetrators of the pain at the pump.

• Rather than compete with each other to provide more cheaper gasoline, oil companies cheat together to withhold needed gasoline supply from the market. Consistently, the companies artificially pull back refinery production of gasoline in order to reduce supply coming in during periods of peak demand so they can increase prices. It’s legal so long as there is no smoky back room where they talk about it, but they don’t need to since industry data about supply flows freely on corporate computer screens. This behavior has been documented by government agencies like the Federal Trade Commission, which found, for example, in an investigation of Midwest gasoline price spikes, that one refiner admitted keeping supply out of a region in need because it would boost prices.

• Oil companies failed to build ample refining capacity to meet demand. Over the last twenty years, America’s demand for gasoline increased 30 percent and refinery capacity at existing refineries increased only 10 percent. No new American refinery has come on line during the last thirty years. Internal memos and documents from the big oil companies show they deliberately shut down refining capacity in order to have a greater command over the market.

• The big oil companies have their own crude oil production operations and control substantial foreign production of crude oil. They profit wildly when the price of crude oil skyrockets, so they have an interest in driving up the price, despite the fact that they blame OPEC for those crude oil increases. The crude oil producers can even drive up the price of crude by restricting gasoline production and trading crude oil among their own subsidiaries to drive up the price paid for crude by others. Traders with connections to the oil companies can also make big bets on the opaque crude oil futures market to drive up the price and also drive up the value of their Exxon shares.

• The crude oil that big integrated oil companies use in their own refineries is mostly bought on long-term contracts or through their own production, so the oil companies don’t pay the world price for crude oil when it’s high. Their raw material costs are much lower than they would like us to believe. So when the companies raise the price of gasoline in tandem with the run-up in crude oil prices, they are making big profits because Exxon’s crude oil unit is charging its own refining unit a higher price for crude than is necessary. The accounting shenanigans result in an overall windfall profit but show the companies’ gasoline refineries making little profit, and “upstream” crude-oil production divisions making the lion’s share.
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Posted by Jamie Court, author of The Progressive’s Guide to Raising Hell and President of Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

The deadline for submitting claims to the $20 billion BP oil spill compensation fund is midnight Tuesday. The wrangling over payouts will go on, perhaps for years. Yet the administrator of the fund, Kenneth Feinberg, stubbornly refuses to say how much he’s being paid by the oil company, eroding the trust of frustrated claimants and the public.

If BP had funneled the $20 billion through government, which hired Feinberg to administer it, his pay would have been public from day one. BP was allowed to skip the government intermediary, but BP didn’t hire Feinberg–President Obama appointed him, straight out of a real public job as White House overseer of executive pay at bailed-out companies.

Obama said as Feinberg took the job: “I’m confident he will assure that claims are administered as quickly, as fairly and as transparently as possible.”

What’s weird is that Feinberg’s law firm and BP were then allowed to bargain Feinberg’s and the firm’s compensation in private. It’s no shock that the “quickly” part of the payouts failed miserably, the “fairly” is questioned by business owners who have shut down while waiting months for help, and as a result Feinberg’s secrecy about his pay is under fire. After all, delay saves BP millions of dollars in accrued interest, and keeping claimants out of court altogether may save the oil company billions.

Feinberg also showed a completely deaf ear about his private actions when he agreed this month to give a keynote speech to a U.S. Chamber of Commerce subsidiary dedicated to preventing ordinary Americans from holding corporations accountable in court.  When Feinberg delivered the speech, he rather gently said that ending lawsuits against all corporate wrongdoing was a bit too broad. But what he said didn’t really matter: It was his presence honoring the Chamber group, the Institute for Legal Reform, that validated its ferociously anti-consumer and pro-corporate crusade.

As with the Chamber speech, Feinberg can’t see a conflict in his pay from BP.

Even in July, right after Feinberg was appointed, some legal scholars questioned this public-duty for private-pay model.

Prof. Byron G. Stier of Southwestern Law school, who represented tobacco companies and could hardly be seen as having an anti-corporate view, said this:

[E]ven federal judges have their compensation set publicly and in a manner that could not be said to incentivize them to favor one litigant over another.  We would never approve of a judge being paid confidentially by only one litigant — and we shouldn’t here either, especially when the claims structure could be seen as quasi-public … Ultimately, removing the issue of Feinberg’s fees from any controversy would aid Feinberg in making the BP fund a success.

Since then, Feinberg’s firm has released its overall compensation, coming to about $1,000 an hour for every lawyer who touched the case. But Feinberg is still mum about how and how much he’s personally making.

In a Reuters follow-up story Tuesday, Feinberg told the news service he is operating under “no official legal statute or court-imposed authority.” He is, he said, “a private party asked by both sides to design and implement the Gulf Coast Claims Facility on behalf of both sides.”

The phrase “asked by both sides” puts the White House in a disturbingly equal position with BP. But what was even more disturbing was Feinberg’s statement to Reuters that his three-year compensation deal with BP was verbal, not written. Doesn’t that mean it can be changed at any time to shift the pay incentives in BP’s favor? To see that BP ends up with some of the $20 billion back in its pocket?

The longer Feinberg lets his non-disclosure fester, the more it stinks like oil kill on a hot beach.  President Obama appointed Feinberg and should demand a written public contract for everything about BP’s payment to the Feinberg Rozen firm and its members. Otherwise, the BP fund is just another example of poorly considered outsourcing.

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Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.

You think you’re done being mad at BP? You’re over the fact that it’s still getting piles of U.S. taxpayer subsidies, including subsidies on what it promised to pay for the cleanup? Jim Hightower, the Texas populist and scourge of misbehaving corporations, tells us that BP isn’t just hiring out-of-work Florida Pandhandle folks–it’s using semicamouflaged prison labor, and the scary fellas come with a subsidy of $2,500 per head:

In the early days of the cleanup, crews suddenly appeared wearing scarlet pants and white T-shirts with bold red letters spelling out, "Inmate Labor." Investigative reporter Abe Louise Young writes that the sight of prison laborers outraged the local community, so they were removed.

Not the inmates, the uniforms. Now they wear BP shirts, jeans and rubber boots with no prison markings, and they are moved to and from the job in unmarked white vans. No officials with BP or the feds could or would tell Young how many inmates are being used or what they’re being paid. However, a local sheriff’s official told Young, "They’re not getting paid – it’s part of their sentence."

But guess who is getting paid for this convict labor? BP. It’s getting paid by you and me. Under a little-known tax provision passed during the Bush regime, corporations can get a "work opportunity tax credit" of $2,400 for every work release inmate they hire.

Then he totes up a bunch of other subsidies, including $10 billion from all of us because BP can deduct its costs of paying for the cleanup from its U.S. tax bill.

On second thought, it’s not BP that deserves a new dose of outrage, it’s Congress, which pounds on BP in hearings and in speeches, but sits on its hands rather than touch the tens of billions of dollars in tax breaks that the whole oil industry gets. Clean energy, meanwhile, is stuck on a roller-coaster of now you see it, now you don’t federal investment.

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Posted by Judy Dugan, research director for Consumer Watchdog, a nonpartisan, nonprofit organization dedicated to providing an effective voice for taxpayers and consumers in an era when special interests dominate public discourse, government and politics. Visit us on Facebook and Twitter.