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“Speculators Wagging The Election Year Dog”: Blame The GOP For $4 Gas

Gas prices continue to rise, which is finally giving Republicans an issue. Mitt Romney is demanding the president open up more domestic drilling; the super PAC behind Rick Santorum just released a new ad in Louisiana blasting the president on gas prices; and the GOP is attacking the White House on the Keystone XL Pipeline.

But the rise in gas prices has almost nothing to do with energy policy. It has everything to do with America’s continuing failure to adequately regulate Wall Street. But don’t hold your breath waiting for Republicans to tell the truth.

As I’ve noted before, oil supplies aren’t being squeezed. Over 80 percent of America’s energy needs are now being satisfied by domestic supplies. In fact, we’re starting to become an energy exporter. Demand for oil isn’t rising in any event. Demand is down in the U.S. compared to last year at this time, and global demand is still moderate given the economic slowdowns in Europe and China.

But Wall Street is betting on higher oil prices in the future — and that betting is causing prices to rise. The Street is laying odds that unrest in Syria will spill over into other countries or that tensions with Iran will affect the Persian Gulf, and that global demand will pick up as American consumers bounce back to life.

These bets are pushing up oil prices because Wall Street firms and other big financial players now dominate oil trading.

Financial speculators historically accounted for about 30 percent of oil contracts, producers and end users for about 70 percent. But today speculators account for 64 percent of all contracts.

Bart Chilton, a commissioner at the Commodity Futures Trading Commission — the federal agency that regulates trading in oil futures, among other commodities — warns that too few financial players control too much of the oil market. This allows them to push oil prices higher and higher — not only on the basis of their expectations about the future but also expectations about how high other speculators will drive the price.

In other words, a relatively few players with very deep pockets are placing huge bets on oil — and you’re paying.

Chilton estimates that drivers of small cars like Honda Civics are paying an extra $7.30 every time they fill up — and that money is going into the pockets of Wall Street speculators. Drivers of larger vehicles like the Ford Explorer are paying speculators $10.41 when they fill up.

Funny, but I don’t hear Republicans rail against Wall Street speculators. Could this have anything to do with the fact that hedge funds and money managers are bankrolling the GOP as never before?

Wall Street isn’t bankrolling Democrats nearly as much this time around because the Street is still smarting from the Dodd-Frank Wall Street reform law pushed by the Democrats, and from the president’s offhand remark in 2010 calling the denizens of the Street “fat cats.”

The Commodity Futures Trading Commission is trying to limit how much speculators can bet in oil futures — a power it was given by Dodd-Frank. It issued a rule in October, but it won’t take effect for another year.

Meanwhile, Wall Street has gone to court to stop the rule. It’s already won a stay.

As rising gas prices start wagging the election-year dog, the president should let America know what’s really causing prices to rise.

 

By: Robert Reich, From The Robert Reich Blog, Published in Salon, March 15, 2012

April 2, 2012 Posted by | Energy, Wall Street | , , , , , , , | Leave a comment

“It’s A Question Of When”: Study Predicts Keystone Pipeline Will Spill

Republicans have sought to frame the Keystone XL pipeline as a job-creating project being thwarted by “radical environmentalists.” Is it? A new Cornell University study claims that the pipeline could actually have a negative impact on the economies of the states it would pass through.

“In the national debate, job creation has been set alongside environmental concerns in a rigid either-or fashion,” says Sean Sweeney, one of the study’s authors, “But oil spills also kill jobs, they consume resources, they have an impact on health, and can also lead to a lower quality of life.”

The range of estimates of jobs vary widely. TransCanada claims the pipeline will create 20,000 jobs. A State Department report estimates that only 20 permanent operating jobs would be created in the six states along the pipeline route. By comparison, those same states are home to robust agricultural, ranching and tourist industries that are dependent on water and vulnerable to environmental contamination. Across the six states agriculture employs 571,000 workers and tourism 780,000; the total revenue from those sectors, respectively, is $76.3 billion and $67 billion.

Sludge not crude

Tar sands oil — known in energy circles as diluted bitumen — may be more damaging to environments and communities than regular crude. Said Sweeney, “Diluted bitumen is an irregular substance — it runs thick and thin, hot and cold. It’s basically a sludge, not like regular crude — it behaves differently.” Tar sands also seem more likely to spill than conventional crude: The spill rate for diluted bitumen in the northern Midwest between 2007-2010 was three times the national average for conventional oil. This may be because the heavy, corrosive material puts greater stress on pipelines.

The already existing Keystone I pipeline, which runs 2,100 miles from Alberta to Illinois, began operating in 2010; in the two years since, 35 spills have occurred. In the pipeline’s first year of operation alone, its spill rate was 100 times TransCanada’s projection. All told the amount of tar sands oil being transported through the United States has more than tripled in the past decade to 600,000 barrels in 2010. Keystone XL, if built, would add another 830,000 barrels per day.

John Stansbury, a professor of civil engineering at the University of Nebraska, analyzed spill data from the Keystone I pipeline to estimate that 91 spills would occur over the course of 50 years of Keystone XL’s operation — close to two spills each year. In a worst-case scenario, he says, a spill could contaminate 4.9 billion gallons of groundwater in Nebraska’s Sand Hills with benzene, a known carcinogen.

The threat the pipeline poses to Nebraska’s Ogallala Aquifer, which provides 30 percent of the irrigation water in the U.S., has been much-discussed, but the pipeline would also cross another 1,747 bodies of water, including the Yellowstone and Missouri Rivers and the Carrizo-Wilcox aquifer, the third largest aquifer in Texas.

If Keystone were to leak — or worse, rupture — the consequences could be serious. In July 2010, a pipeline operated by the company Enbridge ruptured — the company has never explained why — spilling 1 million gallons of tar sands oil into Michigan’s Kalamazoo River. The oil drifted 40 miles upstream, causing 145 reported instances of illness and health problems for people living in the riverside community of Marshall, Mich. Marshall residents living within 200 feet of the river were eligible for a buyout program; about 130 people sold their houses to Enbridge, leaving some areas uninhabited.

The Kalamazoo cleanup has cost $725 million so far — twice as much as Enbridge estimated — and the river remains closed to fishing, hunting and other recreational activities over a year and a half after the spill occurred. Officials in the Calhoun County Health Department have said some bitumen will likely remain in the river “indefinitely.” Sweeney points out that the rural areas along pipeline routes are unprepared to cope with spills. “They had to bring someone in from the Gulf to deal with Kalamazoo,” he explained.

While the Kalamazoo spill was the biggest-ever tar sands spill, pipeline spills occur with startling frequency. In 2011 alone, there were 600 reported pipeline incidents. TransCanada’s website argues that “if they do occur, pipeline leaks are small,” yet pipeline spills caused 17 deaths and 68 injuries, and over $335 million in property damage. In 2010, when the Kalamazoo spill occurred, the damages from pipeline spills topped $1 billion. While pipeline spills don’t get the attention of disasters like the Exxon-Valdez and BP, they point to a familiar pattern of underestimating risk and underpreparing for disaster.

TransCanada insists that it will comply with all federal regulations, and construct and operate Keystone XL “to the highest industry standards.” Danielle Droitsch, an attorney with the National Resources Defense Council, argues that we don’t know enough about diluted bitumen to be able to transport it safely. “We’re building these pipelines as if they were conventional oil pipelines,” she said. “We don’t have any special regulations in place to deal with the fact that these are tar sands pipelines and they are very different. Until we have a new regulatory system in place there are no safety measures proposed that would make this pipeline safer.”

And in the meantime? “There’s no question this pipeline will spill — it’s a question of when.”

 

By: Allyssa Battistoni, Salon, March 19, 2012

March 20, 2012 Posted by | Energy, Environment | , , , , , , , | Leave a comment

Why Gas Prices Aren’t Likely To Decide The 2012 Election

This morning’s Washington Post-ABC poll shows that President Obama’s poll numbers are falling in tandem with rising gas prices. Nearly two-thirds of Americans say they disapprove of how he’s handling the situation at the pump. Could gas prices end up swaying the 2012 election after all?

It’s hard to rule anything out, but evidence remains thin that gasoline will be a determining factor in November. While Americans love to grumble about expensive gasoline — and with good reason — political science research suggests that it’s not the main thing that shifts votes. Nate Silver, for one, has found that “there’s not a lot of evidence that oil prices are all that important” a factor in presidential elections. Nor do gasoline prices necessarily dictate the public’s view of the White House: Back during George W. Bush’s presidency, there was a much-linked graph showing his approval ratings climbing and dipping in lockstep with gas prices. But subsequent analysis by political scientist Brendan Nyhan showed that the correlation was just a “statistical artifact.”

The more severe worry for Obama, at this point, is that soaring gas prices could stomp on the nascent economic recovery. The way this typically happens is that pricey gasoline starts crimping the checkbooks of U.S. consumers, who then have less money to spend on other things. (In the Post-ABC poll, most respondents said they were already feeling the pinch.) That leads to slower growth. And slower growth, political scientists agree, really can sink a presidency. As Silver puts it, “higher gas prices are important to the extent that they affect things like G.D.P., inflation and unemployment. But there isn’t evidence that they matter above and beyond that.”

That said, it’s not yet clear whether oil prices actually will crush the current recovery. There’s certainly reason for concern: James Hamilton, an economist at UC San Diego, has found that most U.S. recessions since World War II have been preceded by a sharp run-up in oil prices. But, oddly enough, one person who isn’t gloomy about our current predicament is Hamilton himself. “I find myself in the unusual position,” he recently wrote, “of being less concerned about the impact of oil prices on the U.S. economy than many other analysts.” Hamilton notes that, for now, oil prices are simply moving back to 2011 levels. And price increases that simply reverse earlier declines are less harmful than historic new highs.

For instance, high oil prices have historically inflicted disproportionate harm on the U.S. economy by leading to a cut-back in sales of SUVs and other inefficient vehicles that Detroit has long specialized in. But this time around, he notes, sales are holding steady — perhaps because U.S. automakers have shifted to selling fuel-efficient models. Moreover, low natural gas prices, a warm winter, and improved fuel efficiency have helped insulate U.S. consumers from pricey oil to date. Overall energy expenditures are actually down this year. Americans have been grappling with expensive oil for several years now, and they appear to be adapting.

That should come as a quiet relief to most incumbent politicians. Because the unsatisfying reality is that there’s not a whole lot the White House or Congress can actually do to lower gasoline prices. Oil prices are skyrocketing because global crude supplies remain tight and tensions with Iran are making traders skittish about a possible conflict in a crucial oil-producing region. If Obama could figure out a way to calm down the situation with Iran, that might cause crude prices to settle back down.

But apart from that, options are limited. More domestic drilling won’t bring back $2.50-per-gallon gas, as Newt Gingrich has suggested — oil prices are dictated by the vast world market, of which U.S. production is just a small fraction. The still-in-limbo Keystone XL pipeline is just as likely to raise gasoline prices in the Midwest as anything else. Cracking down on “financial speculators,” as many Democrats have called for, isn’t particularly promising, as many oil traders simply appear to be following fundamentals. And, judging by past experience, releasing oil from the Strategic Petroleum Reserve won’t offer much more than very short-lived relief. Meanwhile, Americans are becoming significantly more oil efficient, but that’s a slow, painstaking process.

That won’t stop politicians from talking about the issue. And it won’t stop Americans from expressing their disapproval. But those are two very different things from swaying an election.

Update: Here’s another notable aspect of the Post-ABC poll to consider, pointed out to me by Third Way’s Josh Freed. At the moment, 63 percent of Americans say that gas prices are causing them financial hardship, with 36 percent saying the gas squeeze is causing “serious” financial hardship. (See Question 11.) But those are actually the lowest hardship numbers since May of 2008 — and, in fact, it’s virtually identical to what Americans were saying in May of 2004, six months before George W. Bush won re-election.

 

By: Brad Plumer, The Washington Post, March 12, 2012

March 13, 2012 Posted by | Election 2012 | , , , , , , , , | Leave a comment

“The Langoliers Are Coming”: What Boehner Faces In 2012 After Payroll Tax Debacle

In the immediate aftermath of the GOP’s payroll tax debacle, a handful of conservative House Republicans publicly attacked their leaders — particularly Speaker John Boehner (R-OH).

“I am disappointed that our Republican leadership in both the House and Senate chose a course of political expediency rather than standing on conservative principle,” said Rep. Todd Akin (R-MO) in an official statement.

Others appealed to Fox News, where conservatives and Republicans feel more comfortable expounding on party/movement contretemps.

“He’s (Boehner) got a big problem when he comes back,” one anonymous congressman claimed. “He may have a hard time keeping his Speakership after this.”

“We were hung out to dry by our leadership,” said another unnamed member.

The list goes on. But the holidays calmed the backlash, and with a week’s hindsight a consensus of sorts has emerged among party strategists, aides (current and former) and congressional scholars. Not all agree on the question of how well or poorly Boehner handled the situation. But though Boehner’s 2012 won’t be easy, those House conservatives who were seeing blood last week are likely to be disappointed again.

“I don’t think his leadership is going to be taken away from him over the course of the next year,” said Norm Ornstein — a Congress expert at the right-leaning American Enterprise Institute. “But I’m expecting a pretty difficult year ahead for him next year.”

“Going into next year he has to reassert his authority going into the payroll tax debate, and frankly other debates,” said a former senior House aide. “In addition to that he will most likely take a conference-wide stance on the payroll tax fight and will work to fight and win.”

Boehner’s 2012 depends to a huge extent on how much the GOP conference is still spoiling for a fight. If they’re chastened by the horrendous month they had — and thus resigned to ceding the payroll tax issue to the Democrats — then Boehner will have it pretty easy. The payroll tax cut will be extended through the end of the year, and, in a sense, his original judgment will have been vindicated. His members won’t lead the party astray again. But if a substantial number of Republicans return from recess breathing fire, and try once again to use the expiring payroll tax cut to extract massive concessions from Democrats then Boehner and the rest of the GOP are likely in for a politically costly battle.

“When you start with the Republicans rejecting even a dime of taxes on millionaires and you want to take money out of other programs that benefit the middle class or poor people, you’re going to have a tough time doing this,” Ornstein said. “The other part is the Republicans in the House settled on a narrative to justify their action. They said they want a full year payroll tax cut. The fact is a very substantial share of those Rs don’t want anything. They don’t want any payroll tax cut.”

This is correct — and it’s worth recalling that GOP leaders originally solved that problem by tying the payroll tax cut to the Keystone XL oil pipeline. But they already got that — and now that Republicans have built a consensus for a yearlong payroll tax cut almost by accident, it’s unlikely Democrats are going to be willing to concede much of anything to them.

“He tried to throw in this lever, which was this pipeline. Well, they got it,” Ornstein said. “The incentive for Obama to give in more is pretty much zero.”

Despite the unfavorable dynamic for the GOP, most see the worst-case scenario for him as a leadership challenge … in 2013 (assuming the GOP retains its majority in the 2012 elections).

“[Y]ou’re always going to have squeaky wheel members who are never going to be satisfied,” the senior aide said. “And there may be some members who don’t like Boehner who are using it as a way to complain.” However, if the dissent starts creeping beyond that rump in the next couple weeks, “then he’s got a big problem,” the aide says. “[But] I doubt that’s going to happen.”

 

By: Brian Beutler, Talking Points Memo, December 29, 2011

December 30, 2011 Posted by | Payroll Tax Cuts, Republicans, Right Wing, Teaparty | , , , , | 1 Comment

The Pointlessness Of Being A Republican House Speaker

It appears that the House will vote later today on a plan to extend payroll tax cuts for two more months that breezed through the Senate by an 89-10 margin over the weekend. But there’s no suspense: Speaker John Boehner even says it’s going to fail. So why go ahead with the vote? There are some technical and procedural reasons, but it probably has more to do with an attempt at face-saving on the speaker’s part.

The problem for Boehner, as has been amply demonstrated this year, is that he’s a speaker who lacks the muscle typically associated with his title. This really isn’t his fault. The GOP’s House membership can roughly be divided into two groups: 1) Conservative true believers (many of whom won their seats in 2010) who embody the Tea Party’s anti-Washington, anti-Obama, anti-compromise absolutism; and 2) conservatives who have some pragmatic instincts but who are terrified of acting on them in the Obama era, lest it prompt a primary challenge from a Tea Party purist.

Now consider what Boehner, an 11-term House incumbent who led the GOP in the lower chamber during the final few years of the Bush presidency, represents to the average Tea Party activist: the exact sort of entrenched D.C. insider who spent the Bush years signing off on W’s big government agenda and giving conservatism a bad name, thereby abetting the rise of Obama in 2008. He managed to secure the speaker’s gavel for the 112th Congress mainly by being in the right place at the right time, but he’s had to wield it with the knowledge that scores of his members (along with the conservative activists and media personalities who have credibility with the Tea Party base) are ready to punish him the minute he sells them out. Add in the presence of an ambitious No. 2 House GOP leader who isn’t very fond of Boehner and who enjoys far more trust from the Tea Party crowd, Eric Cantor, and it becomes clear that Boehner is essentially a speaker-in-name-only.

Which makes situations like the payroll tax debate painful to watch. The rate is set to rise to 6.2 percent unless an agreement can be reached by the end of the year, and after some intense posturing, it seemed like one had been struck over the weekend, with Senate Democrats and Republicans voting nearly unanimously to extend it through February and to pay for it with a series of small cuts previously agreed to by both parties during deficit reduction talks. To mollify Republicans, a provision was included to force Obama to decide on the Keystone XL pipeline by February. The deal could hardly have been described as a big win for either side. It was what it was: a way to prevent a tax increase on millions of middle class Americans that neither party wants to be blamed for.

Boehner was well aware of this. Senate Minority Leader Mitch McConnell kept him in the loop as he negotiated with Majority Leader Harry Reid, with Boehner saying then: “If the Senate acts, I’m committed to bringing the House back — we can do it within 24 hours — to deal with whatever the Senate does.” But when McConnell and Reid struck their deal and the Senate approved it on Saturday, Boehner took part in a conference call with the House’s GOP members. According to numerous reports, he started out by calling it a “good” deal and expressing his support. But then Cantor and his allies trashed it, and so did numerous other members on the call. A strong speaker, one who isn’t constantly on guard against potential mutinies, might have laid down the law at this point and leaned on his leadership team to twist arms and bring the membership into line. But Boehner was in no position to do that, and he hasn’t been all year.

So that was that. By Sunday, Boehner was on television calling the deal unacceptable, vowing that the House GOP wouldn’t approve it, and raising the possibility that the tax cuts will expire at the end of the year. Which brings us to today’s pointless vote. Asked by Greg Sargent to reconcile Boehner’s eagerness to move on a McConnell-Reid deal last week with his new position, Boehner’s spokesman claimed there was no inconsistency because the speaker had only said that the House would act on it — not that the vote would turn out a certain way.

Believe that if you want, but this sure feels like only the latest episode in which Boehner wanted to protect his party from inflicting political damage on itself but had no standing to do so.

 

By: Steve Kornacki, Salon War Room, December 19, 2011

December 19, 2011 Posted by | Payroll Tax Cuts | , , , , , | Leave a comment

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