The Wonk Room

Rep. Bachmann Claims Offshore Drilling And Her Own Determination Lowered Gas Prices»

According to the American Automobile Association (AAA), the nationwide average for a gallon of gas has fallen to $2.50 a gallon, which is a 19-month low. Rep. Michele Bachmann (R-MN) has two simple explanations for the drop: offshore drilling and her own magical influence over the price of gas.

As the Minnesota Independent reported, “In an Oct. 29 campaign event with Norm Coleman, Bachmann took credit for gas prices that in her district were $2.04 a gallon.” “That was my goal. When I started out early this year, my goal was to get to $2 — oh they gave me grief for it,” she said.

Meanwhile, on her Townhall blog Bachmann wrote:

What happened the past few months to lower the cost of gas? Several things, but perhaps most importantly, Congress has let the ban on offshore oil exploration and oil shale expire, sending a signal to the markets that the United States may finally be ready to up their supply.

To credit the mere expiration of the offshore drilling ban - or her own personal influence - as the reason for dropping prices is patently ridiculous. Bachmann completely failed to note the “historic pullback in consumption by U.S. motorists this year.” CNN Money noted that there was “a 5.3% decline in demand for motor gasoline over the four weeks ended Oct. 3, compared to a year earlier.”

Also, the economic crisis has solidified the belief that demand will not rise anytime soon. The U.S. economy contracted by 0.3 percent in the last quarter, which is “reinforcing expectations of a prolonged slump in demand.”

Unless Bachmann is personally taking credit for driving the demand for gasoline down across the country, she might want to find another accomplishment to crow about.

Exxon-Mobil Profits Up 250% Since 2000, American Worker Wages Stagnant»

The winners and losers of the Bush years are now clear.

Today, Exxon-Mobil announced third quarter profits of $14.83 billion, the most profitable three months of any U.S. company in history.

These profits represent annual profits over 250% of the levels at the beginning of the Bush years. Over the same period, real average wages for the American worker have stayed essentially flat, growing only 2% over eight years.

Real median household income was lower in 2007 (last data available) than it was in 2000, after growing 13% from 1992 to 2008.

These huge oil company profits come even as the American economy has shrunk 0.3% and slides into recession.

John McCain’s plan to solve this crisis? A budget busting tax plan that would give a $1.2 billion tax break to Exxon-Mobile ($4 billion for America’s largest oil companies) and give nothing to over 100 million Americans.

Digg It!

CNBC On Speculators Gone Wild: ‘So What?’»

Yesterday, the Center for American Progress Action Fund’s Dan Weiss stood up for working American families as CNBC host Trish Regan and two other guests defended unlimited oil speculators. They dismissed any notion that the wild price swings in the oil market harmed anyone, and scoffed at the idea that the oil markets need reform. Regan scorned an independent report that found unrestrained speculation by investors uninvolved in the oil market caused the 2008 bubble:

Guys, welcome to all of you. According to this report, in the five months from January to May traders poured $60 billion into the commodities market and basically per the report they caused a big spike in oil prices. My question to you is, Dennis, well, so what? So what? They invested in oil, oil went up. What’s wrong with that?

Futures speculator and promoter Dennis Gartman replied, “Well, there’s nothing wrong with it.” Infectious Greed blogger Paul Kedrosky called market reform “insidious.”

Watch it:

As Weiss tried to explain over the rolled eyes and scoffing laughs of the other guests, the oil price spike caused real harm to American families, especially as health, education, housing, and food costs simultaneously rose — also in part due to speculators gone wild in those markets — while incomes declined and jobs were lost.

Today, the Commodity Futures Trading Commission released a report recommending specific improvements to commodities markets to eliminate the swaps loophole that encourages risky bets that inflate speculative bubbles. The report also found that trades involving outside speculators (”noncommercial traders”) surged from 10 percent in 2000 to 40 percent by 2008. Sen. Dianne Feinstein (D-CA) said all of the commission’s recommendations “should be implemented immediately.”

Oil Man Inhofe Leads Political Stunt To Misdeliver Gas Receipts»

From Michelle Malkin, “Several Republican members of Congress are asking constituents to send in their gas receipts” to be presented to Senate Majority Leader Harry Reid (D-NV) and House Speaker Nancy Pelosi (D-CA). The leader of this campaign is notorious global-warming denier, oil-industry apologist, and false populist Jim Inhofe (R-OK), who has received over one million dollars in lifetime contributions from the oil and gas industry:

Please mail me your gas receipts and a short note about what your family has had to sacrifice because of out-of-control prices at the pump. I’ll bundle together all the receipts and stories I receive and send them to Senator Reid. Together, we will send a message to Washington and show Harry Reid that high gas prices are hurting Oklahomans.

Please mail your gas receipts by August 21 to:
Jim Inhofe
PO Box 13300
Oklahoma City, OK 73113

Several right-wing congressmen are jumping into the game: Geoff Davis (R-KY), Lee Terry (R-NE), Michael McCaul (R-TX), Bill Sali (R-ID), and Randy Kuhl (R-NY).

In June, Steve Chabot (R-OH) performed the stunt, confronting Speaker Pelosi on June 26 with a “few dozen” receipts. Pelosi’s spokesman said that Chabot should support honest solutions, including the “Use It or Lose It” legislation to force oil companies to explore existing leases. Jon Porter (R-NV) performed the stunt in July.

In fact, every single one of these seven congressmen voted against the Use It or Lose It legislation (H.R. 6251), and have a record of taking Big Oil’s money to do their bidding:

Pelosi and Reid should accept the gas receipts — and collect hundreds of thousands more to match up to the millions in industry contributions these stuntmen have received. Then they should march to 1600 Pennsylvania Avenue and deliver them to the one man most responsible for today’s energy crisis: President George W. Bush.

A Sale Of Oil From The SPR Led To ‘Relief At The Pump’»

The Washington Post published an editorial today slamming a proposal to swap a slight amount of oil from the government’s oil reserves to moderate prices and offer relief to American families. They write:

Mr. Obama would swap more-expensive light crude held there for cheaper heavy crude “with the goal of bringing down prices at the pump.” President Bill Clinton did such a swap in September 2000 — yes, just before another presidential election — and President Bush released oil in 2005 after Hurricane Katrina. Both moves led to drops in the spot price of crude but not the sort of relief at the pump that Mr. Obama promises.

This seems to imply that lower crude prices didn’t lead to lower prices at the pump for families. But that’s just not the case.

In 2005, when President Bush announced a sale from the SPR in the wake of Hurricane Katrina, American families saved approximately $125 in lower gas prices over the next three months.

Read the full report from the Center for American Progress Action Fund here.

America’s Auto Makers: Congress Should Inflate Their Tires, Not Their Rhetoric»

Our guest blogger is Charles Territo, Director of Communications for the Auto Alliance (BMW, Chrysler, Ford, GM, Mazda, Mercedez Benz, Mitsubishi, Porsche, Toyota, and Volkswagen).

For most of this year rising gas prices have been on everyone’s mind. Believe me, the auto industry understands very well just how much of an impact $4/gallon gas has had on American consumers. As you may have seen, it’s having an impact on us, as well.

Last week, the Auto Alliance and the National Auto Dealers Association sponsored tire pressure checks for members of Congress and their staff who park in the Rayburn Office Building. Surprisingly, we found that most drivers had tires between 5 and 7 pounds under inflated — some had tires under-inflated by as much as 20 pounds. This significantly reduced their vehicle’s fuel economy.

We all share a goal of increasing fuel economy, as well as enhancing energy security and reducing greenhouse gas emissions, and the fuel economy increases passed last year by Congress (and supported by the Auto Alliance) will help. But consumers want ways to fight back against high gas prices right now. By properly inflating tires, we can have an immediate impact on the more than 245 million vehicles currently on our nation’s roads and highways.

Earlier this year, we cosponsored the Alliance to Save Energy’s Drive Smarter Challenge. As part of this campaign we advocated maintaining proper tire pressure as one simple step consumers could take to increase fuel economy and reduce carbon dioxide emissions. It’s more important than you may think. For instance, did you know…

• The Department of Energy estimates that 1.2 billion gallons of fuel were wasted in 2005 as a result of driving on under-inflated tires.

• Fuel efficiency is reduced by 1% for every 3 PSI that tires are under-inflated.

• Proper tire inflation can save the equivalent of about 1 tank of gas per year.

• Proper tire inflation also reduces CO2 emissions.

• Experts estimate that 25% of automobiles are running on tires with lower than recommended pressure, because people don’t know how to check their tires or don’t realize that tires naturally lose air over time.

Maintaining proper tire pressure may not solve our dependence on foreign oil, but it will help. Consumers can get a few more miles to gallon, and when combined other driving and maintenance tips, those small steps can help to make a serious improvement in vehicle fuel economy.

Digg it!

Previous Release From Strategic Petroleum Reserves Helped Save Average Household $125 Over 100 Days»

American families are struggling with high gas prices, even as oil companies rake in record profits.

One way provide relief for families would be to release a small amount of oil from the 98 percent full Strategic Petroleum Reserve. President George H. W. Bush dipped into the Reserve to stabilize prices during the run-up to Operation Desert Storm in 1991, and President George Bush did so again in the wake of Hurricane Katrina.

The oil sold from the reserve in both cases helped stabilize oil markets and lower gas prices.

A new analysis of these two releases by the Center for American Progress Action Fund finds that, in the 100 days after each release, American families enjoyed significant savings on their gasoline bills. These savings amounted to $65 per household after the 1991 Desert Storm release, and $125 per household after the Hurricane Katrina release in 2008 dollars.

Read the full report here.

Clearly many other factors intervened that may have caused changes in gasoline and oil prices in the winter of 1991 and the fall of 2005, but the release of a relatively modest amount of oil from the SPR contributed in large part to the drop in oil prices, the moderation of gasoline prices, and the savings that American families enjoyed.

Read more benefits of releasing a small amount of oil from the Strategic Petroleum Reserves here.

$236 Per American Driver: Big Oil’s U.S. Profits From The Last Year»

Sky-high gas prices mean hardship for American families but huge profits for big oil companies.

According to a new study from the Center for American Progress Action Fund, their U.S. profits from the last 12 months were the equivalent to $236 from every single person with a drivers license in America.

In the past year, oil and gasoline prices have broken all records. Oil reached $147 a barrel, and gasoline hit a new high of $4.11 a gallon earlier this month. Oil prices were 90 percent higher over the past three months than they were a year ago.

Today, Exxon Mobil announced that they had made $11.7 billion in the last three months, the most profitable quarter ever for an American company.
The other big five oil companies announced earnings 26% higher than this same period last year, putting them on track to break last year’s record profits.

High prices may be good for oil company profits, but they’re bad news for American families. Higher gasoline prices are costing ordinary families hundreds, or even thousands, of dollars a year.

In the past 12 months, the five largest oil companies have earned $148 billion world wide, including an estimated $47 billion in the United States. To put these numbers in perspective: if these U.S. profits were distributed evenly among American drivers, it would equal about $236 per driver.

For more information, check out the Center for American Progress Action Fund’s full report here.

UPDATE: Chevron has since released their Q2 2008 profits: $5.98 billion in the last three months, up 11% from the same period last year. While slightly less than predicted in our report, it doesn’t significantly change the per-driver share of the five companies’ U.S. profits over the past year which remains approximately $236 per American driver.

Senate Conservatives Vote Against Low-Income Energy Assistance, Push Oil Drilling Myth»

Yesterday, Senate conservatives voted down bipartisan legislation that would have “provided an additional $2.5 billion in funding for the Low-Income Home Energy Assistance Program (LIHEAP),” a federal program “that helps low- income families pay their cooling and heating bills.”

Arguing that “the chamber should focus on crafting a comprehensive plan to address high energy costs before taking up specific pieces of the debate,” conservatives insisted that drilling for more “gas and oil” would do more to help struggling families pay for heating oil.

Watch a compilation video of conservative senators pushing the false myth that drilling will help low-income families pay their heating bills:

But drilling for oil will do nothing to “alleviate and bring down those natural gas prices for us.” As the Energy Information Administration (EIA) has explained, “access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030.” But because United States demand for oil far outstrips production — we consume 25 percent of the world’s supply but have two percent of the proven reserves — further exploitation of domestic resources will not have a long-term impact either. After 2030, the EIA found, “any impact on average wellhead prices is expected to be insignificant.”

This winter, the “average cost of heating a home…will total about $1,114 – 14.6 percent more than last year,” forcing “low-income families [to] spend on average about 15 percent of their income on home energy bills.” Unfortunately, rather than voting for substantive relief, conservatives continue to propagate false myths for political purposes.

Transcript: More »

New McCain Ad On Gas Prices Contradicts McCain»

Our guest blogger is Adam Jentleson, the Communications and Outreach Director for the Hyde Park Project at the Center for American Progress Action Fund.

McCain has a new ad up that claims offshore drilling will lower the price of gas. Referring to McCain, it says, “One man knows we must now drill more in America and rescue our family budgets.”

In response to the ad, Progressive Accountability highlights the 28 lobbyists (plus one) to whom McCain has outsourced his energy policy.

Watch it:

McCain himself has said that offshore drilling would not provide “immediate relief,” and that the benefits to American families struggling to pay for gas would be “psychological“:

I don’t see an immediate relief, but I do see that exploitation of existing reserves that may exist — and in view of many experts that do exist off our coasts — is also a way that we need to provide relief. Even though it may take some years, the fact that we are exploiting those reserves would have a psychological impact that I think is beneficial.

McCain’s chief policy advisor, Douglas Holtz-Eakin, has also said that offshore drilling would have “no immediate effect” on gas prices.

And the government’s official source for energy statistics, the Energy Information Administration, says that new offshore drilling will not have a significant impact on gas prices — not even in twenty years.

So what is the basis for McCain’s claim that offshore drilling will lower gas prices? Short of some new information substantiating that claim, this new ad is tremendously misleading. The only “family budgets” helped by McCain’s plan are those of the superwealthy Big Oil CEOs whose lobbyists are running his campaign.

Can McCain Find A Single Economist To Back His Claim That Offshore Drilling Will Lower Gas Prices?»

Our guest blogger is Adam Jentleson, the Communications and Outreach Director for the Hyde Park Project at the Center for American Progress Action Fund.

The government’s official source for energy statistics says that offshore drilling will not have a “significant impact” on gas prices until 2030.

McCain’s own campaign admits that offshore drilling will have no short term effect on gas prices:

“Douglas Holtz-Eakin, a senior advisor to McCain’s campaign, acknowledged in a conference call to reporters that new offshore drilling would have no immediate effect on supplies or prices.”

Yet McCain insists on touting offshore drilling as the best way to “assure affordable fuel for America,” as he said in his speech on Tuesday.

This begs the question: can John McCain find a single economist who backs his claim that offshore drilling will lower gas prices in the short term – or even before 2030?

If not, what is the basis for his claim that offshore drilling will lower gas prices?

This is not the first time McCain has had trouble finding economists who would endorse his proposals for lowering gas prices – in fact, just a few weeks ago, McCain failed to find a single economist who would endorse his claim that a temporary suspension of the gas tax would provide significant relief for American families.

The policy was so thoroughly discredited that the only argument McCain and his team could muster was to simply bash economists as a group.

At a campaign stop in New Hampshire, a frustrated McCain told the audience, “If you want to call it [his gas tax proposal] a gimmick, fine. You know the economists? They’re the same ones that didn’t predict this housing crisis we’re in.”

On “This Week” with George Stephanopoulos, Senior Advisor Carly Fiorina, “scoffed at the lack of support from economic analysts. ‘I don’t think it matters,’ she said.”

Even Senior Advisor Douglas Holtz-Eakin – a Ph.D. economist himself – got in on the act, saying, “You can stack all the economists end to end and still not find common sense.”

Is this déjà vu all over again? Can McCain find a single economist to back his claim that offshore drilling will lower gas prices, or will his campaign be left with no recourse but to roll out poor Douglas Holtz-Eakin to trash his own profession, yet again?

UPDATE: The Huffington Post takes up the challenge and reports, “the consensus seemed to be that if the presumptive GOP nominee was persuading voters that he could help decrease their gas bill, he was either living in a political fantasy or being disingenuous.”

Rove Whines That McCain And Obama Are ‘Economically Illiterate And Irresponsibly Populist.’»

It’s not often that Karl Rove, former adviser to President Bush, has something negative to say. JUST KIDDING! But even Karl Rove outdid himself in an op-ed in today’s Wall Street Journal, in which he criticizes aspects of both Senator Obama and Senator McCain’s economic plans by calling the candidates “economically illiterate and irresponsibly populist.”

McCain is economically illiterate… and has conceded as much. But Rove’s critique of Obama, however, focuses on one central element: The senator’s support of a windfall tax profit on American oil companies. In Rove’s view:

Why should we stop with oil companies? They make about 8.3 cents in gross profit per dollar of sales. Why doesn’t Mr. Obama slap a windfall profits tax on sectors of the economy that have fatter margins? Electronics make 14.5 cents per dollar and computer equipment makers take in 13.7 cents per dollar, according to the Census Bureau. Microsoft’s margin is 27.5 cents per dollar of sales. Call out Mr. Obama’s Windfall Profits Police!

There are a couple things wrong with Rove’s logic here. First is his misunderstanding of the phrase ‘windfall profit.’ According to the dictionary definition, a windfall profit is a “profit that occurs unexpectedly as a consequence of some event not controlled by those who profit from it.” So something like, let’s say, a huge and unexpected increase in the cost of oil over the course of six years, might fall into those parameters. And these price increases occurred due to factors that big oil had no control over — the plunging value of the dollar, speculators gone wild, and growing demand from the developing world. They do have control over one factor linked to skyrocketing oil prices: stagnant demand. Despite record profits, oil companies are only investing $10 billion annually into new exploration – or about 10 cents for every dollar of profit.

Something like profits made on increased computer sales or cell phones, does not.

To back this up with numbers, the five largest American oil companies have seen their average profits increase from $37 billion in 2001, to $81 billion in 2004, to $123 billion in 2007–a total annual increase of $86 billion in six years. Since Bush became president, the big five companies made mroe than $600 billion. As a point of reference, between 1977 and 1983, oil company profits increased by $3.6 billion. Between 1990 and 1996, profits increased $.3 billion. A $86 billion increase in six years, coupled with a quadrupling in price for a barrel of oil is the epitome of a windfall profit — and is not the same as a Best Buy making money on flat screen televisions.

Secondly, if Rove really wants to compare profits between industries, then let’s actually compare profits between industries. According to US News and World Report

Exxon Mobil’s profits are 80 percent higher than those of General Electric, which used to be the largest U.S. company by market capitalization before Exxon left it in the dust in 2005. The new economy? Microsoft earns about a third as much money. And next to Exxon, the world’s largest retailer, Wal-Mart, looks like a quaint boutique, with annual profits of about $11 billion.

So if Rove wants to know “why isn’t [Obama] targeting other industries?” the answer is simple: none of these other industries are suddenly reaping the largest profits claimed in corporate history, and benefiting from record prices while American families suffer.

Lifting Offshore Moratorium Is Boon To Big Oil And No One Else»

Today’s speech by President Bush calling for America to drill its way out of its energy crisis is, in the words of Sen. Harry Reid (D-NV), replete with the “failed policies of yesterday” designed to “pad the pockets of Big Oil.”

There are two central facts about fossil fuel use President Bush carefully avoided when he called on Congress to increase the supply of oil accessible to his industry cohorts:

– The United States has only 2% of the world’s proven oil reserves, but consumes 24% of the world’s oil production. There’s simply no way for us to drill our way to energy independence or eliminate what Bush calls our “addiction” to oil. [EIA 1/29/07, 6/9/08]

– The energy future Big Oil and Bush desire involves burning up the planet. The American Petroleum Institute is promoting an increase in oil demand of 45% by 2030, which would lead to global warming 8.9 to 11°F above pre-industrial levels — guaranteeing global catastrophe. Bush’s “rational, balanced” approach to global warming is in line with this scenario. [CAPAF 4/16/08, 4/25/08]

Bush’s justification for ending the federal moratorium on Outer Continental Shelf drilling that was signed into law by President Reagan and extended by President George H.W. Bush after the Exxon Valdez relies on misleading and false statements. In the Rose Garden today, Bush 43 said:

So my administration has repeatedly called on Congress to expand domestic oil production. Unfortunately, Democrats on Capitol Hill have rejected virtually every proposal — and now Americans are paying the price at the pump for this obstruction.

Congress — which was under Republican control for most of the Bush presidency — is not blocking drilling. The number of off- and on-shore drilling permits has exploded in recent years, going from 3,802 five years ago to 7,561 in 2007. Between 1999 and 2007, the number of drilling permits issued for development of public lands increased by more than 361%.

In fact, Congress and this administration have already opened the floodgates for more oil and gas drilling in the years to come. Since 2002, the number of permits issued has greatly outstripped the number of new wells drilled. In the last four years, the Bureau of Land Management has issued 28,776 permits to drill on public land; yet, in that same time, 18,954 wells were actually drilled. That means that companies have stockpiled nearly 10,000 extra permits to drill that they are not using to increase domestic production.

Furthermore, less than a quarter of offshore acreage open to drilling is being used. Only 10.5 million of the 44 million leased acres are currently producing oil or gas. More »

Flashback: Murdoch Predicted Oil Prices Would Near ‘$20 A Barrel’ After Iraq War»

Our guest blogger is Scott Lilly, a Senior Fellow at the Center for American Progress Action Fund.

Last week, in a fiery exchange with a producer from Fox News’ The O’Reilly Factor, Bill Moyers challenged Rupert Murdoch’s 2003 prediction that the Iraq war would lead to a decrease in global oil prices:

Wait a minute, wait a minute, wait a minute—to support the Iraq war, Rupert Murdoch said the best thing that will come out of the Iraq war will be gasoline at $20 a barrel. Now, today, when I came here, I looked, and it was $130-something. When is Rupert going to explain why the war didn’t give us $20-a-barrel oil?

A study of U.S. crude oil expenditures as a percentage of GDP demonstrates Murdoch’s folly. Not only has the world not benefited from “cheaper oil,” but prices are now at an all time high:

Pain At The Pump Retrospective: How Gas Prices Soared During The Bush Administration»

On Sunday, the national average price for a gallon of gas reached a new, previously unthinkable milestone of $4.00/gallon. Americans are struggling — and drivers in some parts of the US are spending up to 16% of their income on fuel.

But we didn’t just wake up one morning to find gas prices this high. Although the cost of a gasoline can be attributed to a variety of factors, we sometimes forget that in 2000 when George Bush took office, gas was only $1.51/gallon. It is also remarkable just how thoroughly out of touch Bush has been on this issue, and how little substance he has put forth to deal with it over the years.

In 2000, Bush assured Americans that he would “bring down gas prices through ‘sheer force of personality.’” Lo and behold, the initial jump in fuel costs occurred during Bush’s first term.

Fast forward four years to 2004 when gas prices passed the $2.00 mark — sending shock waves through the economy. Former Treasury Secretary John Snow acknowledged the problem but had little to offer in the solutions department. “Higher gas prices are creating a financial hardship for millions and millions of Americans,” he says. “We know that. Those higher gas prices, in a way, are becoming a proxy for how they feel about the economy.”

Push ahead now to 2006 — two years ago and two years into Bush’s seco