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.

Who's To Blame For High Gas Prices? Is It Qaddafi? Or Mitch McConnell?

Although America doesn't buy any oil from Libya, the problems there may be adding a couple of pennies to the cost of gasoline here. But what accounts for the fact that drivers in California are looking for service stations that are only charging $4/gallon-- looking and not finding. Is there someone to blame? There sure is! On July 25, 2008 the Senate took up a cloture resolution to break the Republican filibuster on S. 3268 (Stop Excessive Energy Speculation Act of 2008), which was meant to amend the Commodity Exchange Act in order to "prevent excessive price speculation with respect to energy commodities." Only two Republicans-- Olympia Snowe and Susan Collins, both of Maine-- voted to end the Republican fillibuster. The rest of them followed Mitch McConnell's lead in making sure speculators would have the "right" to manipulate the price of oil, manipulation that we are feeling at the pumps today. Even shameless oil industry shill Mary Landrieu had to draw the line on this one and vote against the speculators. But Orrin Hatch (UT), Dick Lugar (IN), Bob Corker (TN), John Barrasso (WY) and Roger Wicker (MS) all voted to continue the filibuster. Why mention these 5 galoots? They're all up for reelection next year and even if the price of gas hit $10 a gallon they represent constituencies that would never hold them accountable for their votes anyway.

The anti-speculation bill had passed the House with overwhelming bipartisan support, 402-19, every Democrat (including even the worst Blue Dogs) plus all the Republicans except 19 deranged extremists voting YES. Among the Republicans who put the rights of speculators over the rights of consumers-- and the economic well-being of the nation-- were the current Republican candidate for the open Arizona Senate seat, Jeff Flake, as well as fellow extremists Steve King (R-IA), Marsha Blackburn (R-TN), Jerry Lewis (R-CA), Mike Pence (R-IN), Pete Sessions (R-TX), Dan Rohrabacher (R-CA) and Jeb Hensarling (R-TX).

Nevertheless, I haven't heard a peep out of the DSCC about the Republican battle to protect speculators. This is a shame, since back in 2008, they certainly understood its significance as an issue. Here's a press release the DSCC put out then against McConnell:

Senate Minority Leader Mitch McConnell voted against a bill today to lower gas prices by curbing excessive speculation in energy markets. Experts have noted that speculation is driving up the price of a barrel of oil, and a recent House committee report revealed that speculators-- institutional investors buying contracts with no intention of taking delivery of oil-- now account for 73% of all trading of crude oil contracts on the New York Mercantile Exchange, up from 37% in 2000.

"Mitch McConnell had an opportunity to lower the price of gas today, but instead he voted with the speculators who are profiting from Kentuckians' pain at the pump," DSCC spokesman Matthew Miller said. "Mitch McConnell's constituents deserve better than a politician who sides with Wall Street speculators over Kentucky families."

McConnell voted against legislation to guard against price manipulation just one day after the Commodity Futures Trading Commission announced its first case against a trading fund in the agency's probe of crude oil market manipulation. The bill will eliminate so-called "dark markets" to increase transparency and accountability in commodities trading, strengthen the CFTC's enforcement capacity, and close the "London Loophole" so all U.S.-based trading of American commodities is subject to American regulation.

Speculation is driving rising oil prices past where they should be, even with flat supply and rising demand. Economists and energy experts believe that speculation is helping drive the sudden spike in oil prices, which rose more than 50% between February and June.

Both OPEC (and the Saudis) and the White House are blaming the avarice of speculators. "The problem is," said President Obama yesterday, "is that oil is sold on these world markets, and speculators and people make various bets, and they say, you know what, we think that maybe there's a 20 percent chance that something might happen in the Middle East that might disrupt oil supply, so we're going to bet that oil is going to go up real high. And that spikes up prices significantly." Last month a dozen senators-- Sherrod Brown (D-OH), Maria Cantwell (D-WA), Barbara Boxer (D-CA), Al Franken (D-MN), Jeff Merkley (D-OR), Patty Murray (D-WA), Robert Menendez (D-NJ), Mark Begich (D-AK), Jay Rockefeller IV (D-WV), Carl Levin (D-MI), Barbara Mikulski (D-MD), and Bill Nelson (D-FL)-- called for a crackdown on the Wall Street gambling that is enriching them while draining billions out of the pockets of American consumers. They're asking the Commodity Futures Trading Commission (CFTC) to crack down on oil speculation. Cantwell has taken the lead on this and wrote that “Washington drivers are paying at the pump for reckless Wall Street oil speculation. Last year, we gave the financial cops the tools they need to rein in rampant Wall Street speculation. Today, we’re asking them to put those tools to use. It’s time for Wall Street to stop the reckless gambling on what it costs for Washingtonians to fill up their gas tanks.” She points out that the price of oil has less to do with the traditional laws of supply and demand, and more with speculators artificially inflating the price-- and perceived demand-- of oil. Since the latest round of civil unrest began late January in North Africa and then the Middle East, oil trades by speculators have jumped dramatically 35% to 50% in some markets. During that same period, U.S. gas prices have soared by almost 40%. By the way, only 8 members of Congress have gotten over a million dollars in legalistic bribes from Big Oil so far. All 8 are Republicans of course:

Sometimes A Little Obstructionism Can Be Just What The Doctor Ordered-- Bernie Sanders Does The Right Thing

Gary Gensler points to the man who will save us from more Phil Gramm economics

Peter Orszag, Obama's Director of OMB (Office of Management and Budget) is looking more and more like his best economic advisor. Some of Obama's other finance and economic advisors... well, I'm still worried about Geithner and Summers, who seem too predisposed to think of themselves as the representatives of capital or, even worse, Wall Street. These people have gotten Obama into some hot water and are jeopardizing his program-- and our country. The other day a friend of mine told me she had been telling her family members that Geithner really is a good Treasury Secretary but that what he needs is some media training. I suggested she stop telling her family and get word to the administration. Turns out she has; her brother is an undersecretary of the Treasury. Judging by Geither's performance in front of the House Financial Services Committee yesterday, he hasn't acted on her advice yet.

Meanwhile, though, one of the Senate's most trustworthy members, Bernie Sanders (I-VT), has put a hold on Obama's nominee to chair the Commodity Futures Trading Commission (CFTC), Gary Gensler, another Goldman Sachs author of the economic catastrophe that the country was dragged into. Here's the problem, straight from Senator Sanders' website:

“While Mr. Gensler clearly is an intelligent and knowledgeable person, I cannot support his nomination. Mr. Gensler worked with Senators Phil Gramm and Alan Greenspan to exempt credit default swaps from regulation, which led to the collapse of A.I.G. and has resulted in the largest taxpayer bailout in U.S. history.  He supported Gramm-Leach-Bliley, which allowed banks like Citigroup to become ‘too big to fail.’ He worked to deregulate electronic energy trading, which led to the downfall of Enron and the spike in energy prices.  At this moment in our history, we need an independent leader who will help create a new culture in the financial marketplace and move us away from the greed, recklessness and illegal behavior which has caused so much harm to our economy.”

Did I mention that Senator Sanders, like Chuck Schumer, went to my high school, James Madison?


UPDATE: Bernie on Olbermann

He was on last night explaing the power of the special interests and Republican obstructionism: