More SPR Nonsense

I must say that I find it amazing that the same people can argue 1). We are too dependent upon fossil fuels; 2). We must find alternatives; 3). Carbon emissions are too high; 4). We need to promote higher fuel efficiency — and then 5). We must tap the Strategic Petroleum Reserve (SPR) to bring oil prices down so people can afford to consume more. This is utter rubbish, and I have addressed this once before (including the observation that nobody seemed to fact-check the claims that the SPR was being filled at a rate of 70,000 bbl/day).

Again, what is the purpose of the SPR?

In the event of an energy emergency, SPR oil would be distributed by competitive sale. The SPR has been used under these circumstances only twice (during Operation Desert Storm in 1991 and after Hurricane Katrina in 2005). Its formidable size (700-plus million barrels) makes it a significant deterrent to oil import cutoffs and a key tool of foreign policy.

However, the calls for tapping the reserve continue to come, because high prices apparently constitute an energy emergency in some people’s minds. Here’s the latest:

Eight Reasons to Release Oil from the Strategic Petroleum Reserve

Let’s look at a couple of the reasons given:

1. Record oil prices have hurt American families

Ordinary families are struggling with record high energy prices. Many families’ gas costs have increased by hundreds or even thousands of dollars a year. The price of home heating oil has doubled in the past year. And the Department of Energy predicts that average electricity prices will increase by 5 percent this year, and go up 9 percent in 2009.

Yes, and we are seeing significant drops in gasoline demand as a result. You know what that means? The people who argue for lower carbon emissions should be happy. And the kicker of this article is that the author, Daniel J. Weiss, is “the Director of Climate Strategy at American Progress, where he leads the Center’s clean energy and climate advocacy campaign.” What’s wrong with this picture? Do climate advocates think getting people to change is going to be easy? No, there is going to be cost, pain, and inconvenience. But people respond to price. They don’t respond to feel-good speeches about the need to cut back.

Let’s look at one more:

6. There is plenty of oil in the reserve to withstand a supply disruption

The SPR has more oil than ever before—706 million barrels, which is 98 percent capacity. Selling 50 million barrels over 100 days would still leave it filled to over 90 percent capacity. This is enough oil to cope with a complete foreign supply disruption for nearly two months, assuming zero reduction in demand in the wake of such a catastrophe.

This is just an argument that the SPR is bigger than it needs to be. Yet the authorization to fill (eventually to 1 billion barrels) was made as a part of the Energy Policy Act of 2005, which received broad support. As someone who is very concerned about disruptions of future oil supplies, I want a healthy volume in the SPR. I want it tapped only in the event of something like a major supply disruption that actually threatens to sharply reduce the amount of available oil. I didn’t want it tapped at $20 oil, and I won’t want it tapped at $500 oil.

Finally, let’s not forget the history here. Chuck Schumer has lobbied to have the SPR tapped since 1999, when oil was hitting the outrageous value of $20 a barrel. He got his way in 2000, as President Clinton caved leading up to the elections. Here Schumer (and others) are at it again in 2004, which was also an election year. Oil at that time had risen to $35 a barrel. (Here’s another article from someone who recognizes Schumer’s misguided logic in tapping the SPR).

Where would we be had we heeded these perpetual calls to tap the reserve? With higher gasoline consumption, higher carbon emissions, a drained SPR, and Senator Schumer complaining about fossil fuel consumption. We would be much more vulnerable to supply disruptions, and our financial position with respect to the SPR would be billions of dollars worse off than it is now (i.e., down 100 million barrels or more from today’s level with oil at $130/bbl).

High fuel prices have led to many positive changes in people’s behaviors. Demand is down, fuel efficiency is being embraced, and sales of SUVs are down. The very same people who advocate these things are the same people who would reverse these positive changes by tapping the SPR. It appears that they don’t understand that cheap energy is the very reason we became so dependent upon fossil fuels. We won’t wean from fossil fuels if they remain cheap. As I have noted before, a big reason that Europe’s per capita energy usage is half that of the U.S. is because they have maintained prices at artificially high levels. This caused them to develop different living/transportation/consumption preferences than is the case in the U.S.

If people are forced to tighten budgets – and heaven forbid carpool, ride the bus, or simply drive less as a result of high prices – that does not constitute an energy emergency. We need to get past these ridiculous calls to tap the SPR, and highlight the inconsistencies (and past history) of the positions of those who advocate such a move.

The Fault of the Government

I have long maintained that the root of our energy problems in the U.S. stems from our failure to enact a consistent, long-term energy policy. Big energy projects generally take years to complete, and when there is an extra risk that the government will change the rules halfway through the project, companies are going to take a very cautious approach. So, we end up with less energy than we might have if there was more consistency.

For the first time, it seems that the public overwhelmingly thinks so as well:

Drivers blame D.C. for high gas prices

According to a Consumer Reports Auto Pulse Survey released Thursday, 77% of consumers said the root of high gas prices lies with the government’s failure to implement an effective energy policy. That compares with 75% of drivers who blamed oil companies, 70% who said foreign oil producers were at fault and 68% who thought the Middle East conflict was a leading cause for record fuel costs.

So, 152% of those polled thought it was either the government or Big Oil behind the problem. (Must have been a case of “Vote early and often.”)

One thing that was surprising to me was the number of people who favored off-shore drilling:

As a result, 90% of those surveyed support an increase in alternative energy development, and 81% want the U.S. government to allow more drilling on and off our nation’s shores. Americans also favored conservation measures, with 83% saying they supported tax incentives for alternate transportation.

Of course I know one person who voted for Big Oil as the culprit behind oil prices. He works for the government. Chuck Schumer, notorious demagogue when the topic is oil, had this to say following the recent congressional hearings into the impact of speculation on oil prices:

Schumer downplayed the role of speculators in driving up oil prices, and he placed blame on the oil industry and the Organization of Petroleum Exporting Countries.

“I think it is interesting that the big oil companies and OPEC are blaming speculators for out-of-control prices, when they may be much more of the cause,” said Schumer.

Attaboy, Chuck. Keep looking for that boogie man. But don’t be surprised if you spot him during your morning shave.

Chuck Schumer’s Fabrications

I have never cared for Chuck Schumer. In my opinion he is a classic example of a demagogue. He tells half-truths, or sometimes untruths, in order to push his agenda. And he did so again yesterday with a letter to the Washington Post. In response to an editorial by Robert J. Samuelson – “A Full Tank of Hypocrisy” – Senator Schumer responded in his standard style by omitting key facts and providing misleading information.

Here are some excerpts from the Samuelson editorial, followed by Senator Schumer’s response and my comments:

It’s one of those delicious moments when Washington’s hypocrisy is on full and unembarrassed display. On the one hand, some of America’s leading politicians condemn high gasoline prices and contend that they stem from “gouging” by oil companies. On the other, many of the same politicians warn against global warming and implore us to curb our use of fossil fuels that emit carbon dioxide, the main greenhouse gas. Guess what: These crowd-pleasing proclamations are contradictory.

In late May, gasoline prices hit a national average of $3.22 a gallon, which, after correcting for inflation, is roughly as high as in early 1981, the recent peak. This elicited the usual expressions of outrage. Sen. Charles E. Schumer (D-N.Y.) suggested breaking up big oil companies that he says may be to blame for “the sky-high gas prices.”

Which would be a great idea if you want to buy your gasoline directly from Saudi Arabia and ship those refining jobs over there. Even ExxonMobil, as large as it is, is a fraction of the size of some of the national oil companies like Saudi Aramco. It takes many billions of dollars of capital to compete in this business. That’s why the mergers happened.

It’s always fun to blame unpopular occurrences on corporate greed. Schumer’s notion, for example, is that the wave of giant oil mergers (among others: BP/Arco, Exxon/Mobil, Chevron/Texaco) has so concentrated U.S. refinery capacity that companies can constrict supply and create artificial scarcities by refusing to build new refineries. It’s a plausible-sounding theory whose major defect is the absence of supporting evidence.

Whenever gasoline prices surge unexpectedly, Congress routinely vents its anger by ordering the Federal Trade Commission to investigate the oil industry for collusive practices. Invariably, the studies exonerate the industry.

But the evidence just has to be there. Doesn’t it? We just need more investigations. In fact, we should continue having investigations until someone, somewhere, uncovers something that indicates that someone from Shell once talked to someone from BP about gas prices, and we will never have to hold another investigation. It will be the proof we have been looking for over the past 30 years. And we can always point to that for the next 30 years, because now we know “the truth” – widespread collusion in the oil industry. In fact, I may run for office on that platform.

Testifying last week before the congressional Joint Economic Committee (JEC), Michael Salinger, an FTC economist, said that the industry’s concentration levels remain “low to moderate.” According to JEC figures, ConocoPhillips is the biggest U.S. refiner, with 13 percent of capacity; the six largest have 61 percent of capacity. The oil industry is less concentrated than the auto industry, which is considered intensely competitive. As for the absence of new refineries, that problem preceded the merger wave by many years; the last major U.S. refinery was constructed in 1976. There must be some other explanation (environmental restrictions, past low profitability).

Congressional Democrats especially have targeted global warming. “We hold our children’s future in our hands,” Pelosi said early this year. “As the most adaptable creatures on the planet, it is time for us to adapt.”

Energy prices apparently are the huge exception to this moral imperative. It is not necessary to adapt to them. The way that Pelosi and others navigate around this illogic is to assume painless improvements in energy efficiency.

Or the painless massive scale-up of biofuels. I agree with Samuelson that the positions that some are taking on global warming – “we need to reduce greenhouse gas emissions” – and on gas prices – “we need to reduce gas prices so people can afford to drive more” – are completely contradictory. This is about demagoguery, which brings us to some choice excerpts from Senator Schumer’s response:

According to a Government Accountability Office report, there is a direct link between oil company mergers and higher gas prices.

And how much did they say it contributed, Chuck? Do you remember? 1 cent. That was their estimate, although they said that due to the margin of error in their model, it might be as high as 7 cents. Surely this explains the run up in gas prices.

The high gas prices that Mr. Samuelson cheered have not curtailed Americans’ driving. Nor have they spurred U.S. oil companies to expand production or invest in sustainable energy solutions that would create jobs and help drivers save — they’ve merely induced Big Oil to buy back stock.

Here is one of those half-truths. Yes, oil companies have been buying back stock. If I am a CEO and I believe the market is undervaluing my company, buying back stock is a way to rectify that. It is amazing that people have started associating this with some sort of shady practice. Lots of companies buy back their own stock.

But the untruth is the suggesting that oil companies have not been expanding production. Leave it to another illustrious senator – formulating our energy policy for crying out loud – to get his facts wrong.

The five largest oil companies reported almost $120 billion in profits last year alone but invested only $1.2 billion in renewable energy sources from 2000 to 2005, according to the American Petroleum Institute.

Glaring omission. Well, 2. He left off 2006 on the renewables investments, which saw a huge spike from the oil industry (that mirrored the cash that flowed into the sector last year from many sources). But he also failed to point out that oil companies have been busy spending $50 billion to meet new environmental regulations. Senator Schumer, like several politicians who have been recently in the news, needn’t wonder where that money went, because their policies dictated where many billions went. (Again, I have no issue with these regulations. Just pointing out that politicians always seem to overlook their own influence in redirecting oil company capital).

Mr. Samuelson’s comparison of the oil and auto industries is equally misleading. They are two fundamentally different industries. U.S. and foreign carmakers compete vigorously to sell a wide variety of vehicles of all sizes and prices, but there is virtually no substitute for the gas that 99 percent of cars need to run.

Ah yes, the always popular excuse: But I have to buy gasoline! Do you have to buy so much? Do you have to drive a Yukon? Do you have to live 40 miles from work? The choices that have been made leading up to this point have resulted in the supply/demand imbalance. Now people want to say “I made poor choices. Help me, Senator Schumer and punish the oil companies for profiting from my poor choices.” And Senator Schumer always responds in a way befitting of a demagogue.

Chuck Schumer’s Fabrications

I have never cared for Chuck Schumer. In my opinion he is a classic example of a demagogue. He tells half-truths, or sometimes untruths, in order to push his agenda. And he did so again yesterday with a letter to the Washington Post. In response to an editorial by Robert J. Samuelson – “A Full Tank of Hypocrisy” – Senator Schumer responded in his standard style by omitting key facts and providing misleading information.

Here are some excerpts from the Samuelson editorial, followed by Senator Schumer’s response and my comments:

It’s one of those delicious moments when Washington’s hypocrisy is on full and unembarrassed display. On the one hand, some of America’s leading politicians condemn high gasoline prices and contend that they stem from “gouging” by oil companies. On the other, many of the same politicians warn against global warming and implore us to curb our use of fossil fuels that emit carbon dioxide, the main greenhouse gas. Guess what: These crowd-pleasing proclamations are contradictory.

In late May, gasoline prices hit a national average of $3.22 a gallon, which, after correcting for inflation, is roughly as high as in early 1981, the recent peak. This elicited the usual expressions of outrage. Sen. Charles E. Schumer (D-N.Y.) suggested breaking up big oil companies that he says may be to blame for “the sky-high gas prices.”

Which would be a great idea if you want to buy your gasoline directly from Saudi Arabia and ship those refining jobs over there. Even ExxonMobil, as large as it is, is a fraction of the size of some of the national oil companies like Saudi Aramco. It takes many billions of dollars of capital to compete in this business. That’s why the mergers happened.

It’s always fun to blame unpopular occurrences on corporate greed. Schumer’s notion, for example, is that the wave of giant oil mergers (among others: BP/Arco, Exxon/Mobil, Chevron/Texaco) has so concentrated U.S. refinery capacity that companies can constrict supply and create artificial scarcities by refusing to build new refineries. It’s a plausible-sounding theory whose major defect is the absence of supporting evidence.

Whenever gasoline prices surge unexpectedly, Congress routinely vents its anger by ordering the Federal Trade Commission to investigate the oil industry for collusive practices. Invariably, the studies exonerate the industry.

But the evidence just has to be there. Doesn’t it? We just need more investigations. In fact, we should continue having investigations until someone, somewhere, uncovers something that indicates that someone from Shell once talked to someone from BP about gas prices, and we will never have to hold another investigation. It will be the proof we have been looking for over the past 30 years. And we can always point to that for the next 30 years, because now we know “the truth” – widespread collusion in the oil industry. In fact, I may run for office on that platform.

Testifying last week before the congressional Joint Economic Committee (JEC), Michael Salinger, an FTC economist, said that the industry’s concentration levels remain “low to moderate.” According to JEC figures, ConocoPhillips is the biggest U.S. refiner, with 13 percent of capacity; the six largest have 61 percent of capacity. The oil industry is less concentrated than the auto industry, which is considered intensely competitive. As for the absence of new refineries, that problem preceded the merger wave by many years; the last major U.S. refinery was constructed in 1976. There must be some other explanation (environmental restrictions, past low profitability).

Congressional Democrats especially have targeted global warming. “We hold our children’s future in our hands,” Pelosi said early this year. “As the most adaptable creatures on the planet, it is time for us to adapt.”

Energy prices apparently are the huge exception to this moral imperative. It is not necessary to adapt to them. The way that Pelosi and others navigate around this illogic is to assume painless improvements in energy efficiency.

Or the painless massive scale-up of biofuels. I agree with Samuelson that the positions that some are taking on global warming – “we need to reduce greenhouse gas emissions” – and on gas prices – “we need to reduce gas prices so people can afford to drive more” – are completely contradictory. This is about demagoguery, which brings us to some choice excerpts from Senator Schumer’s response:

According to a Government Accountability Office report, there is a direct link between oil company mergers and higher gas prices.

And how much did they say it contributed, Chuck? Do you remember? 1 cent. That was their estimate, although they said that due to the margin of error in their model, it might be as high as 7 cents. Surely this explains the run up in gas prices.

The high gas prices that Mr. Samuelson cheered have not curtailed Americans’ driving. Nor have they spurred U.S. oil companies to expand production or invest in sustainable energy solutions that would create jobs and help drivers save — they’ve merely induced Big Oil to buy back stock.

Here is one of those half-truths. Yes, oil companies have been buying back stock. If I am a CEO and I believe the market is undervaluing my company, buying back stock is a way to rectify that. It is amazing that people have started associating this with some sort of shady practice. Lots of companies buy back their own stock.

But the untruth is the suggesting that oil companies have not been expanding production. Leave it to another illustrious senator – formulating our energy policy for crying out loud – to get his facts wrong.

The five largest oil companies reported almost $120 billion in profits last year alone but invested only $1.2 billion in renewable energy sources from 2000 to 2005, according to the American Petroleum Institute.

Glaring omission. Well, 2. He left off 2006 on the renewables investments, which saw a huge spike from the oil industry (that mirrored the cash that flowed into the sector last year from many sources). But he also failed to point out that oil companies have been busy spending $50 billion to meet new environmental regulations. Senator Schumer, like several politicians who have been recently in the news, needn’t wonder where that money went, because their policies dictated where many billions went. (Again, I have no issue with these regulations. Just pointing out that politicians always seem to overlook their own influence in redirecting oil company capital).

Mr. Samuelson’s comparison of the oil and auto industries is equally misleading. They are two fundamentally different industries. U.S. and foreign carmakers compete vigorously to sell a wide variety of vehicles of all sizes and prices, but there is virtually no substitute for the gas that 99 percent of cars need to run.

Ah yes, the always popular excuse: But I have to buy gasoline! Do you have to buy so much? Do you have to drive a Yukon? Do you have to live 40 miles from work? The choices that have been made leading up to this point have resulted in the supply/demand imbalance. Now people want to say “I made poor choices. Help me, Senator Schumer and punish the oil companies for profiting from my poor choices.” And Senator Schumer always responds in a way befitting of a demagogue.

Chuck Schumer’s Fabrications

I have never cared for Chuck Schumer. In my opinion he is a classic example of a demagogue. He tells half-truths, or sometimes untruths, in order to push his agenda. And he did so again yesterday with a letter to the Washington Post. In response to an editorial by Robert J. Samuelson – “A Full Tank of Hypocrisy” – Senator Schumer responded in his standard style by omitting key facts and providing misleading information.

Here are some excerpts from the Samuelson editorial, followed by Senator Schumer’s response and my comments:

It’s one of those delicious moments when Washington’s hypocrisy is on full and unembarrassed display. On the one hand, some of America’s leading politicians condemn high gasoline prices and contend that they stem from “gouging” by oil companies. On the other, many of the same politicians warn against global warming and implore us to curb our use of fossil fuels that emit carbon dioxide, the main greenhouse gas. Guess what: These crowd-pleasing proclamations are contradictory.

In late May, gasoline prices hit a national average of $3.22 a gallon, which, after correcting for inflation, is roughly as high as in early 1981, the recent peak. This elicited the usual expressions of outrage. Sen. Charles E. Schumer (D-N.Y.) suggested breaking up big oil companies that he says may be to blame for “the sky-high gas prices.”

Which would be a great idea if you want to buy your gasoline directly from Saudi Arabia and ship those refining jobs over there. Even ExxonMobil, as large as it is, is a fraction of the size of some of the national oil companies like Saudi Aramco. It takes many billions of dollars of capital to compete in this business. That’s why the mergers happened.

It’s always fun to blame unpopular occurrences on corporate greed. Schumer’s notion, for example, is that the wave of giant oil mergers (among others: BP/Arco, Exxon/Mobil, Chevron/Texaco) has so concentrated U.S. refinery capacity that companies can constrict supply and create artificial scarcities by refusing to build new refineries. It’s a plausible-sounding theory whose major defect is the absence of supporting evidence.

Whenever gasoline prices surge unexpectedly, Congress routinely vents its anger by ordering the Federal Trade Commission to investigate the oil industry for collusive practices. Invariably, the studies exonerate the industry.

But the evidence just has to be there. Doesn’t it? We just need more investigations. In fact, we should continue having investigations until someone, somewhere, uncovers something that indicates that someone from Shell once talked to someone from BP about gas prices, and we will never have to hold another investigation. It will be the proof we have been looking for over the past 30 years. And we can always point to that for the next 30 years, because now we know “the truth” – widespread collusion in the oil industry. In fact, I may run for office on that platform.

Testifying last week before the congressional Joint Economic Committee (JEC), Michael Salinger, an FTC economist, said that the industry’s concentration levels remain “low to moderate.” According to JEC figures, ConocoPhillips is the biggest U.S. refiner, with 13 percent of capacity; the six largest have 61 percent of capacity. The oil industry is less concentrated than the auto industry, which is considered intensely competitive. As for the absence of new refineries, that problem preceded the merger wave by many years; the last major U.S. refinery was constructed in 1976. There must be some other explanation (environmental restrictions, past low profitability).

Congressional Democrats especially have targeted global warming. “We hold our children’s future in our hands,” Pelosi said early this year. “As the most adaptable creatures on the planet, it is time for us to adapt.”

Energy prices apparently are the huge exception to this moral imperative. It is not necessary to adapt to them. The way that Pelosi and others navigate around this illogic is to assume painless improvements in energy efficiency.

Or the painless massive scale-up of biofuels. I agree with Samuelson that the positions that some are taking on global warming – “we need to reduce greenhouse gas emissions” – and on gas prices – “we need to reduce gas prices so people can afford to drive more” – are completely contradictory. This is about demagoguery, which brings us to some choice excerpts from Senator Schumer’s response:

According to a Government Accountability Office report, there is a direct link between oil company mergers and higher gas prices.

And how much did they say it contributed, Chuck? Do you remember? 1 cent. That was their estimate, although they said that due to the margin of error in their model, it might be as high as 7 cents. Surely this explains the run up in gas prices.

The high gas prices that Mr. Samuelson cheered have not curtailed Americans’ driving. Nor have they spurred U.S. oil companies to expand production or invest in sustainable energy solutions that would create jobs and help drivers save — they’ve merely induced Big Oil to buy back stock.

Here is one of those half-truths. Yes, oil companies have been buying back stock. If I am a CEO and I believe the market is undervaluing my company, buying back stock is a way to rectify that. It is amazing that people have started associating this with some sort of shady practice. Lots of companies buy back their own stock.

But the untruth is the suggesting that oil companies have not been expanding production. Leave it to another illustrious senator – formulating our energy policy for crying out loud – to get his facts wrong.

The five largest oil companies reported almost $120 billion in profits last year alone but invested only $1.2 billion in renewable energy sources from 2000 to 2005, according to the American Petroleum Institute.

Glaring omission. Well, 2. He left off 2006 on the renewables investments, which saw a huge spike from the oil industry (that mirrored the cash that flowed into the sector last year from many sources). But he also failed to point out that oil companies have been busy spending $50 billion to meet new environmental regulations. Senator Schumer, like several politicians who have been recently in the news, needn’t wonder where that money went, because their policies dictated where many billions went. (Again, I have no issue with these regulations. Just pointing out that politicians always seem to overlook their own influence in redirecting oil company capital).

Mr. Samuelson’s comparison of the oil and auto industries is equally misleading. They are two fundamentally different industries. U.S. and foreign carmakers compete vigorously to sell a wide variety of vehicles of all sizes and prices, but there is virtually no substitute for the gas that 99 percent of cars need to run.

Ah yes, the always popular excuse: But I have to buy gasoline! Do you have to buy so much? Do you have to drive a Yukon? Do you have to live 40 miles from work? The choices that have been made leading up to this point have resulted in the supply/demand imbalance. Now people want to say “I made poor choices. Help me, Senator Schumer and punish the oil companies for profiting from my poor choices.” And Senator Schumer always responds in a way befitting of a demagogue.

Chuck Schumer’s Fabrications

I have never cared for Chuck Schumer. In my opinion he is a classic example of a demagogue. He tells half-truths, or sometimes untruths, in order to push his agenda. And he did so again yesterday with a letter to the Washington Post. In response to an editorial by Robert J. Samuelson – “A Full Tank of Hypocrisy” – Senator Schumer responded in his standard style by omitting key facts and providing misleading information.

Here are some excerpts from the Samuelson editorial, followed by Senator Schumer’s response and my comments:

It’s one of those delicious moments when Washington’s hypocrisy is on full and unembarrassed display. On the one hand, some of America’s leading politicians condemn high gasoline prices and contend that they stem from “gouging” by oil companies. On the other, many of the same politicians warn against global warming and implore us to curb our use of fossil fuels that emit carbon dioxide, the main greenhouse gas. Guess what: These crowd-pleasing proclamations are contradictory.

In late May, gasoline prices hit a national average of $3.22 a gallon, which, after correcting for inflation, is roughly as high as in early 1981, the recent peak. This elicited the usual expressions of outrage. Sen. Charles E. Schumer (D-N.Y.) suggested breaking up big oil companies that he says may be to blame for “the sky-high gas prices.”

Which would be a great idea if you want to buy your gasoline directly from Saudi Arabia and ship those refining jobs over there. Even ExxonMobil, as large as it is, is a fraction of the size of some of the national oil companies like Saudi Aramco. It takes many billions of dollars of capital to compete in this business. That’s why the mergers happened.

It’s always fun to blame unpopular occurrences on corporate greed. Schumer’s notion, for example, is that the wave of giant oil mergers (among others: BP/Arco, Exxon/Mobil, Chevron/Texaco) has so concentrated U.S. refinery capacity that companies can constrict supply and create artificial scarcities by refusing to build new refineries. It’s a plausible-sounding theory whose major defect is the absence of supporting evidence.

Whenever gasoline prices surge unexpectedly, Congress routinely vents its anger by ordering the Federal Trade Commission to investigate the oil industry for collusive practices. Invariably, the studies exonerate the industry.

But the evidence just has to be there. Doesn’t it? We just need more investigations. In fact, we should continue having investigations until someone, somewhere, uncovers something that indicates that someone from Shell once talked to someone from BP about gas prices, and we will never have to hold another investigation. It will be the proof we have been looking for over the past 30 years. And we can always point to that for the next 30 years, because now we know “the truth” – widespread collusion in the oil industry. In fact, I may run for office on that platform.

Testifying last week before the congressional Joint Economic Committee (JEC), Michael Salinger, an FTC economist, said that the industry’s concentration levels remain “low to moderate.” According to JEC figures, ConocoPhillips is the biggest U.S. refiner, with 13 percent of capacity; the six largest have 61 percent of capacity. The oil industry is less concentrated than the auto industry, which is considered intensely competitive. As for the absence of new refineries, that problem preceded the merger wave by many years; the last major U.S. refinery was constructed in 1976. There must be some other explanation (environmental restrictions, past low profitability).

Congressional Democrats especially have targeted global warming. “We hold our children’s future in our hands,” Pelosi said early this year. “As the most adaptable creatures on the planet, it is time for us to adapt.”

Energy prices apparently are the huge exception to this moral imperative. It is not necessary to adapt to them. The way that Pelosi and others navigate around this illogic is to assume painless improvements in energy efficiency.

Or the painless massive scale-up of biofuels. I agree with Samuelson that the positions that some are taking on global warming – “we need to reduce greenhouse gas emissions” – and on gas prices – “we need to reduce gas prices so people can afford to drive more” – are completely contradictory. This is about demagoguery, which brings us to some choice excerpts from Senator Schumer’s response:

According to a Government Accountability Office report, there is a direct link between oil company mergers and higher gas prices.

And how much did they say it contributed, Chuck? Do you remember? 1 cent. That was their estimate, although they said that due to the margin of error in their model, it might be as high as 7 cents. Surely this explains the run up in gas prices.

The high gas prices that Mr. Samuelson cheered have not curtailed Americans’ driving. Nor have they spurred U.S. oil companies to expand production or invest in sustainable energy solutions that would create jobs and help drivers save — they’ve merely induced Big Oil to buy back stock.

Here is one of those half-truths. Yes, oil companies have been buying back stock. If I am a CEO and I believe the market is undervaluing my company, buying back stock is a way to rectify that. It is amazing that people have started associating this with some sort of shady practice. Lots of companies buy back their own stock.

But the untruth is the suggesting that oil companies have not been expanding production. Leave it to another illustrious senator – formulating our energy policy for crying out loud – to get his facts wrong.

The five largest oil companies reported almost $120 billion in profits last year alone but invested only $1.2 billion in renewable energy sources from 2000 to 2005, according to the American Petroleum Institute.

Glaring omission. Well, 2. He left off 2006 on the renewables investments, which saw a huge spike from the oil industry (that mirrored the cash that flowed into the sector last year from many sources). But he also failed to point out that oil companies have been busy spending $50 billion to meet new environmental regulations. Senator Schumer, like several politicians who have been recently in the news, needn’t wonder where that money went, because their policies dictated where many billions went. (Again, I have no issue with these regulations. Just pointing out that politicians always seem to overlook their own influence in redirecting oil company capital).

Mr. Samuelson’s comparison of the oil and auto industries is equally misleading. They are two fundamentally different industries. U.S. and foreign carmakers compete vigorously to sell a wide variety of vehicles of all sizes and prices, but there is virtually no substitute for the gas that 99 percent of cars need to run.

Ah yes, the always popular excuse: But I have to buy gasoline! Do you have to buy so much? Do you have to drive a Yukon? Do you have to live 40 miles from work? The choices that have been made leading up to this point have resulted in the supply/demand imbalance. Now people want to say “I made poor choices. Help me, Senator Schumer and punish the oil companies for profiting from my poor choices.” And Senator Schumer always responds in a way befitting of a demagogue.

Chuck Schumer’s Fabrications

I have never cared for Chuck Schumer. In my opinion he is a classic example of a demagogue. He tells half-truths, or sometimes untruths, in order to push his agenda. And he did so again yesterday with a letter to the Washington Post. In response to an editorial by Robert J. Samuelson – “A Full Tank of Hypocrisy” – Senator Schumer responded in his standard style by omitting key facts and providing misleading information.

Here are some excerpts from the Samuelson editorial, followed by Senator Schumer’s response and my comments:

It’s one of those delicious moments when Washington’s hypocrisy is on full and unembarrassed display. On the one hand, some of America’s leading politicians condemn high gasoline prices and contend that they stem from “gouging” by oil companies. On the other, many of the same politicians warn against global warming and implore us to curb our use of fossil fuels that emit carbon dioxide, the main greenhouse gas. Guess what: These crowd-pleasing proclamations are contradictory.

In late May, gasoline prices hit a national average of $3.22 a gallon, which, after correcting for inflation, is roughly as high as in early 1981, the recent peak. This elicited the usual expressions of outrage. Sen. Charles E. Schumer (D-N.Y.) suggested breaking up big oil companies that he says may be to blame for “the sky-high gas prices.”

Which would be a great idea if you want to buy your gasoline directly from Saudi Arabia and ship those refining jobs over there. Even ExxonMobil, as large as it is, is a fraction of the size of some of the national oil companies like Saudi Aramco. It takes many billions of dollars of capital to compete in this business. That’s why the mergers happened.

It’s always fun to blame unpopular occurrences on corporate greed. Schumer’s notion, for example, is that the wave of giant oil mergers (among others: BP/Arco, Exxon/Mobil, Chevron/Texaco) has so concentrated U.S. refinery capacity that companies can constrict supply and create artificial scarcities by refusing to build new refineries. It’s a plausible-sounding theory whose major defect is the absence of supporting evidence.

Whenever gasoline prices surge unexpectedly, Congress routinely vents its anger by ordering the Federal Trade Commission to investigate the oil industry for collusive practices. Invariably, the studies exonerate the industry.

But the evidence just has to be there. Doesn’t it? We just need more investigations. In fact, we should continue having investigations until someone, somewhere, uncovers something that indicates that someone from Shell once talked to someone from BP about gas prices, and we will never have to hold another investigation. It will be the proof we have been looking for over the past 30 years. And we can always point to that for the next 30 years, because now we know “the truth” – widespread collusion in the oil industry. In fact, I may run for office on that platform.

Testifying last week before the congressional Joint Economic Committee (JEC), Michael Salinger, an FTC economist, said that the industry’s concentration levels remain “low to moderate.” According to JEC figures, ConocoPhillips is the biggest U.S. refiner, with 13 percent of capacity; the six largest have 61 percent of capacity. The oil industry is less concentrated than the auto industry, which is considered intensely competitive. As for the absence of new refineries, that problem preceded the merger wave by many years; the last major U.S. refinery was constructed in 1976. There must be some other explanation (environmental restrictions, past low profitability).

Congressional Democrats especially have targeted global warming. “We hold our children’s future in our hands,” Pelosi said early this year. “As the most adaptable creatures on the planet, it is time for us to adapt.”

Energy prices apparently are the huge exception to this moral imperative. It is not necessary to adapt to them. The way that Pelosi and others navigate around this illogic is to assume painless improvements in energy efficiency.

Or the painless massive scale-up of biofuels. I agree with Samuelson that the positions that some are taking on global warming – “we need to reduce greenhouse gas emissions” – and on gas prices – “we need to reduce gas prices so people can afford to drive more” – are completely contradictory. This is about demagoguery, which brings us to some choice excerpts from Senator Schumer’s response:

According to a Government Accountability Office report, there is a direct link between oil company mergers and higher gas prices.

And how much did they say it contributed, Chuck? Do you remember? 1 cent. That was their estimate, although they said that due to the margin of error in their model, it might be as high as 7 cents. Surely this explains the run up in gas prices.

The high gas prices that Mr. Samuelson cheered have not curtailed Americans’ driving. Nor have they spurred U.S. oil companies to expand production or invest in sustainable energy solutions that would create jobs and help drivers save — they’ve merely induced Big Oil to buy back stock.

Here is one of those half-truths. Yes, oil companies have been buying back stock. If I am a CEO and I believe the market is undervaluing my company, buying back stock is a way to rectify that. It is amazing that people have started associating this with some sort of shady practice. Lots of companies buy back their own stock.

But the untruth is the suggesting that oil companies have not been expanding production. Leave it to another illustrious senator – formulating our energy policy for crying out loud – to get his facts wrong.

The five largest oil companies reported almost $120 billion in profits last year alone but invested only $1.2 billion in renewable energy sources from 2000 to 2005, according to the American Petroleum Institute.

Glaring omission. Well, 2. He left off 2006 on the renewables investments, which saw a huge spike from the oil industry (that mirrored the cash that flowed into the sector last year from many sources). But he also failed to point out that oil companies have been busy spending $50 billion to meet new environmental regulations. Senator Schumer, like several politicians who have been recently in the news, needn’t wonder where that money went, because their policies dictated where many billions went. (Again, I have no issue with these regulations. Just pointing out that politicians always seem to overlook their own influence in redirecting oil company capital).

Mr. Samuelson’s comparison of the oil and auto industries is equally misleading. They are two fundamentally different industries. U.S. and foreign carmakers compete vigorously to sell a wide variety of vehicles of all sizes and prices, but there is virtually no substitute for the gas that 99 percent of cars need to run.

Ah yes, the always popular excuse: But I have to buy gasoline! Do you have to buy so much? Do you have to drive a Yukon? Do you have to live 40 miles from work? The choices that have been made leading up to this point have resulted in the supply/demand imbalance. Now people want to say “I made poor choices. Help me, Senator Schumer and punish the oil companies for profiting from my poor choices.” And Senator Schumer always responds in a way befitting of a demagogue.

Chuck Schumer’s Fabrications

I have never cared for Chuck Schumer. In my opinion he is a classic example of a demagogue. He tells half-truths, or sometimes untruths, in order to push his agenda. And he did so again yesterday with a letter to the Washington Post. In response to an editorial by Robert J. Samuelson – “A Full Tank of Hypocrisy” – Senator Schumer responded in his standard style by omitting key facts and providing misleading information.

Here are some excerpts from the Samuelson editorial, followed by Senator Schumer’s response and my comments:

It’s one of those delicious moments when Washington’s hypocrisy is on full and unembarrassed display. On the one hand, some of America’s leading politicians condemn high gasoline prices and contend that they stem from “gouging” by oil companies. On the other, many of the same politicians warn against global warming and implore us to curb our use of fossil fuels that emit carbon dioxide, the main greenhouse gas. Guess what: These crowd-pleasing proclamations are contradictory.

In late May, gasoline prices hit a national average of $3.22 a gallon, which, after correcting for inflation, is roughly as high as in early 1981, the recent peak. This elicited the usual expressions of outrage. Sen. Charles E. Schumer (D-N.Y.) suggested breaking up big oil companies that he says may be to blame for “the sky-high gas prices.”

Which would be a great idea if you want to buy your gasoline directly from Saudi Arabia and ship those refining jobs over there. Even ExxonMobil, as large as it is, is a fraction of the size of some of the national oil companies like Saudi Aramco. It takes many billions of dollars of capital to compete in this business. That’s why the mergers happened.

It’s always fun to blame unpopular occurrences on corporate greed. Schumer’s notion, for example, is that the wave of giant oil mergers (among others: BP/Arco, Exxon/Mobil, Chevron/Texaco) has so concentrated U.S. refinery capacity that companies can constrict supply and create artificial scarcities by refusing to build new refineries. It’s a plausible-sounding theory whose major defect is the absence of supporting evidence.

Whenever gasoline prices surge unexpectedly, Congress routinely vents its anger by ordering the Federal Trade Commission to investigate the oil industry for collusive practices. Invariably, the studies exonerate the industry.

But the evidence just has to be there. Doesn’t it? We just need more investigations. In fact, we should continue having investigations until someone, somewhere, uncovers something that indicates that someone from Shell once talked to someone from BP about gas prices, and we will never have to hold another investigation. It will be the proof we have been looking for over the past 30 years. And we can always point to that for the next 30 years, because now we know “the truth” – widespread collusion in the oil industry. In fact, I may run for office on that platform.

Testifying last week before the congressional Joint Economic Committee (JEC), Michael Salinger, an FTC economist, said that the industry’s concentration levels remain “low to moderate.” According to JEC figures, ConocoPhillips is the biggest U.S. refiner, with 13 percent of capacity; the six largest have 61 percent of capacity. The oil industry is less concentrated than the auto industry, which is considered intensely competitive. As for the absence of new refineries, that problem preceded the merger wave by many years; the last major U.S. refinery was constructed in 1976. There must be some other explanation (environmental restrictions, past low profitability).

Congressional Democrats especially have targeted global warming. “We hold our children’s future in our hands,” Pelosi said early this year. “As the most adaptable creatures on the planet, it is time for us to adapt.”

Energy prices apparently are the huge exception to this moral imperative. It is not necessary to adapt to them. The way that Pelosi and others navigate around this illogic is to assume painless improvements in energy efficiency.

Or the painless massive scale-up of biofuels. I agree with Samuelson that the positions that some are taking on global warming – “we need to reduce greenhouse gas emissions” – and on gas prices – “we need to reduce gas prices so people can afford to drive more” – are completely contradictory. This is about demagoguery, which brings us to some choice excerpts from Senator Schumer’s response:

According to a Government Accountability Office report, there is a direct link between oil company mergers and higher gas prices.

And how much did they say it contributed, Chuck? Do you remember? 1 cent. That was their estimate, although they said that due to the margin of error in their model, it might be as high as 7 cents. Surely this explains the run up in gas prices.

The high gas prices that Mr. Samuelson cheered have not curtailed Americans’ driving. Nor have they spurred U.S. oil companies to expand production or invest in sustainable energy solutions that would create jobs and help drivers save — they’ve merely induced Big Oil to buy back stock.

Here is one of those half-truths. Yes, oil companies have been buying back stock. If I am a CEO and I believe the market is undervaluing my company, buying back stock is a way to rectify that. It is amazing that people have started associating this with some sort of shady practice. Lots of companies buy back their own stock.

But the untruth is the suggesting that oil companies have not been expanding production. Leave it to another illustrious senator – formulating our energy policy for crying out loud – to get his facts wrong.

The five largest oil companies reported almost $120 billion in profits last year alone but invested only $1.2 billion in renewable energy sources from 2000 to 2005, according to the American Petroleum Institute.

Glaring omission. Well, 2. He left off 2006 on the renewables investments, which saw a huge spike from the oil industry (that mirrored the cash that flowed into the sector last year from many sources). But he also failed to point out that oil companies have been busy spending $50 billion to meet new environmental regulations. Senator Schumer, like several politicians who have been recently in the news, needn’t wonder where that money went, because their policies dictated where many billions went. (Again, I have no issue with these regulations. Just pointing out that politicians always seem to overlook their own influence in redirecting oil company capital).

Mr. Samuelson’s comparison of the oil and auto industries is equally misleading. They are two fundamentally different industries. U.S. and foreign carmakers compete vigorously to sell a wide variety of vehicles of all sizes and prices, but there is virtually no substitute for the gas that 99 percent of cars need to run.

Ah yes, the always popular excuse: But I have to buy gasoline! Do you have to buy so much? Do you have to drive a Yukon? Do you have to live 40 miles from work? The choices that have been made leading up to this point have resulted in the supply/demand imbalance. Now people want to say “I made poor choices. Help me, Senator Schumer and punish the oil companies for profiting from my poor choices.” And Senator Schumer always responds in a way befitting of a demagogue.