What gives? As usual, it’s the refineries. There are only 12 refineries supplying gasoline in the state, according to the California Energy Commission. Several of them are fully or partly shut down, for repairs or “scheduled maintenance” or just because the owner thinks refining gasoline is temporarily not profitable enough. This restriction in the state’s gasoline supply can go on for as long as refineries wish–the state has no authority to demand that scheduled maintenance be more rationally planned or efficiently conducted, or to investigate whether a plant owner is playing games with our pocketbooks.

The bottom line is that California, because it’s not on any major gasoline pipeline network, can’t bring in supplies to counter refinery shutdowns, is stuck with whatever shortage-induced gasoline price the refineries want to impose. If they can make up on profit what they lose on production, it’s just dandy for their bottom line. The extra profit that refineries generally make in California even has a name in the industry: “West Coast Premium.”

According to a 2009 investor report  by the Texas-based refiner Tesoro, West Coast refineries have an average margin that is $8.50 per barrel higher than those operating on the Gulf Coast.

Given the power that refiners’ restrictions of gasoline supply have on gasoline prices, the state should have more regulatory power over refinery operations, modeled on regulation of power companies. The refiners would be guaranteed a modest but steady profit, and would in return have to guarantee a steady, reliable gasoline and diesel fuel supply. The new oversight would be more than paid for with a modest extraction tax on oil drilled in California–something every other oil-producing state enacted long ago.

Another conclusion from  current gasoline prices in the state is that drilling more in California–off the coast, in deep shale, or by using dangerous superhot steam to wring more from old oilfields–won’t lower pump prices by a penny. Oil prices are going down now because speculators finally had to admit that there is no shortage of oil in the U.S. or in the world, but California drivers haven’t seen a penny of benefit.

California, even if it could produce every drop of oil that the state uses, would still be largely at the mercy of refiners.

Gas prices have soared about 15% in the last six months, hitting $3.94 a gallon average nationwide, and $4.29 in California.

The mood of motorists? Meh.

Partisan finger-pointing aside, polls suggest that most people aren’t as worked up over gas prices as they were four years ago, when a gallon of regular hit a national average of $4.11 a gallon. Nor has there been as much clamor for drastic measures, such as tapping the Strategic Petroleum Reserve in Texas and Louisiana.

“I think we all have adjusted,” said Lara Clayton of Los Alamitos as she spent nearly $60 recently to fill up her 2008 Lincoln Town Car at a Seal Beach 76 station. “We just don’t drive as much and we are careful to combine errands.”

That’s one reason for the comparative complacency, and economists and industry observers say there are others.

A big factor is that the current run-up in fuel prices has been nowhere near as steep as in 2008, when prices escalated 35% in six months.

Having already seen prices cross the $4 barrier, motorists are less likely to become outraged when they see it happen again, said Michael Sivak, who heads the University of Michigan’s Transportation Research Institute. And because the costs of other items have risen — notably food — it stands out less as a household budget buster.

“If we adjust for inflation, gas costing $4 a gallon now is analogous to gas costing $3.72 four years ago,” Sivak said.

Another factor is that more people are driving fuel-efficient cars, as older gas-guzzlers are gradually replaced with new vehicles that get better mileage.

Auto sales figures this week demonstrate that trend. Through the first three months of the year, sales of small cars accounted for 27% of retail car sales, said research firm J.D. Power & Associates. Toyota sold a record 29,000 of its Prius hybrids last month, making it the sixth-most popular vehicle in March. More than 40% of the vehicles General Motors sold last month had the smaller four-cylinder engines, a company record.

With more hybrids and four-cylinder engines in the mix, the vehicles sold in February 2012 get nearly 17% better mileage than those purchased in February 2008, Sivak said.

One reflection of that is evident in figures from the U.S. Energy Information Administration and the Federal Highway Administration. Americans drove just 1% fewer miles last year compared with 2010, but the nation used 3% less motor fuel.

That may help explain the results of a recent Washington Post poll. Asked whether “recent price increases in gasoline caused any financial hardship for you or others in your household,” 63% of the respondents said yes. That’s well below the 77% that answered yes during the price surge of 2008, and it was the lowest affirmative response to the same question in five years.

Still, Americans are feeling the pain, and if prices cross the $5-a-gallon line, there could be a lot more furor. Gallup polled drivers last month and found that about 14% said that even gas priced under $4 a gallon forced them to make lifestyle choices. And 28% said a price point in the $4 range caused them to reduce spending in other areas.

But the tipping point comes above $5, at which level 76% say they would start changing spending habits. With the national average for regular gasoline still under $4 a gallon, Gallup said its data suggest that “there is room for a considerably greater increase in gas prices before Americans say prices will begin to have widespread, serious consequences on their spending and lifestyle patterns.”

During previous surges, high gas prices ate into sales at fast-food restaurants and discount retailers such as Wal-Mart and Dollar General.

Back in 2005, when California gas prices were in the low-to-mid-$2 range, both consumers and politicians were more vociferous with their complaints, especially in California, where, because of refinery and fuel blend issues, prices are higher than in other regions. The House Oversight and Government Reform subcommittee on energy and resources even held hearings in Long Beach.

In 2006, the Federal Trade Commission launched an investigation to look at whether rising gas prices were the result of antitrust violations by oil companies or refiners. It eventually concluded that the increases were based on supply and market conditions.

That same year, the California Energy Commission launched its own investigation, eventually finding that unplanned refinery outages, unusually high fuel exports and tanker troubles — not misdeeds by the oil industry — were the primary drivers behind a springtime price surge.

As prices soared in 2007, state attorneys general jumped into the fray. Florida’s Bill McCollum said his office was looking at more than 200 complaints about price gouging at gas stations. That same year, the House approved a bill that made gasoline price gouging a federal offense.

This year, motorists are essentially saying, “We survived and moved on,” said Jeff Spring of the Automobile Club of Southern California, which closely follows fuel prices.

Activist Jamie Court, president of Consumer Watchdog in Santa Monica, calls it “capitulation.”

“After you get bonked on the head by $4 and $5 gasoline enough times, maybe it doesn’t hurt as much,” Court said.

Yet Court said he believes there’s still plenty of consumer angst bubbling under the outward signs of resignation, and that the public still views oil companies and their executives with disdain.

Long Beach City College education teacher Lee Douglas copes by filling his car every time the tank dips below half. The tab doesn’t feel as bad that way, Douglas said as he pumped $40 worth of gas into his Buick LaCrosse in Seal Beach.

“We have gotten to a point of acceptance,” he said, “whether we like it or not.”
————–
Contact the author at: jerry.hirsch@latimes.com

California refineries “emit 19–33% more greenhouse gases (GHG) per barrel [of crude oil] refined than those in any other major U.S. refining region,” according to a recent report for the Union of Concerned Scientists. The reason is a corresponding increase in the amount of heavier, dirtier crude oil processed, including dark, sticky tar sands oil from Canada. The gasoline produced at the end of the process is no dirtier–but the gases that could otherwise come from your tailpipe are going up the refinery smokestack instead.

A story in Inside Climate Today points to requirements that refiners remove sulfur pollutants from gasoline and diesel fuels. Such scrubbing is harder to do with the cheaper, dirtier tar oil, and refiners may emit more carbon pollutants during a longer refining process, especially as they try to squeeze out more  fuel from every barrel of oil.

California isn’t yet capping refiinery pollution, and this week delayed putting financial teeth in planned emission caps. Pardon us for thinking oil industry lobbying could have had something to do with it.

No one is forcing refiners to buy Canadian tar oil–refiners want because it’s cheaper than lighter oils and produces a bigger profit. It’s the same reason oil companies are demanding their high-volume Keystone XL pipeline from Canada to Texas, which could make California refinery pollution look like a clear day in spring. Exxon Mobil officials won’t even admit that the tar oil is dirtier to refine. From a Texas story on the pipeline:

An ExxonMobil spokesperson refused to specify how much heavy crude the company’s refineries are already processing in Texas or might process if the pipeline is completed. Nor would the company respond to questions about how refining tar sands oil affects the amount of air pollution created by the plants.

Extra profit also comes from U.S. refiners exporting gasoline and diesel fuel at record rates. Fuel is now America’s top export, even as refiners import the dirtiest oil to make it.  Domestic pump prices go up and the refinery pollution burden on Americans goes up while other nations reap the clean fuel.

Californians are already buying and driving cleaner cars and cutting consumption. All families prize clean air, but those who live near refineries are suffering more, not less, pollution.  There’s “gas pain” for everyone except the oil industry and its servants in government, as in a Congress that won’t even trim the industry’s billions in corporate welfare.

Between the quakes, serious drinking water pollution and permanent damage to land around “fracking” wells (so named because they fracture deep rock to release natural gas), even Exxon can’t argue that this sort of natural gas is perfectly safe and clean. Injecting it into bedrock rock faults is out, killing wildlife brings bad PR and pouring it into our drinking water is increasingly frowned on.

I’m no geologist, but making a mess should have consequences for the people who made it. So here’s my top 10 list:

Proper Use of Fracking Wastewater

10. Spray it on the lawns of the oil and drilling executives who commit fracking

9. Fill the swimming pools of state elected officials (for instance Pennsylvania and Wyoming) who let oil companies frack  for years without even disclosing the chemicals they used.

8. Make interestingly colored ice cubes for the refreshment tables at oil company corporate retreats and shareholder meetings.

7. Fill thousands of tanker trucks and park them at the corporate headquarters, vacation properties, investment properties and home driveways of all of the above executives and state and federal politicians.

6. Water the playing fields of NFL and college teams that indirectly made millions from Exxon TV ads about clean, safe and cheap natural gas from fracking.

5. Fill the water coolers of members of Congress who are laboring to eradicate the Environmental Protection Agency and its “job-killing” air and water safety regulation.

4. Hack the Netflix accounts of the same members of Congress so the only offering is the movie “Idiocracy.” Send refreshing “Frack Snack” bottles with the movie. (Spoiler alert: It no longer seems farfetched that corporate political influence would lead to watering farms fields with taxpayer-financed Gatorade-ish sports drinks.)

3.  Top up the debate podium water glasses of presidential candidates who see “drill, baby, drill” as the best energy solution.

2. Turn drilling-site wastewater holding ponds into docks for the sailboats and pleasure yachts of the political and corporate fans of fracking.

1. Make Jell-O salad for every oil and drilling company headquarters cafeteria.

Maybe it’s just a drop in the disposal bucket, but at least the toxic water would be going to the proper places.

The price of gasoline in the U.S. set a full-year record in 2011, swiping $4,155 from the average family pocketbook, more than 8% of family earnings. Last year’s payroll tax cut that was supposed to stimulate the economy went largely to the pockets of OPEC, Exxon and friends.

Given the 4% jump in crude oil prices on Tuesday, the first trading day of the new year, 2012 looks like it could be even worse. What’s most shocking, however, is that effective government could put a stop to the price roller-coaster.

The news stories, parroting the financial analysts, blamed the mini-”Iran crisis” and economic growth in China, India and the U.S. for the oil price spike. But the truth is that Iran’s saber-rattling is nothing new and on-and-off embargos have already diminished the importance of Iranian oil in world markets. Just a week ago, oil prices fell slightly when the same analysts proclaimed Iran’s actions as “empty threats.”

Another truth is that growth in the U.S. and Asia is offset by the economic mess in Europe, where economies have shrunk and the risk of full economic meltdown persists. So worldwide oil demand is expected to be flat in 2012, and U.S. crude oil supplies are still well above what they were before the 2008 economic meltdown, according to U.S. Energy Information Administration data.

There is absolutely no supply and demand reason for crude oil prices to spike above $100 a barrel, or for families to fork over 8.4% of their income on gasoline to get to a worse-paying job than they had three years ago. The real reason remains speculation in oil markets, and a government so beholden to financial and corporate powers that it can’t respond in any effective way.

From London’s Guardian newspaper:

BP’s attempt to rebuild its public image after the worst oil spill in US history has been dealt a blow by court documents showing it was willing to do a major deal with Russian billionaires whom it regarded as “crooks and thugs” to gain access to the country’s vast oil wealth.

The damaging allegations have come to light at a critical time for BP, which faces a criminal investigation by the US justice department while preparing to fight a massive legal case in New Orleans over the Gulf of Mexico oil spill.

North American rival Norex Petroleum is seeking $1bn damages in its case at the New York supreme court as it argues that BP and its Russian business partner, TNK, have benefited from oil assets that were seized [by TNK] in the late 1990s. Russia is important to BP – its joint-venture, TNK-BP, produces a quarter of its oil. At the heart of the dispute is the alleged misappropriation of the Yugraneft oilfield in Siberia, which Norex claims has generated $1bn in oil revenues in the past decade.

In 2003, BP announced a $6.75bn (£4.2bn) deal to acquire a 50% holding in Tyumen Oil – TNK – which was backed by Alfa Access Renova (AAR), a consortium controlled by four of the country’s richest businessmen, Mikhail Fridman, German Khan, Leonard Blavatnik and Viktor Vekselberg.

Of course, there are precious few businesses that think investing in Russia’s private sector is a safe or good idea, and a new book by a British reporter tells the whole Russian privatization story in its title, “Mafia State.” But for BP, the smell of oil overcame the stench of corruption.

It’ll be interesting to see how BP frames its defense. BP’s lawyers can’t just say that executives knew the Russians were crooks but their need for new oil was greater than their scruples–not while facing a Justice Department criminal investigation that has reportedly reached the the grand jury stage (according to a July 2011 SEC filing by Halliburton)–and could indict individuals as well as the company.

The ongoing criminal investigation and BP’s cavalier corporate scruples in the Russian deal ought to raise some sharp questions in the White House about its decision last month to let BP resume drilling in the Gulf of Mexico–in even deeper waters than the location of the 2010 spill.

Cooper says:

By building on analyses and testimony offered by the Consumer Federation of America during the rapid expansion of oil commodity market trading and the escalation of price in the mid-2000s, the paper shows that excessive speculation, not market fundamentals caused the spike in oil prices. The movement of trading and prices in the three years since the speculative bubble in oil burst in 2008 provides even stronger evidence that excessive speculation is a major problem that afflicts the oil market and the economy. …

Failing to provide effective oversight of speculation, policy makers allowed the enrichment of Wall Street speculators through financialization of commodities like oil, at the expense of the real economy on Main Street.

The Consumer Fed study concludes that the gambling of market speculators adds about $30 to the average price of a 42-gallon barrel of oil, now hovering near $85 in the U.S. That translates to nearly $1 a gallon, once  refining and financial carrying costs are added in. Think what the costs are to truckers, railroads and airlines, as well as farmers and manufacturers.

Yet our regulators, specifically the federal Commodity Futures Trading Commission, have been so cowed by financial lobbyists that they have endlessly delayed  regulations that would begin to halt excessive speculation. A vote on key regulations is scheduled for Tuesday Oct. 18, and the 5-member CFTC board now reportedly has three votes to pass them.

Main Street can’t wait much longer.

Their claim that they ensure compliance with all “applicable environmental and safety regulations” is my personal turning point, because in the U.S. those regulation barely exist. It’s easy to comply with nothing, so Exxon can get away with telling us that fracturing bedrock thousands of feet deep, drilling through the aquifers that supply our drinking water, using scarce water supplies spiked with an unidentified slew of toxic chemicals, is as safe as braiding a a daisy chain.

Some other countries, however, are starting to act on their doubts.

France has outlawed this drilling, known as “fracking,” until doubts about what it does to water supplies and how its waste poisons the land are dealt with. Britain’s Advertising Standards Authority banned one of the Exxon ads, stating that its claim on liquefied natural gas as one of the world’s cleanest fuels is misleading.

In the U.S., enviro and consumer groups grumble, and SolarDave has made an on-target spoof of the Exxon ads, but our lawmakers and regulators are still mostly twiddling their thumbs. There isn’t a federal requirement that drillers tell us what chemicals they’re squirting into the ground, or a law to prevent dumping their wastewater into the rivers from which we drink.

After a slew of investigative reporting (special kudos to ProPublica) on the health and environmental fallout from fracking, government is starting to ask questions. This week, Sen. Jeff Bingaman of New Mexico led off a Senate Energy and Commerce hearing on fracking, ticking off the water issues, land poisoning and air pollution issues, and adding on fracking’s release of highly potent climate-change gases, particularly methane. But a show of sympathy is a long, long way from effective regulation.

Fracking waste pit

Pennsylvania, where some of the most egregious fracking complaints are centered, and four other states are now requiring some disclosure of drilling chemicals, but not regulating them.

California is even more pathetic. The state agency that is supposed to regulate natural gas says it doesn’t  know how many fracking operations the state has, if any, or where they’re located (even though industry sources identify at least seven locations around Bakersfield).  A bill to require identification of the wells and the chemicals they’re using failed to pass the Legislature this year. The reason, as stated by one of the negotiators on the bill a few weeks before it died, was that the oil and gas industry wasn’t completely satisfied with it:

[T]he bill’s ultimate chance of passage… could hinge on getting the state’s oil and gas producers completely on board to back the legislation, but as of yet, the bill’s sponsors still have not come to a complete agreement with the … industry on several issues.

So it boils down to this: In the U.S., what the oil industry wants too often trumps the needs of citizens and the health of the environment. it’s never been more clear than with fracking.

The speculators are counting on the public not understanding or caring about commodities regulation. Prove them wrong.

Here’s OilWatchdog’s earlier post on the damage the speculators are doing. And here’s the text of the e-mail message sent by Tyson Slocum at Public Citizen, explaining the technical point at issue:

Did you know that for every gallon of gas you buy, 65 to 70 cents goes right into the pockets of Wall Street traders?

Speculation on Wall Street, while currently legal, artificially inflates the price purely to make traders richer. It has nothing to do with how much it costs to find, refine or distribute oil. It’s just the manipulation of markets for the sake of greed.

American consumers end up paying millions and millions more for fuel. And the distorted profits contribute to perpetuating our addiction to oil.

You can do something about it.

The 2010 Wall Street Reform and Consumer Protection Act gave the Commodity Futures Trading Commission (CFTC) the authority to limit speculation.

But the CFTC has not only failed to act so far, but just postponed a vote on a rule intended to crack down on oil speculation scheduled for September 22 after a huge lobbying campaign by Wall Street.

Sign a petition urging CFTC Chairman Gary Gensler to limit practices that give Wall Street speculators huge profits while driving up our energy costs.

We WILL get Chairman Gensler’s attention. Even with a problem as serious as this, he’s not expecting activists to weigh in on what he considers a technical aspect of the Wall Street reform legislation.

The reform would place restrictions (a.k.a. “position limits”) on how big a chunk of the oil market a single trader, like Goldman Sachs, can control. More effective competition is created by limiting the size of such positions.

Of course, the larger a share of the market a bank controls, the more opportunities it has to control prices and make bigger profits. So the banks have been fighting back at the CFTC, trying to get the agency to back down. It’s your job to show the collective voice of the people is bigger than the money and lobbying of just a couple of banks.

Sign the petition today and we’ll deliver your signature to Chairman Gensler before the vote (which is now scheduled for next month).

The CFTC has the power to stand up for consumers and end Wall Street domination of energy markets. It’s time for them to exercise that power.

 Sept 13 (Reuters) - A potential leak at a Chevron (CVX.N) oil
installation in the Gulf of Mexico has led the company to shut
down its Main Pass pipeline network offshore Louisiana, it said on
Tuesday.

 Chevron has shut a portion of the Main Pass pipeline as well
as its Cypress line, the company said in a statement. Chevron
didn't say how much oil is transported on the lines or provide
details about the potential oil spill at the Main Pass 299 block.

 Several calls to Chevron for comment were not returned.

How can anyone still buy the idea that major energy industries should be allowed to regulate themselves?

From Tuesday’s report in the Los Angeles Times:

In a scathing critique, federal investigators blamed Pacific Gas & Electric Co. for what one official called “baffling” mistakes that led to a gas pipeline explosion last September that killed eight people and destroyed 38 homes in the Bay Area last year.
The National Transportation Safety Board also said PG&E exploited the lack of monitoring by regulators, who mistakenly placed “blind trust” in the utility.
The report Tuesday concluded that poor pipeline welds went undetected because of a lack of inspections by the company and inadequate monitoring by state and federal regulators. The utility also lacked a workable emergency response plan that board members said could have helped to prevent the devastation in the city of San Bruno.
“This represents a failure of the entire system — a system of checks and balances that should have prevented this disaster,” said Robert L. Sumwalt, an NTSB board member.

Yet “failure” is too neutral a word. The crippling of regulatory checks and balances was exactly what PG&E intended as it spent $100 million lobbying Congress and federal agencies since 2006. From the California Progress Report:

 For years, PG&E and utility lobbyists have used a standard set of arguments to head off proposed safety regulations: higher costs to consumers, impractical and rigid prescriptions, unnecessary rules, ‘one-size-fits-all’ regulations that don’t work. If they weren’t reeling from the disaster today, they’d likely be calling new legislative proposals to strengthen pipeline protections “job killers.”

PG & E lobbied aggressively – and successfully — against several key safety proposals over the last decade.

What if PG&E had used some of that $100 million to run an internal pipeline check up through the corners and curves of the San Bruno pipe? Even one check over decades of use would have found the grossly faulty welds that gave way in an inferno.Then again, finding the bad weld would have led to costly digging and replacement, and the likelihood that similarly bad pipes are in other places

PG&E’s disregard for the lives of its customers doesn’t, however, excuse the state Public Utilities Commission from its own complete failure to inspect pipelines. The PUC never trained specialists in pipeline inspection and relied on corporate promises of safety responsibility–much as federal regulators ceded their responsibility to oil companies drilling in risky deep water in the Gulf of Mexico. Corporate safety in the energy industry has proved an oxymoron–over and over, in ever deadlier ways.

The next time energy lobbyists utter the phrase “self-regulation,” legislators need to summon the guts to chase them out of the room.

Economists are cheering the drop in the price of oil, but it won’t do much to help consumers unless the price of fuel comes down as well.

Attached is the AAA national price chart for Wednesday. Note that the gap between the price of oil and the price of gasoline is about $1.80–around twice the recent usual, and the gap has been growing since the beginning of July. Because stations these days turn over their inventory fast, unlike in the old days of mom-and-pop stations, there’s no visible excuse for the retail prices.

I’m often on the side of gasoline retailers when it comes to pricing, because they get squeezed by refiners and price-setting by their suppliers. But wholesale gasoline prices are also dropping sharply, so it looks like the branded retail chains are reaping a bonanza even as drivers suffer as much as ever from a trashed economy.

Yet the real shock in the story is that we allow energy companies take vast quantities of fresh water, add largely unregulated chemicals and force it under high pressure into deep shale beds to fracture rock and release natural gas. The gas rises back up like soda water and releases the gases it collected underground (methane) and the chemicals added by drillers, sometimes morphed by heat and pressure into something more dangerous (cancer-causing benzene).

It turns out that in 2005, the Bush Administration got Congress to exempt this “fracking” technique from federal clean air and water rules.

Here’s the result, described by a Texan living in the middle of it, as told to Propublica.com:

 I live and work in south central Texas. The nations new hotspot for fracking. The enviromental destruction Fracking has caused in the last 5 years is unbelievable. The air quality in this rural area is worse than in most large cities. The wholesale destruction of the ecosystem is unimaginable. The amount of water used in fracking is irresponsible in a water scarce region.

The Environmental Protection Agency is acting to curb the smog-causing methane and other air pollutants because of a federal lawsuit by environmental groups. Its selling point for the regulation is that the drillers could actually make money by capturing and selling the methane. Conspicuously absent is any mention that methane is a far more potent greenhouse gas than carbon dioxide–though of course it’s now so unfashionable to believe in global warming, much less talk about it.

Federal regulators are still prohibited by the 2005 law from controlling the ruination of vast amounts of clean water in drought-ridden states and the contamination of drinking water. So it’s left to the states. Expectably, Pennsylvania and New York are acting. But Texas, the free-market state, will take the asthma, please, and its drillers, from Exxon down, will no doubt do all they can to cripple the federal regulations before they’re final.

See ProPuiblica’s pioneering series on fracking, and the damage the industry has inflicted from New York to the Southwest, here.