Mixing Oil And Coffee-- To Elect Republicans

When I was a child I hated the treacley bitter-sweet taste of Coffee-Time in my milk. But it's the closest I ever came to drinking a cup of coffee. Nope-- never had one. But lately we've been revisiting the Republican filibuster of the anti-speculation rules passed by the House in terms of oil and gas. In reality the attempt to get sociopath Wall Street speculators under control was about commodities in general, not just gasoline. And the damage they're doing to the American economy may be a dream come true for GOP election planners in terms of wrecking the economy but... the price of gasoline isn't the only commodity being driven through the roof because of the filibuster. Take coffee.

Starbucks is the biggest coffee chain in the world so, of course, they're concerned that coffee prices have hit a 34-year high last week. CEO Howard Schultz points out that food prices are rising across the board. He points out that there is absolutely no problem with supply.

Q: It's all about speculation you've been quoted saying?

Well I just gave a key note address at the National Coffee Association in New Orleans about a month ago. I met one-on-one with key suppliers. There wasn't one supplier that indicated to me that there was any supply issue. So we're living at a time right now where financial speculation index funds, hedge funds have created a rush of very, very high prices. And not only coffee, corn, sugar, cotton and obviously oil, and unfortunately it has to hit the consumer. We're working very hard not to put us in a situation where there's going to be pain for the customer.

Q: So you're holding back passing it on to the customer?

We are. We've also told the Street that regardless of where coffee prices go, we'll be able to navigate through this in 2012 but it's challenging.

Q: How do you manage the volatility in the meantime?

Well, I think there are other ways we can mitigate costs and we've lots of different levers. The fact that just this year alone, we have significant cost pressures. We are having a great year. We've been doing this for forty years. We've seen other cyclical changes. The only difference this time is there's no supply issue.

Q: If coffee prices continue to push higher, will it turn consumers off drinking coffee?

Well I think the question you have to ask yourself is the elasticity of pricing. And I think given the economic downturn, and the pressure on global consumers, we all have to be very conscious of it and that's why I don't want to raise prices.

Like I said, I don't drink coffee. But even though I drive a Prius, I do use some gas and I'm following the way the GOP and their allies have been driving up the price (while driving down the economy). Thursday Robert Reich called out Exxon-Mobil, one of the biggest contributors to the Republican Party of any entity on earth. The taxpayer-subsidized corporation made $10.7 billion in profits since January, a gigantic spike over last year. And, although Exxon denies it, Reich makes the point that it's very much related to the increase in the price of oil and he makes the case that there are a lot of ways taxes could be better used than GOP insistence that it be handed over to Big Oil. Remember, for all his whimpering about when cornered like a rat in his town halls, Ryan's budget bestows another $40 billion in our taxes on the big oil conglomerates!

This gusher is an embarrassment for an industry seeking to keep its $4 billion annual tax subsidy from the U.S. government, at a time when we’re cutting social programs to reduce the budget deficit.

It’s specially embarrassing when Americans are paying through their noses at the pump.

Exxon-Mobil’s Vice President asks that we look past the “inevitable headlines” and remember the company’s investments in renewable energy.

What investments, exactly? Last time I looked Exxon-Mobil was devoting a smaller percentage of its earnings to renewables than most other oil companies, including the errant BP.

In point of fact, no oil company is investing much in renewables-- precisely because they’ve got such money gusher going from oil. Those other oil companies also had a banner first quarter, compounding the industry’s embarrassment about its $4 billion a year welfare check.

American Petroleum Industry CEO Jack Gerard claims the gusher is due to the “growing strength in our economy.”

Baloney. If you hadn’t noticed already, this is one of the most anemic recoveries on record. $4-a-gallon gas is itself slowing the economy’s growth, since most consumers are left with less money to spend on everything else.

Gerard then claims the giant earnings “reflect the size necessary for [American] companies to be globally competitive with national oil companies” around the world.

Let’s get real. The crude oil market is global. Oil companies sell all over the world. The price of crude is established by global supply and demand. In this context, American “competitiveness” is meaningless.

Republicans who have been defending oil’s tax subsidy are also finding themselves in an awkward position. John Boehner temporarily sounded as if he was backing off-- until the right-wing-nuts in the GOP began fulminating that the elimination of any special tax windfall is to their minds a tax increase (which means, in effect, the GOP must now support all tax-subsidized corporate welfare).

Boehner is now trying to pivot off the flip-flop by reverting to the trusty old “drill, drill, drill” for opening more of country to oil drilling and exploration. “If we began to allow more permits for oil and gas production, it would send a signal to the market that America’s serious about moving toward energy independence,” he says.

This argument is as nonsensical now as it was when we last faced $4-a-gallon gas. To repeat: It’s a global oil market. Even if 3 million additional barrels a day could be extruded from lands and seabeds of the United States (the most optimistic figure, after all exploration is done), that sum is tiny compared to 86 million barrels now produced around the world. In other words, even under the best circumstances, the price to American consumers would hardly budge.

Whatever impact such drilling might have would occur far in the future anyway. Oil isn’t just waiting there to be pumped out of the earth. Exploration takes time. Erecting drilling equipment takes time. Getting the oil out takes time. Turning crude into various oil products takes time. According the federal energy agency, if we opening drilling where drilling is now banned, there’d be no significant impact on domestic crude and natural gas production for a decade or more.

Oil companies already hold a significant number of leases on federal lands and offshore seabeds where they are now allowed to drill, and which they have not yet fully explored. Why would they seek more drilling rights? Because ownership of these parcels will pump up their balance sheets even if no oil is actually pumped.

Last but by no means least, as we’ve painfully learned, the environmental risks from such drilling are significant.

Let’s not fool ourselves-- or be fooled. There’s no reason to continue to give giant oil companies a $4 billion a year tax windfall. Nor any reason to expand drilling on federal lands or on our seashores.

But there are strong reasons to invest in renewable energy-- even in a time of budget austerity. Use the $4 billion this way. And why stop there? Why not a windfall profits tax to the oil companies, to be used for renewable energy?

Senator Bernie Sanders has very similar feelings and he sent Obama letter this week demanding real action on speculators. “The skyrocketing cost of gasoline is causing severe economic pain to millions of Americans who have already suffered through the worst economic crisis since the Great Depression," he wrote, going on to ask the president to intercede with the Commodity Futures Trading Commission, the federal regulatory body that has failed to rein in the rampant speculation artificially driving up oil prices.

The Wall Street reform law enacted last year required the commission to impose so-called position limits, which would restrict the amount of oil that speculators could trade in the energy futures market. The law called for the tough new regulations to take effect by Jan. 22. The commission balked. Now, three months later, the price of gasoline has gone up 80-cents a gallon because of the commission’s hands-off approach to the markets it is supposed to regulate.
 
Only two of the five sitting commissioners support strong limits that the new Wall Street law envisioned. It takes three commissioners to adopt a new rule. The president, Sanders said, should insist that the law be enforced and demand the immediate resignation of commissioners who refuse to do their job.
 
“I urge you to make it clear to the CFTC that they must obey the law and establish strong oil speculation limits as soon as possible,” the senator wrote. “I would also urge you to ask for the immediate resignation of any CFTC commissioner who refuses to obey the law and nominate someone else who will.”

And this morning President Obama addressed the nation on radio agreeing that taxpayer subsidies for oil companies should end. He contradicted the shrill oil company claims that their profits don't go up when the price of gasoline is jacked up.

Of course, while rising gas prices mean real pain for our families at the pump, they also mean bigger profits for oil companies. This week, the largest oil companies announced that they’d made more than $25 billion in the first few months of 2011-- up about 30 percent from last year.

Now, I don’t have a problem with any company or industry being rewarded for their success. The incentive of healthy profits is what fuels entrepreneurialism and helps drives our economy forward. But I do have a problem with the unwarranted taxpayer subsidies we’ve been handing out to oil and gas companies-– to the tune of $4 billion a year. When oil companies are making huge profits and you’re struggling at the pump, and we’re scouring the federal budget for spending we can afford to do without, these tax giveaways aren’t right. They aren’t smart. And we need to end them.

...[I]nstead of subsidizing yesterday’s energy, we should invest in tomorrow’s – and that’s what we’ve been doing. Already, we’ve seen how the investments we’re making in clean energy can lead to new jobs and new businesses. I’ve seen some of them myself -- small businesses that are making the most of solar and wind power, and energy-efficient technologies; big companies that are making fuel-efficient cars and trucks part of their vehicle fleets. And to promote these kinds of vehicles, we implemented historic new fuel-economy standards, which could save you as much as $3,000 at the pump.