Gas prices rise at alarming rate

Laura — Tue, 08 Jul 2008 11:39:07 -0700

UCAN In the Media

GAS: Pump prices up 23 cents this week

Rise is steepest in years; $4.39 is also new record

By CHRIS BAGLEY - Staff Writer

Thursday, June 5, 2008

North County Times - Gasoline prices shot up this week at their fastest rate in years, smashing the previous record for the 16th time in 18 weeks, according to weekly surveys for the North County Times.

Regular-grade gas climbed 23 cents to $4.39 per gallon, according to a survey of 151 stations on Thursday by the Utility Consumers' Action Network. Diesel fell to $5.06 from a record $5.11, according to the survey.

The steepening increase in gas prices was alarming, even after a four-month surge, said Charles Langley, who conducts the survey. Still, the wholesale price of raw, unblended gasoline fell 24 cents on Wednesday before rising again on Thursday, Langley said.

"We view this volatility with deep suspicion because it smacks of market manipulation," Langley wrote in an e-mail. "Not to add fuel to the fire, but I think it is a five-alarm fire."

The overall fall of several cents this week could translate into lower pump prices within a few days, Langley said.

Regular unleaded has risen 41 percent in the last 12 months and 44 percent since a dip in late January, according to Langley's surveys. Based on historical spending patterns, current prices, and recent gas-sales data from a state tax agency, the average household in San Diego County now spends more than $3,500 a year on gasoline.

The price spike at the pump comes even as oil edges back from more than $130 per barrel. Light, sweet crude for July delivery was trading in the $120 to $123 range earlier this week, but rose $5.49 to $127.79 on the New York Mercantile Exchange. It was the biggest single-day price increase in the history of the Nymex crude contract.

Crude's surge came as the dollar fell in response to comments by European Central Bank President Jean-Claude Trichet suggesting the bank could raise interest rates.

"Oil, which was very weak, rallied on those comments," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "They're out of step with the U.S., which is weakening the dollar."

When interest rates rise in Europe or fall in the U.S., bond investors tend to move money into Europe and out of the U.S., weakening the dollar against the euro. Many investors buy commodities such as oil as a hedge against inflation when the dollar is falling. Also, a weaker greenback makes oil less expensive to investors dealing in other currencies. Those investors tend to step up their oil purchases, which pushes up its price for those who deal in dollars.

Many analysts believe the dollar's decline has been one reason why oil prices have nearly doubled from year-ago levels. The rise in oil, which now accounts for about 70 percent of the price of gasoline, has in turn pushed gas prices to records.

Gasoline's average refining margin, a measure that includes both profit and cost, fell below 25 cents per gallon last month from about $1 a year ago, according to estimates by the California Energy Commission. Gasoline's rise this week paralells an increase in the estimated refining margin, to more than 50 cents per gallon.

Independent gas stations are losing an average of at least 25 cents on each gallon they sell, the commission estimated on Monday. Stations that sell gas under agreements with specific refiners such as Shell and Valero were earning an estimated average of less than 1 cent per gallon.

Earlier this week, Federal Reserve Chairman Ben Bernanke indicated that more interest rate cuts are unlikely in the U.S. Bernanke's comments sent the dollar higher, helping push oil prices lower.

The average national price of a gallon of gas rose by a fraction of a cent overnight to a record $3.989 on Thursday, according to a survey of stations by AAA and the Oil Price Information Service. Prices haven't fallen since May 6, AAA records show.

"We may still get to $4 in the next couple of days, but I do think ... it's just a matter of time before the retail price starts to stall," AAA spokesman Geoff Sundstrom said.

Diesel prices are already falling; the average national price of a gallon of diesel slid 0.8 cents overnight to $4.77, according to AAA and OPIS, though prices are above $5 per gallon in some areas. Diesel prices peaked at a record $4.792 on May 30, and have risen $1.87 in a year due mostly to rising demand for the fuel in the developing world. High diesel prices have boosted prices of food and consumer goods transported by truck, ship and rail, putting additional pressure on families already struggling with $4 gas.

Oil's decline since May 22 follows concerns about demand. Recent data from the U.S. Energy Department and the California Board of Equalization show that high prices have led consumers to buy less gas. Automakers are cutting production of large SUVs and trucks, and sales of those vehicles have been declining in San Diego County for more than a year now, according to a local association of dealers.

Still, gasoline refiners, wholesalers and retailers are feeling pressure to keep prices high, for now. Crude prices have risen 89 percent in the past year, while gas prices are up only 27 percent. That discrepancy has pressured profit margins along the gasoline supply chain; falling demand may have prevented gas suppliers from raising prices as much as they would like.

The Associated Press contributed to this article. Contact staff writer Chris Bagley at (760) 740-5444 or cbagley [at] nctimes [dot] com.

Gas prices beat national average in San Diego's North County communities

Laura — Tue, 08 Jul 2008 10:40:50 -0700

UCAN In the Media

GAS: Local gas prices soar higher, faster than nation's

Analysts cite refining, taxes and possible discrimination

By CHRIS BAGLEY - Staff Writer

Friday, June 13, 2008

NORTH COUNTY TIMES - Gasoline prices in North County continued to shoot up higher and faster than the national average last week, a gap that analysts attribute to California's unique refining requirements, higher sales tax and possible price discrimination by refiners and wholesalers.

North County stations were selling regular gas for an average of $4.59 a gallon Friday, up by about 17 cents in the last week, according to regular surveys by the San Diego-based Utility Consumers' Action Network.

The national average had risen by about 8 cents in a week, to $4.07 a gallon Friday.

Over the last year, the national average price has risen by $1.02, according to AAA.

North County drivers, in contrast, are now paying $1.38 more per gallon than they were paying a year ago. That translates into another $932 out of the pocket of a driver who uses 675 gallons a year, the state average.

Refiners and independent analysts have pointed to the skyrocketing price of crude oil on international markets as the leading cause of the price escalations.

But analysts say that doesn't explain the growing gap between California and the rest of the country, because oil costs roughly the same regardless of location.

Historically, Californians have paid 20 to 25 cents more per gallon than drivers in most other parts of the country.

North County's gap had been comparable, but it widened to 30 cents in early March, flirted with 40 cents in April and May, and topped 50 cents within the last week.

Gaps often grow in the springtime when California air-quality regulations begin to require different blends, analysts said.

That makes for less competition among refiners during the summer months because out-of-state refiners can't easily produce and deliver gas that meets California regulations, said Severin Borenstein, director of the University of California Energy Institute, at the Berkeley campus.

Even within California, prices frequently vary by as much as 20 cents a gallon from one community to the next.

Gas in San Francisco, among the state's most expensive cities a year ago, has risen only $1.06 in the last year, to $4.57, according to daily reports by the automobile association.

Gas in the Los Angeles area has risen by $1.31, to $4.58, according to the group.

Tupper Hull, a spokesman for companies that extract and refine oil in the western United States, said gas stations have historically charged higher prices in San Diego County because the ratio of stations to residents is lower than in Los Angeles.

This disparity is even more dramatic when tourists are included, Hull said, citing a 1997 study commissioned by the industry.

Competition in San Diego County is also thwarted because generally stricter land-use regulations slow down the process of setting up new stations, Hull said.

Most gas stations in Southern California are independently owned but operate under a sort of franchise agreements with Chevron, Shell or another refining company.

Margaret Felts, a Sacramento petroleum engineer who investigated energy-market manipulation during the California energy crisis of 2000-01, said it's easy for refiners to charge higher prices to affiliated stations in affluent suburban areas such as North County, translating into higher retail prices.

"It's a market where they know they can get a higher price, and so they do," Felts said.

Known as "price discrimination," such behavior is common in several industries and is generally legal as long as sellers act independently of one another, Felts said.

Borenstein said he's seen no recent evidence that refiners are colluding with one another to set prices. Still, he said, he can't rule it out.

"It would be very difficult to find evidence in this market," he said. "That's just a black hole."

David Hackett, an Irvine-based analyst, said Southern California prices have gotten an extra bump since mid-May, when a refinery in New Mexico began having problems.

The metropolitan Phoenix area, which had drawn much of its gas from New Mexico, began buying more from California refineries, Hackett said.

It's nearly impossible to determine how easily California refineries can react by producing more gas, Borenstein said. To do so might require state monitors at each refinery, he said.

"The solution has to be not second-guessing how refiners are producing, but making sure the market stays competitive," Borenstein said.

California's sales tax is also 2 to 3 cents higher than those of most other states, Borenstein noted.

When the price of gas rises by $1 at the wholesale level, the retail price rises by nearly $1.08 in California.

In Georgia, a similar wholesale increase pumps up the retail price by $1.04.

The increases have caused ever-greater disruptions in the lifestyles of North County residents and would-be residents.

Pam Mattox, who lives by herself in Temecula and works at a nearby casino, said she's been looking for a change of pace in her life.

She decided a few weeks ago that she'd like to live with a friend in Escondido, but is putting off the move until she can arrange a daily car pool to Temecula.

"If the gas keeps going up, I can't move," she said. "It's just too expensive."

Prices have changed other commuting habits, too. Several North County drivers have reported switching to smaller cars and leaving lower-mileage trucks and sport utility vehicles parked at home.

Such newfound frugality has pushed down gasoline use by 1 to 2 percent from year-earlier levels, according to a state agency.

The Associated Press contributed to this article. Contact staff writer Chris Bagley at (760) 740-5444 or cbagley [at] nctimes [dot] com.

Oil prices up, gas prices dropping

Charles Langley — Fri, 04 Jul 2008 13:41:23 -0700

UCAN News

Yesterday, oil reached a new all-time record high of $145.29 a barrel, yet San Diego gas prices are dropping.

Today, the average price of gas in San Diego County has dropped 4¢ since last Friday to a new average of $4.55 a gallon.

The new average is the highest price average ever in San Diego history for the Fourth of July. Last year on this day, San Diego gasoline averaged $3.08 a gallon.

Diesel prices have surged, and will continue to climb, reflecting massive increases on the spot market. Today, diesel once again climbed above the $5 mark to a new average price of $5.03 a gallon. This new average is up 5¢ from Tuesday, an we expect to see aggressive price hikes of 5 to 20¢ a gallon in the next week at most diesel retailers. Last year on July 4, San Diego diesel averaged $3.13 a gallon.

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High gas prices equate to higher public support for oil exploration, Pew survey finds

Sandy Young — Wed, 02 Jul 2008 10:40:24 -0700

The Pew Research Center for the People and the Press, an independent opinion research group has released a nationwide study finding that "amid record gas prices, public support for greater energy exploration is spiking . . . and an increasing proportion (of people taking the survey) also says that developing new sources of energy - rather than protecing the environment - is the more important national priority.

The survey's found that an increasing number of support for energy exploration came from groups that previously had "viewed this as a less important priority."

Click here to read the entire survey.

Iraq's no-bid contracts delayed

Sandy Young — Tue, 01 Jul 2008 10:13:30 -0700

Yesterday, the widely anticipated announcement of the winners to Iraq's no-bid contracts was delayed. Today's New York Times reports that Iraq's oil minister, Hussain al-Shahristani made the announcement at a news conference in Baghdad. Click here to read the entire article.

Expectation was that Iraq would award the contracts to a handful of western oil companies. Instead Iraq invited foreign companies to bid for contracts to develop key oil production fields.

The Financial Times in London reports that:

Iraq's oil minister, specified conditions that illustrate the extreme political sensitivity of allowing western oil companies into Iraq, where many people believe the US-led invasion of 2003 was designed to seize control of the country's resources. Click here to read the entire article.

SHUT UP AND DRIVE! Why new laws should not apply to young people.

Charles Langley — Mon, 30 Jun 2008 13:53:52 -0700

Hey - Maybe it is time to lower the "talking-while driving" age!

Using a cell phone without hands-free equipment while driving is now unlawful. Yet according to the LA Times talking to a fellow passenger while driving is as bad or worse than driving drunk.

What is it that makes a phone so dangerous? Why isn't listening to the radio or talking to a passenger equally deadly?

Is it possible that driving and phoning skills are a function of age?

If you are over the age of 35, you probably learned to relate to the phone differently than younger generations. Young people are far more familiar with multi-tasking, but for the middle-aged, we grew up relating to a phone that had a cord attached to the wall.

When middle-aged people talk on the phone, we tend to mentally revert to the "phone attached to the wall" mode. We get engaged in the conversation and start driving like old people ... really old people.

Just imagine for a moment, John McCain, Barack Obama, and Chelsea Clinton in a NASCAR style road race where each of them had to drive and answer tricky policy questions on a cell phone. Who do you think would win? I'm betting that Obama and McCain would come in dead last, with an emphasis on dead.

This is one area where young adults (not teenagers) have superior skills, because they have grown up learning how to multi-task. Perhaps younger people who have learned this skill should be exempted from laws that limit driving while talking. We don't allow people over the age of 40 to enlist in the military because of their advanced age, so why should they be allowed to use a phone while driving?

Just a thought.

With age comes wisdom, but youth could well come with the ability to talk on the phone while driving safely.

Gas, food prices put America's seniors in jeopardy

Laura — Fri, 27 Jun 2008 14:49:15 -0700

Memo to Congress:

Our troubled economy and skyrocketing energy prices are hurting some of our nation’s most vulnerable – our senior citizens.

Seniors on fixed incomes have seen their savings and the value of their homes diminished. Many depend on programs that provide home-delivered hot meals or meals at senior centers as well as transportation to medical appointments and social activities.

One example: The San Francisco Chronicle reported that drivers with the Alameda County Meals on Wheels program cover 1,600 miles a day delivering 2,200 meals to homebound seniors -- two-thirds of them 75 and older.

Executive Director Cindy Houts said: “Our programs are just reeling from the double whammy of increased fuel and food costs. It’s happening throughout the county and throughout the country.”

Locally, Meals on Wheels told KPBS that it has lost 30% of its drivers since the first of the year. This means fewer drivers must deliver to more homes (about 1,500 a week in San Diego).

These costs will be magnified further in the face of a population that is growing older and will need even more of these services.

Senior citizens on fixed incomes may increasingly become victims in this economy as they skimp on medication and medical care, scale down their daily nutrition due to rising grocery prices, and find themselves isolated at home because of rising gas prices and transit programs that are curtailed.

These factors can trigger depression and other medical problems that will cost our economy even more in terms of increased costs for medical treatment and early institutionalization of seniors who rely on these programs to maintain their independence. For America’s seniors in this economy, the “golden” years are in jeopardy and many will suffer in silence.

Cc: John McCain

Barack Obama

The U.S. Energy Department releases its long-term market report

Sandy Young — Thu, 26 Jun 2008 15:39:20 -0700

The U.S. Energy Department has released its Annual Energy Outlook 2008 report with projections to 2030 this week. The following excerpt is under the title, Oil Production:

There is considerable uncertainty surrounding the future of unconventional crude oil production in the United States. Environmental regulations could either preclude unconventional production or raise its cost significantly. If future U.S. laws limited and/or taxed greenhouse gas emissions, they could lead to substantial increases in the costs of unconventional production, which emits significant volumes of CO2. Restrictions on access to water also could prove costly, especially in the arid West. In addition, environmental restrictions on land use could preclude unconventional oil production in some areas of the United States.
Click here to find all of the reports.

Today, Jim Jelter of Marketwatch covers the reports in his column. He says:

The Energy Department reasons that much of the supply tightness currently gripping the market, whether real or imagined, is likely to ease as major new oil fields come on line in Brazil, Azerbaijan, Kazakhstan, Russia and even here in North America. That would signal a fundamental shift in the supply-demand picture, even though output would need to increase by about 12 million barrels a day -- over half the 20 million barrels of oil the U.S. currently burns in a day -- to keep pace with global demand.

Investors have a choice in the weeks and months ahead. They can either pay attention to underlying fundamentals in the marketplace or, like Macbeth, they can continue to listen to witches playing on their innermost fears and succumb to madness. Click here to read more from Marketwatch.

Independent gas stations find themselves in pricing stranglehold

Laura — Wed, 25 Jun 2008 00:00:00 -0700

UCAN In the Media

Pump pain hits independents

Prices keep station owners from competing with branded dealers

By Bruce V. Bigelow

UNION-TRIBUNE STAFF WRITER

June 24, 2008

Price-sensitive motorists have long viewed independent service stations as relative havens in times when fuel costs are soaring.

Lower gasoline prices are the key advantage that independents have in competing against stations affiliated with major oil companies like Chevron, Shell and ExxonMobil. But during the great price spike of 2008, pump prices have often been lower at branded dealers than at independent stations – sometimes by 25 cents a gallon or more.

“From the beginning of this year, we cannot compete,” said Jamal Jonna, co-owner of the Ultra Gas and Mini-Mart on San Diego's El Cajon Boulevard. “There is no independent guy that can match or beat the brand name.”

The reason is that independent station owners have been paying higher wholesale prices for gasoline than branded dealers – a situation known in industry parlance as a “rack inversion.”

Independent dealers who count their profits at 10 or 11 cents per gallon say in recent weeks they confronted wholesale price increases of 15 or 20 cents per day – and there's nothing they can do about it.

At Pearson Fuels, an independent station on El Cajon Boulevard, co-owner Mike Lewis said he was selling each gallon of unleaded gasoline at 2½ cents below cost during the first week of June – and his price was still 25 cents a gallon higher than nearby branded stations.

“I've never seen it this bad,” said David Hallack, who owns Emerald Oil of La Mesa. “I thought (Hurricane) Katrina was bad. But this is a lot worse. For the past six months, we've been getting slaughtered, just killed.”

With gasoline prices at record highs, many consumers assume that even independent gas stations are sharing in Big Oil's windfall profits.

Behind record fuel prices at the pump, however, dealers are seeing unprecedented spikes in wholesale fuel prices, sharply higher credit card fees, increased operating costs and reduced customer demand.

Such factors help explain why ExxonMobil recently announced plans to sell its company-owned service stations, joining an industry trend by getting out of the retail fuel business.

Industry officials estimate that major oil companies now own fewer than 2 percent of California's gas stations – and less than 5 percent of stations nationwide.

That means branded station owners are responsible for maintaining the property – including environmental concerns – and buy their fuel under long-term contracts directly from their affiliated supplier.

Independents typically buy gasoline from refinery terminals, which set wholesale prices based on the spot market for crude oil. The independents can set their retail prices below branded rivals when wholesale fuel prices “at the rack” are below the so-called “tank wagon price” paid by branded dealers.

But with U.S. crude oil prices doubling over the past 12 months, wholesale prices at the rack have often been sharply higher than what branded dealers pay. While such price inversions occur from time to time, wholesale prices paid by independents in San Diego stayed upside-down from mid-March to June.

If such inversions continue indefinitely, “The end result is that every independent would try to become a branded station – or they would go out of business,” said Lewis of Pearson Fuels.

“I'm sure every independent is feeling it,” said Dave Whitlow, who owns Spirit Gas in Lakeside. “We're all pumping 50 percent less than we were a year ago.”

Whitlow said wholesale fuel dealers now react within hours to spikes in crude oil futures trading on the commodities exchanges.

“The rack price, the wholesale price, is changing daily and sometimes even two or three times a day,” Whitlow said. “If you own a branded station with a fuel-supply contract, the prices also change, but just not as much.”

Such volatility means every 8,800-gallon tanker truck of gasoline becomes a $35,000 gamble for independent station owners.

“When prices get this high, it gets much more difficult for people to pay our bills,” said Matt Davis, purchasing and supply coordinator for the Soco Group, a fuel wholesaler in Carlsbad. “With higher prices, we have to extend a lot more credit.”

The implications are obvious, especially to those who view independent service stations as a competitive antidote to the seemingly lock-step pricing among branded gas stations.

About 20 independent stations have closed in San Diego County over the past six months, according to Charles Langley, fuel price specialist at UCAN, the Utility Consumers' Action Network.

Langley estimates that over the past 10 years, 240 gas stations of all types have stopped selling gas in San Diego – roughly 30 percent of the county's total. Of those, 80 were independents, Langley estimates.

Among the latest casualties is Hallack's Emerald Oil in La Mesa. He said he recently signed a letter of intent to affiliate his station with Valero Energy Corp., which operates hundreds of service stations in California.

“If it were not for our alternative fuels and the alternative fuels that I sell to others, we would have had to shut down two years ago,” said Lewis of Pearson Fuels. His station sells and supplies ethanol, which consists of 85 percent ethanol and 15 percent gasoline and is suitable only for flexible fuel vehicles. It has been priced nearly a dollar below the station's price for unleaded gas.

Mini-mart sales are also a key to survival, Lewis said. He noted the $1.20 profit he makes from a $1.59 slush drink is about the same as the $1.21 profit he gets from selling 11 gallons of gas at $4.54 a gallon.

Another problem facing branded and unbranded stations is the percentage of the sales price that credit card companies charge on every consumer transaction. The percentage is fixed, usually at just under 2 percent, but with gas prices topping $4 per gallon, credit card companies are taking a bigger piece of each fill-up.

Gas stations, which typically mark up retail gasoline by 11 to 12 cents a gallon, are seeing credit card fees take most or all of their profits.

UCAN's Langley said another ominous development for consumers is the recent announcement that Sacramento-based New West Petroleum plans to sell 29 service stations in San Diego.

New West acquired the Exxon-branded stations as part of an antitrust deal that enabled the 1999 merger of Exxon and Mobil to move forward. Valero also supplied fuel to New West's stations, which Langley said has helped to keep gasoline prices more competitive in the San Diego market.

Gil Moore, New West's founder and owner, said he doubts that the sale will have any effect on gas prices in San Diego, which he contends have become much more competitive over the past decade.

On Friday, the average price for unleaded gasoline in San Diego County was $4.61 a gallon, according to UCAN. In San Francisco, the average price for unleaded was $4.62, according to the American Automobile Association's Daily Fuel Gauge Report. It was $4.63 a gallon in Los Angeles and $4.57 in Sacramento.

Moore said he decided to sell the stations because “we've been running these stores for 10 years and it's getting old. It has nothing to do with San Diego, but we live in Sacramento and we're just tired of coming down to San Diego to do business. We just decided we're going to concentrate in Northern California.”

That may be true, but Lewis of Pearson Fuels also sees the deal as another sign of the times.

The fact is that “if your business is a cash cow, you keep it – or you figure out a way to keep it,” Lewis said. “I can tell you, we haven't made money in a long time.”

Bruce Bigelow: (619) 293-1314; bruce.bigelow [at] uniontrib [dot] com

Iraq's no bid contracts need scrutinizing

Sandy Young — Tue, 24 Jun 2008 13:10:06 -0700

Iraq's no bid oil contracts are being scrutinized by Senators Charles E. Schumer, John Kerry, and Claire McCaskill. Filing a letter today with the State Department is a step in a right direction to shed light on what potentially can be very lucrative contracts. Read more from The New York Times.
More importantly, the no-bid deals could inflame sectarian tensions in Iraq. Read more from The Washington Post.

The New York Times reported Thursday that BP, Exxon Mobil, Shell, and Total were in the final stages of negotiations on the no-bid contracts.

Gas prices have declined slightly

Charles Langley — Fri, 20 Jun 2008 09:16:08 -0700

UCAN News

Today, UCAN's gas survey at www.ucan.org showed a statistically significant price decline of 1.3¢ for regular unleaded gasoline in San Diego County. Whether the new, slightly lower price is a trend toward dropping prices, or a speedbump on the road to $5 a gallon gas remains in the hands of NYMEX oil speculators. If anonymous NYMEX buyers keep bidding up the price of oil, then gas prices will continue to climb in San Diego. It should be noted that 90% of the futures buyers on the NYMEX can not take delivery of the oil when the contracts are due - these are industry outsiders whose lust for quick profits has created the perception of increased demand (see our commentary Paper Money Chasing Paper Barrels).

The new average price is $4.607 a gallon. Diesel prices have declined, too, dropping to 5.005 a gallon, from $5.04 a gallon last Friday (see below for historical data).

The price cuts have been spurred in part by slightly lower oil prices on the futures market. In recent months, local gas prices have reflected changes in the future NYMEX price of oil, which means that consumers are paying for the future price of gasoline today. Oil prices dropped yesterday on rumors that China would reduce its oil consumption by raising gasoline prices. In addition, the Saudis are expected to produce more oil, although it is unlikely that this will have a significant effect on decreasing prices.

Price History:

Price today:
Regular Unleaded = $4.607, Diesel $5.005

Price Last Friday:
Regular Unleaded = $4.614, Diesel = $5.04

Price this day last Month (May 20, 2008),
Regular Unleaded = $3.99, Diesel = $4.86

Price this day last year (May 20, 2007):
Regular Unleaded = $3.12, Diesel = $3.10

Price Two Years Ago:
Regular Unleaded = $3.24, Diesel = $3.21

Oil CEOs' pay up, way up

Sandy Young — Wed, 18 Jun 2008 12:56:36 -0700

The oil industries' chief executive officers' got fat in 2007, well at least their wallets did.

Here are some excerpts from the June 17 magazine article:

Equilar's study found that for the 12 CEOs at the largest U.S.-based, publicly traded oil companies, median total compensation increased by more than four times the rate of that of executives in the Standard & Poor's 500-stock index as a whole.

Some analysts say these CEOs are receiving pay raises based more on factors they don't control-such as sharply rising oil prices-than on managerial prowess. "Energy companies' improved performance is almost entirely due to high oil prices," says Paul Hodgson, an executive pay expert for Corporate Library, a Portland (Me.) corporate governance research organization. "But if [their executives] deny culpability for high oil prices, why are they getting rewarded for them?"

Link to BusinessWeek's news analysis here.

Why John McCain's plan to drill our way out of the energy crisis will fail

Charles Langley — Tue, 17 Jun 2008 17:19:32 -0700

Today the Washington Post reported that John McCain has a solution to America's energy crisis: Drill more oil by opening up more federal lands. The solution is not surprising, given that Sen. McCain has taken nearly $1 million dollars in contributions from Big Oil so far this year.

There's only one problem: There is no guarantee that the leases will be drilled. And even if they are drilled, there is no guarantee that the oil won't be sold to foreign nations. Second, the plan is little more than a continuation of Dick Cheney's 2001 energy plan.

The flaw in McCain's plan is that it relies on the oil industry to actually drill for oil on the land that it leases. It assumes that we have a competitive market for oil and that large mulitinational oil companies will rush to drill once the lands are made available.

This assumption is highly unlikely. According to a new report by the Congressional Committee on Natural Resources, oil companies could immediately begin harvesting an estimated 4.8 million barrels of oil each day from existing leases on U.S. lands. The report notes that according to the federal Minerals Management Service, 79% of the USA's underground/undersea oil supply is already available for leasing.

"Drill Our Way Out of It" is not a new idea. In fact, it is a very old idea crafted entirely by the oil industry in an effort to keep the USA dependent on imported oil for the next 50 years. "Drill Our Way Out of It" is Dick Cheney's original, failed energy policy of 2001 (click here to read the actual policy). It should be noted that the Cheney Plan was crafted entirely by oil and energy industry executives (source) including convicted energy criminal Ken Lay, who was later identified as a key participant in creating the rolling blackout energy crisis of 2001.

For years the oil industry has used a similar argument to "Drill Our Way Out" to explain high gas prices. For example, it has repeatedly stated that "no refineries have been built in the last 35 years." This is a carefully crafted statement that is intended to deceive voters into thinking that the government is rejecting refinery applications.

The reality is that the oil industry doesn't want to build new refineries because more refineries mean more gasoline. More gasoline means the price of gas goes down, and that's bad for profits. If the industry really wanted to build more refineries, it could have taken advantage of George Bush's 2005 energy plan, which made abandoned military bases available to oil companies that wanted to build refineries. To date, not a single company has taken Mr. Bush up on his generous offer.

So far, Big Oil's phony supply side arguments have worked. Millions of Americans believe that the solution to high gas prices is to let the industry build more refineries. Now, Big Oil is using the same distorted lie to explain high oil prices by suggesting that we can drill our way out of this mess by exploiting treasured national parks.

And unfortunately, Sen. McCain believes them.

Gas Pump Accuracy; A Call For Action To Find Stations Charging For More Gas Than You're Getting

sueamacomber — Wed, 11 Jun 2008 10:05:47 -0700

Hypothesis: Some gas stations' pumps are not reflecting the amounts of gas you put into your tank. So, a call to action is requested.

To confirm or negate this hyporthesis, all of San Diego County residents are challenged to check each pump used to make sure you're getting what you pay for by taking the time to protect yourself and stop any potential rip-offs. Whichever grade you are using, put EXACTLY 10 GALLONS in your tank and look at the dollar amount. If the dollar amount is not EXACTLY 10 times the price of the fuel you have chosen, then the pump is rigged.

Wherever you pump gas, please check the 10 gallon price. If you do find a station that is cheating, please do the following: 1) Keep your receipt; 2) Note the pump number; 3) Note the grade of fuel; and 4) Note the time of day and date. IF you have a cell phone, take a photo of the pump. 5) Note the name of the station and the location.

Action: 1) File an on-line complaint so we can notify the authorities.

I hope this practice isn't widespread. But, if we're trying to save money and stop price gauging, then let's get proactive in ways we can gather evidence and get the rip-off stopped.

Paper money chasing paper barrels: Why oil prices are artificially high

Charles Langley — Tue, 10 Jun 2008 19:34:13 -0700

Paper money chasing paper barrels

The cost of oil keeps screaming higher while reports keep showing that demand for oil is down. Even the Saudis admit that their product is overpriced, yet oil and gas markets remain more volatile than ever.

At issue is the fact that the market mania has been driven by two factors: a weak U.S. dollar and speculators trading paper barrels with paper money on the New York Mercantile Exchange (NYMEX) futures market. Let's look briefly at each factor:

Speculators are creating artificially high prices and the illusion of high demand by "flipping" paper barrels.

You've heard of "flipping" homes, right? In a home flip, you buy the home, take possession of the mortgage, and resell it quickly at a profit without even living in it.

Right now, investors are flipping paper barrels of oil. These investors will never take possession of the oil they buy - they're just in it for a quick-and-dirty profit. This flipping of paper barrels has helped create an artificially high price for oil on the NYMEX.

Here's how it works:

NYMEX, or the Merc, is a clearinghouse for barrels of oil delivered one month into the future for WTI oil, which stands for "West Texas Intermediary" oil.

Today, early trading on the NYMEX set the price of a barrel of WTI at nearly $140 a barrel - an all-time hand-me the nitro-and-call-the-paramedics record high.

Now what's important to know about the NYMEX WTI price is that this is the price that everybody in the world watches, even though the amount of oil that is actually delivered or used through NYMEX is a very small amount.

What this means is that when the price of NYMEX oil goes up, it sets off a chain reaction on global oil markets. If the NYMEX price surges, prices will also surge for Brent Crude futures in London. oil futures on the Nikkei, and so on.

None of the traders buying these contracts will ever use the oil they purchase. In fact, most of them have nowhere to store the oil because they are speculators, not oil people. Yet, it is these same speculators who are driving up the price of oil by creating the perception of artificially high demand and artificially high prices.

San Diego recently encountered a similar situation with housing: Real estate agents were buying up multiple condominiums as investments. These investors purchased far more homes than they could live in, believing that they could resell them at fantastic profits. So many real estate agents began flipping homes that it created an artificial demand for housing. Across the street from UCAN, a "condo-flipper" paid nearly a million dollars in 2005 for an 800-square-foot condo on 5th Avenue. The buyer was certain the price would increase. That buyer was wrong. in 2007, the same condo was auctioned off on the street last fall for less than $350,000.

What's important about this story is that our greedy, condo-flipping Realtor helped create a false demand for condos that helped drive up the price. He or she had no intention of living in their new condo. And because of this condo-flipping, real homeowners ended up paying too much because there was a shortage of housing.

The same thing is happening on the NYMEX - the people who are buying the oil have no use for it. They do not own refineries, pipelines, or gas stations. All they own is the paper. They are just like that condo buyer with a mortgage for a home they'll never live in.

And this is where the paper trades get crazy.

According to OPIS, the Oil Price Information Service, on Friday, June 6, more than one million contracts for oil were traded. This represented more than ONE BILLION barrels of crude oil. The numbers are as ridiculous as that overpriced condo we mentioned earlier - one billion barrels of oil is equal to 15 years of WTI production. Paper, not oil, is changing hands. If one billion barrels of oil were actually being delivered in New York Harbor next month, the value of a barrel of oil would drop to about three dollars a unit, gas would cost 78¢ a gallon, and Wall Street would be submerged in about three feet of oil because there would be no place to store it.

Oil prices haven't increased that much, rather the value of the dollar is dropping ...

In November 2002, the Euro and the dollar were almost equal in value: one dollar was equal to one Euro (see graphic).

At that time, NYMEX oil was trading for about $25 US a barrel (or about €25 Euros per barrel). Today, that same barrel of oil costs $131, or about €85 euros (click here for historic conversion rates, click here for historic NYMEX oil prices).

In other words, if the U.S. dollar wasn't being devalued, the price of oil right now would be about $85 a barrel. That means the dollar is inflated by about 154% over the Euro.

This has resulted in "capital flight" away from the dollar into oil. Meanwhile, the relative value of oil has increased because it is worth something, whereas the dollar is being aggressively devalued.

The problem is that the U.S. has been forced to devalue its currency in order to pay its war debts. This is the traditional method that governments use to pay off war debts. By inflating the dollar (i.e. printing more dollars), it allows the government to pay off its debts in cheaper dollars than what were originally loaned. It's sort of like borrowing an ounce of gold from somebody and then paying them back with half an ounce of gold. It's a great deal for the debtor.

This is why inflation has been called the "cruelest tax of all." Strong dollars that were borrowed by the USA are being paid back in weak dollars that aren't worth as much money.

And that's why your gasoline costs so much more than it did a few years ago: Traders are buying paper barrels with paper money.

No wonder Alan Greenspan recently wrote that the current crisis will likely be "the most wrenching since the end of the second world war." (Financial Times)

It all sounds good on paper. But in the real world, the fate of nations hang on the cost of oil.