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“Fracking” for natural gas gets some attention, but so far it’s just yakking

5:45 pm in Uncategorized by Consumer Watchdog

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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 →

Is There a ‘Gashole’ in Your Tank?

3:37 pm in Uncategorized by Consumer Watchdog

The national average price of plain old regular gasoline is up a dollar a gallon over the past week to $3.83, according to AAA. California, which alerts the rest of the nation to where pump prices are going, is at $4.20. And nationwide, the diesel fuel that drives our trucks and trains is $4.14 a gallon, even though diesel is cheaper to make than gasoline. No wonder food prices are spiking.

It’s as though we had another Hurricane Katrina furiously driving up the price of fuel, but without the storm. Which makes it interesting that an indie documentary called “Gas Hole,” (trailer), examining the reasons for our high gas prices in the post-Katrina world and oil company influence on the gas-guzzling engines in our cars, is now getting wider release. You can be sure that Exxon didn’t provide the funding for this funny/weird/disturbing doc. (I love the old desert-rat types with faded sedans that get 100 mpg, and their stories of disappearing clean-car patents.)

We find out why there’s no supply and demand in any real sense driving the price of gas today. Oil prices are spiked upward by speculation in futures markets, not by physical shortage on the market. Gasoline is driven upward not just by oil prices, but by refining companies’ restrictions on their output, and overall supplies. Then the price of gasoline pushes up oil prices some more. We’re all at the mercy of greed, not supply and demand.

Some of the serious points covered in “Gas Hole” track OilWatchdog’s studies and reports over the years, which are covered in my colleague Jamie Court’s book, “The Progressive’s Guide to Raising Hell.” (video). (Full disclosure: Jamie was interviewed for the movie.)

Some of the most eye-opening points from the book:

Remarkably, the idea that oil companies have control over the price at the pump is controversial in Washington, D.C. Oil company executives point to geopolitical instability, future predictions of crude oil scarcity, OPEC, and other forces beyond their control as the culprits.

The public knows the scoop, and its instincts track the research. Oil companies know they can make more money by making less gasoline, so they do.

I have studied the issue of high gasoline prices for more than a decade.

Here’s what I have learned about how the big five oil companies control gasoline prices by making the commodity scarce and keeping the price high. This knowledge is critical to opposing the industry’s anticonsumer behavior and pushing Americans toward real energy change.

• Rather than compete with each other to provide more and 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. … 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.

“Gas Hole” also pays close attention to oil companies’ long history of influencing markets and government to boost their profits and protect their business model. It pays impressive tribute to the inventor of modern investigative reporting (and one of my personal heroes), Ida Tarbell, whose 1904 history of Standard Oil laid bare a price-fixing national monopoly with tentacles everywhere in government.

Gee, does that sound familiar today? “Gas Hole” has too much sense of the absurd–even a clip from “Reefer Madness”–to be pedantic. But knowledge is power. In the end, it’s a lot more useful than boycotting the Exxon station.

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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.

What’s Causing the Gas Hole in Your Wallet? You’ve Got to See This Movie

4:29 pm in Uncategorized by Consumer Watchdog

If you want to know why we’re really paying over $4 per gallon for gasoline, and there appears to be no end in sight, the film Gas Hole lays it all out for anyone who wants to know the history of the pain at the pump.

The filmmakers pull back the curtain on the dirtiest secrets of the oil industry: from oil companies buying up patents for devices that would give you 100 miles per gallon, to intimidation of inventors of green technology, to oil company manipulation of the gasoline supply that drives up prices.

Being released on DVD in time for Earth Day, Gas Hole, narrated by Peter Gallagher and featuring Joshua Jackson, is an eye-opening documentary about the history of oil prices and sheds light on a secret that the big oil companies don’t want you to know — that there are viable and affordable alternatives to petroleum fuel!

View the Gas Hole Trailer from Cinema Libre Studio on Vimeo.

Gas Hole provides a detailed examination of our continued dependence on foreign oil and examines various potential solution.

The film also tells the story of the battle my group, Consumer Watchdog, fought with Shell Oil to keep the company from demolishing a key gasoline refinery during a period of high demand and low supply in order to drive up the price at the pump. A combination of public pressure and intervention by US Senator Barbara Boxer and then California Attorney General Bill Lockyer forced Shell to keep the refinery open and sell it to a competitor.

As Gas Hole documents, it took every bit of raising hell know-how we had to keep Shell honest. Most communities just cannot fight back.

The film artfully lays out what I learned about fighting oil companies for more than a decade about how they jack up the price up at the pump.

• Rather than compete with each other to provide 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.

• Oil companies failed to build ample refining capacity to meet demand. Over the last 20 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 30 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.

The oil companies cannot be shamed, but Gas Hole shows why we need to keep them on a short regulatory string.

What are the solutions? Gas Hole offers them up starting with claims of buried technology that dramatically improves gas mileage, to navigating bureaucratic governmental roadblocks, to evaluating different alternative fuels that are technologically available now, to questioning the American Consumers’ reluctance to embrace alternatives.

If you are paying $4 dollars or more per gallon for gasoline, spending a little more on the DVD of Gas Hole is a wise choice.

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Jamie Court is the president of Consumer Watchdog and author of The Progressive’s Guide To Raising Hell (Chelsea Green)

Follow Jamie Court on Twitter: www.twitter.com/RaisingHellNow

Texas Oil Price Grouging Behind Drive To Stop Greenhouse Gas Caps

10:58 am in Uncategorized by Consumer Watchdog

When the eighth largest economy in the world establishes a landmark greenhouse gas emissions cap, you can bet oil companies are going to try to find a way to knock it down for one reason: money.

A new report shows the motivation behind one Texas oil giant’s crusade against California’s landmark greenhouse emissions law: big profits from price gouging of drivers.

The report by Consumer Watchdog’s Oilwatchdog.org project shows Californians have endured higher gasoline prices than the rest of the nation while Texas-based Valero has averaged 37% higher margins on each barrel of oil it refined in California. The result — $4.5 billion in profits.

That type of price gouging is apparently too profitable a gold rush to threaten with competition from a Green Tech energy sector, which is why Valero is the principle funder behind California Proposition 23. The November ballot measure freezes the state’s greenhouse gas cap until unemployment all but vanishes.

The irony is that Green Tech is the job creation engine of the state, making California tops for green collar jobs in the nation.

Environmentalists have been fighting Proposition 23 on the basis that dirty Texas oil companies want to keep polluting in the state. The bigger truth is that they want to keep price gouging the state’s motorists, and Proposition 23 is a tool to allow the refiners to continue to charge too much for gasoline and make too much profit per gallon. It’s all about dollars and cents per gallon.

According to Consumer Watchdog’s report:

* Valero’s net refining margins in California have been 37% higher per barrel than those from its refineries in other regions since 2002.
* Profits have been highest in California for the company during periods of steadily rising gasoline prices; Valero earned more than $1 billion in California refining profits in 2006 alone.
* Higher than average gasoline prices in the West, created by artificially low supplies during periods of high demand, have been Valero’s recipe for big profits.

Valero’s ability to exact outsized profits from California depends on high pump prices because, unlike integrated oil companies like Chevron, it doesn’t extract crude oil, it only refines oil and sells its products at retail gas stations. This means that refining margins are central to its profits.

During the recession, Valero has been selling off refineries in the Northeast, but has held onto its California refineries with the expectation that it will resume getting outsized California profits by keeping refined gas supplies tight and charging high prices for gasoline in the state.

The ability to tighten gas supplies in California – a key component of the price gouging – will be limited by new environmental rules that support green alternatives to oil and less dependence on gasoline in California. Voters are not yet ready to scrap the greenhouse gas law, but Valero is making it’s run at their hearts and minds — arguing jobs will be lost if the environmental rules take effect.

Californians need to follow the money, all the way to Texas. That says everything about why Valero is backing Proposition 23.

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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.

Big Oil Behind The Tea

11:48 am in climate change, Energy, Environment, Government, Politics, State Government, Tea Party by Consumer Watchdog

When Californians angry about oil companies’ attempt to repeal the state’s greenhouse gas emission cap went to confront the oil refiner behind Prop 23′s power play, they found the Tea Party in their way.

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What’s an angry populist movement that’s supposed to represent real people doing defending oil companies?

It’s a question the New York Times could have answered in its otherwise excellent editorial today, The Brothers Koch and AB 32. Petroleum magnates Charles and David Koch fund both Prop 23′s greenhouse gas cap repeal and The Tea Party.

While the Tea Party is voicing authentic anger, the money fueling it is coming from petroleum magnates who simply want to profit and pollute at the expense of the rest of us. The Tea Party in California has become Big Oil’s army. Not very populist to me.  . . . Read the rest of this entry →