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The Enron shuffle–all over again

by Donald Prothero, Oct 17 2012


For the past several weeks, California gas prices have jumped to around $4.67 a gallon on average, with many stations charging over $5.00 a gallon. (By contrast, I was just in Alabama last week where the price of gas was about $3.30 a gallon, and that’s typical of much of the nation). The official reason given for this price spike was an electrical problem in an Exxon Mobil oil refinery in Torrance, just as the refineries were making the transition from summer blend gas to winter blend gas. Earlier this August, we had another price spike due to a Chevron refinery fire in Richmond, California, that temporarily choked the flow of gas. Naturally, this has outraged the consumers, who lash out at the politicians, the oil companies, the hapless gas station owners, and anyone else they can think of. The price appears to be easing now, because Gov. Brown has urged the release of our winter blend gasoline three weeks early, but it has raised several important questions. How did this happen? Who is really behind it?

As usual, the public and even the media are blaming the wrong people, with crazy conspiracy theories abounding. For example, one right-wing pundit blamed it on illegal aliens filling up their gas tanks as they head back to Mexico before Romney’s victory! Contrary to popular belief, most politicians or government agencies have little or no ability to affect the short-term price of gas, except by extraordinary measures such as releasing gas from the Strategic Petroleum Reserve, or relaxing the rules on California’s gasoline refining laws. Even encouraging drilling in every possible place doesn’t help that much, because the extra American oil just goes into the overall supply, and may just as likely end up in China. Some are outraged that our gas here averages 30 cents per gallon more than most other states (except Hawaii, isolated from refineries). That extra surcharge was put in place long ago to combat California’s severe pollution problems and clean up our air. It’s a price that those of us who used to choke and get sick from smog are willing to pay. We remember first- and second-stage smog alerts here in L.A. in the 1960s and 1970s, and the air is MUCH cleaner now, with almost no smog to mention any more. Others blame the price rises on the pressures of China and India and their runaway development and consumption of oil, and that part is true—but they have nothing to do with the short-term spikes, only the long-term pressures. And as Matt Taibbi shows in his recent book Griftopia, the long-term rise of oil prices is driven more by the out-of-control commodities speculators, as much as it is by global demand due to expanding Asian economies.

Instead, a number of investigative journalists and economists have shown that the key culprits are familiar ones—large energy monopolies which have created artificial scarcity by restricting supply at key choke points, and driving up prices to make huge short-term profits. Because California’s anti-pollution laws make it necessary to refine special gas for California alone, the oil companies have deliberately kept their refining capacity just barely above the minimum, so any short-term disruption means a huge price spike. This allows them to charge 30 cents per gallon more than in other states, since it is not in their interest to make the price of gas in California competitive. In addition, the rest of the U.S. has on average about 24 days’ supply of gasoline on hand; California has only 10-13 days. Not surprisingly, oil companies have reported that their California refineries are consistently the most profitable in the U.S.

As the Los Angeles Times reported on Oct. 12:

Memos from West Coast oil refiners from the 1990s and released years ago by Sen. Ron Wyden (D-Ore.) suggest that this is a deliberate business strategy. An internal Chevron memo, for example, stated: “A senior energy analyst at the recent API [American Petroleum Institute] convention warned that if the U.S. petroleum industry doesn’t reduce its refining capacity, it will never see any substantial increase in refinery margins.” It then discussed how major refiners were closing down refineries. Oil company profit reports show each dramatic gasoline price spike over the last decade has been mirrored by a corresponding corporate profit spike. This situation is well known to policymakers in California. About a decade ago, after some sharp, unexpected price hikes, then-Atty. Gen. Bill Lockyer formed a gas pricing task force that included industry experts. We viewed industry documents and cross-examined industry representatives. Among the conclusions: “Supply disruptions that contributed to major price spikes of 1999 are likely to continue … because (1) California refiners have little spare capacity to cover outages; (2) California refiners maintain relatively low inventory levels.” The report also noted: “Refiners have significant market control.” The task force recommended a series of measures, including building a strategic gasoline reserve that could flood the market when supply is most scarce. But the Legislature didn’t listen. And now we are near 5 bucks a gallon.

Back in 2005, Shell attempted to bulldoze some of its refining capacity, and they were stopped by Sen. Barbara Boxer and Attorney General Bill Lockyer. Internal Shell documents released later showed that these refineries were very profitable and not losing money, so the only reason for Shell to destroy them was to tighten supply even further. In the most recent spate of price gouging, Sen. Diane Feinstein has ordered an investigation after Tesoro Energy was caught trying to squeeze the supply and was forced to buy outside oil to meet its obligations. But the underlying problem is consolidation: too few companies hold almost all our refining capacity, and there is no strong incentive for them to compete or make gas cheaper when gouging California drivers is so profitable. At the moment, Tesoro is trying to buy up Arco, our lowest-cost gasoline chain, currently owned by BP. If the California attorney general lets the purchase go through, Tesoro and Chevron will control 51% of the oil refining capacity in the state, making them a virtual monopoly able to manipulate the price any way they want (and eliminating Arco as the last low-cost national chain in California).

Those of us old enough to remember 2001 are having a sense of deja vu. Back in 2000, the huge Enron Corporation in Houston obtained control over much of California’s electrical grid. As their own internal documents showed, they then used this leverage to manipulate the electrical prices in California in the summer of 2001, generating  38 artificial rolling blackouts by getting suppliers to shut down for unnecessary maintenance, and playing all sorts of tricks to generate artificial scarcity, drive up prices, and enrich themselves. Later on, their internal communications were released showing them gloating over the crisis they had created here and over the wealth they had reaped from their crimes. The Feds finally stepped in during late June 2001 to curtail their activities, but the damage had been done to the California economy. Gov. Gray Davis was destroyed by these outside forces that he could not stop or control, and the voters unfairly punished him with a recall which then gave us the disastrous Schwarzenegger years. We all had the last laugh later in 2001 when Enron itself collapsed and its bosses went to prison over its corruption and criminal activities, but it was too late for California to recover from what an unregulated system of unscrupulous speculators and monopolies can do to the largest state in the union, and a state that by itself is the eighth largest economy in the world.

The Enron pirates were  finally curbed by Federal regulators and then Enron collapsed of its own misdeeds, but no similar effort has been made to curb the power of the major oil companies in California. As this article points out, the easiest solution would be our own strategic petroleum reserve, or at least some sort of state regulation on the oil companies to force them to build refineries and create enough capacity to prevent future squeezes. So far, the Legislature has been unable to act on this idea, even though it is clearly in the best interest of California and its voters. This raises even larger issues: why is government so unwilling to regulate huge powerful corporations that are hurting the consumer (despite all the oil companies’ upbeat PR about how they are helping us)? We don’t allow aircraft companies or airlines to build or fly planes without multiple backup systems and strict safety regulations, so if one part fails, the plane doesn’t crash. It’s in public’s best interest to prevent this, even though it means a greater cost to build,  maintain, and fly each plane. Why then do we allow oil companies to build insufficient refining capacity and periodically squeeze drivers and reap huge profits, when it’s clearly not in the public interest for them to do so? If ever there were a place for government regulation to prevent disasters for consumers and the economy, this seems to be a good example of it.

And the next time you hear someone raving about the virtues of unfettered capitalism, just remember the pirates of Enron—and the robber barons of the oil industry that still hold the nation’s largest state as a hostage.

 

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The Enron shuffle--all over again, 4.0 out of 5 based on 14 ratings

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72 Responses to “The Enron shuffle–all over again”

  1. robin says:

    All you people crying for more regulation and more government control, what a bunch of useful idiots you are.

    I’m going Galt, bye bye!

    • Joseph says:

      What a biting and insightful argument.

    • Jimmy Russell says:

      Yes, I’m sure you’re such a large contributor to the greater good of society, and not just another cog in the machine. Get back to work, those burgers aren’t going to flip themselves, and yes, I do want fries with that.

    • Tom Stewart says:

      Galt actually had something to contribute, thus his withdrawal of this production had an effect.

      And you have..?

    • AL says:

      Guess this is what’s known as a Hit-and-Rand.

  2. M says:

    It’s always so funny to hear about gas prices in the US.

    We have about USD 9 per gallon (15-16 SEK/liter) here…

    • WScott says:

      Yeah, I was in Iceland recently and thought the gas prices weren’t too bad…until I realised it was per LITER, not GALLON!

  3. george says:

    Our dependance on oil has resulted in a tremendous shift of political power to the middle east and a huge drain on our economy. The Arab oil embargo of the ’70s was a warning to us. That the U.S. and Europe have not embarked on a Manhattan scale project to replace oil will go down in history as one of the greatest failures of leadership ever.

    • Daniel says:

      You have to be more specific about what kind of “Manhattan scale project” you’re talking about, how much it would cost, who would pay for it, and be able to answer a lot of other questions, before this argument can be taken seriously. Otherwise, you might as well be saying that with a “Manhattan scale project” we could have colonized Mars or mastered interstellar travel by now.

      • Daniel says:

        Sounds like an interesting idea that might work. Just note this caveat from the article:

        “’In 2011 Denmark was the only EU member state to be energy self-sufficient,’” with energy production 10% higher than consumption in 2011. The main reason is the large amount of oil that the country has in the North Sea relative to its small population of around 5.5 million.”

      • tmac57 says:

        Duly noted that there is a vast scale difference.
        The oil reserve is irrelevant to their goal:
        “The Danes have an impressive goal of 100% renewable energy by 2050 for all of their energy, not just electricity; ”
        I would not bet against them with their track record thus far.

      • Daniel says:

        I’m not an economist, but Hansen’s idea seems pretty naive. So everyone pays an extra dollar per gallon of gas, and then, on average anyway, gets a $3,000 check? Would they not just use that check to buy more gas or buy other stuff that directly or indirectly results in carbon emissions?

        Comparing externalities associated with carbon emissions with those of companies that dump toxic chemicals in a river is apples and oranges. You can roughly estimate what it costs to clean up the river. That’s why those situations can be resolved in litigation, albeit imperfectly. It would be much, much more difficult, if not impossible, to sue Exxon and get an honest number that represents the environmental damage that results from the burning of a gallon of gas.

      • tmac57 says:

        There are already precedents set with the cap and trade policies around the globe.Putting a price on carbon is not an exact science,obviously,but putting some price on it is necessary if we want to disincentivize it’s use.
        I think that it’s true that in Hansen’s plan that some of the added fee would be spent on more gas,but it would also create a price pressure that would cause people to conserve gas,and buy more fuel efficient vehicles,and use the returned fee for other expenditures.

      • tmac57 says:

        Here is an in-depth and rather technical discussion on carbon pricing and why it is so important to the economy as well as the environment:

        http://www.skepticalscience.com/co2-limits-economy-advanced.htm

        Gets pretty deep,but there is also an intermediate discussion tabbed there that is easier to grasp.

      • Daniel says:

        I’ll be honest, I stopped reading it after a few paragraphs.

        I see things about “social costs” I start to roll my eyes, and can tell that the analysis is a huge stretch. You can use all of the fancy jargon and graphs that you want, you cannot state with any certainty at all what effect climate change will have on agricultural production or public health. At most, you could do a rough estimate about the costs of rising sea levels associated with property loss, and the like, but even that’s a stretch.

        Also, for fear of sounding like Jim Inhofe, there are thousands of troubles in the world that ridiculously get blamed on climate change. In the Atlantic, a supposedly serious publication, some writer actually pinned the blame for Darfur on climate change.

        At bottom, there’s enough uncertainty about what the ultimate results of the status quo will be, that anyone who claims to be able to create an economic model about the consequences is not to be taken seriously.

        It doesn’t mean you don’t do anything. It just helps to be open and honest about the difficulties associated with doing whatever it is you think needs to be done.

      • george says:

        By Manhattan scale I’m referring to the Manhattan project that developed the A bomb during WWII. Since the oil embargo we should have invested that level of effort and money.

      • Daniel says:

        Yes, I know what the Manhattan Project was and the point you were trying to make. But you again are extremely vague in what end you want to achieve, much less the means to do it.

        The Manhattan Project had a very specific goal in mind. You are pointing to a vague concept like “energy independence”. Do you mean electric cars (the electricity has to cone from somewhere often coal), more nuclear powerplants (radioactive waste and uneconomical to operate even if you coud theoretically do away with regulatory costs) ethanol (destroy food to power cars and cause environmental damage by requiring mote land to be used for agricultural use)?

        In a few places some very smart people are trying to create a fusion reactor. My science education didn’t go past introductory high school physics, but my understanding is that creating economical fusion energy is extremely difficult and has eluded some very smart people. Maybe someone who’s more familiar with it can tell us whether the best minds — the Oppenheimers, Fermis and Feynmans of this generation — would be able to eventually do it with a budget of $100 billion per year, which is roughly what the Manhattan Project cost in terms of percentage of GDP translated into today’s dollars.

      • Max says:

        You don’t have to be an expert and already have a specific technology in mind to realize that we should invest in alternative energy that’s cleaner, safer, affordable, sustainable, and made at home. The Manhattan Project had multiple lines of research.

      • Daniel says:

        @Max 3:01am

        If the taxpayer is going to foot the bill to the tune of a significant percentage of the national wealth, which is what any Manhattan Project type endeavor will entail, you better believe that I want there to be specific technology or technologies in mind. (You obviously mean the taxpayer when you say “we should invest”). Guess I’m some sort of backward yahoo for being a little upset that my “investment” ends up in the hands of the President’s buddies.

        So again I ask what “alternative energy” are you speaking about that will allow 310 million people to provide electricity for their homes, power their automobiles, and all the other things in a $14 trillion economy.

      • tmac57 says:

        Daniel,maybe this* kind of approach will appeal more to you:
        http://youtu.be/W01nZjZVYQU

        *Amory Lovins TED talk on ‘Reinventing Fire’.

      • Max says:

        Daniel,

        The project goal would be to discover this alternative energy. It would be arrogant and counterproductive to assume from the outset that we already know the answer, especially non-experts. That’s how you end up sinking all your money into one technology that fails.

      • Beelzebud says:

        A project like this would have been better than invading Iraq for nothing.

      • Daniel says:

        When you argue “if not for Iraq”, you have no argument.

  4. Catfish says:

    You folks back in the states can’t moan about your gas prices till they hit $8.50 a gallon like over here in Northern Europe. Be glad gas in subsidized as much as it is.

    • Daniel says:

      Gas is not subsidized in the US, unless you’re of the view that allowing oil companies to depreciate the price of equipment and the like for tax purposes or not being taxed as much for externalities. It IS subsidized in the true sense in OPEC countries, such as Venezuela.

      Gas prices in Europe are much higher because of high consumption taxes.

      • tmac57 says:

        Personally,I do see failure to tax fossil fuel externalities as a subsidy.

      • Daniel says:

        The problem is that fossil fuel externalities are extremely difficult to measure, especially if you consider global warming to be one of those externalities, so it’s hard to arrive at a tax to cover them, even if you take the view (which I don’t, but that’s a matter of opinion) that it’s a subsidy.

      • tmac57 says:

        Here is one idea put forward by James Hansen:
        http://bigthink.com/ideas/17890

      • tmac57 says:

        If the U.S. government allowed a giant manufacturing company to dump all of it’s waste on to public and private lands for free,that would be a definite financial perk for that corp.We can be pedantic about wording,but that is beside the point.

  5. Trimegistus says:

    Pretend Mr. Prothero is a crackpot talking about how the oil companies suppressed his perpetual-motion engine. Now re-read the article: would it be any different? No. This is conspiracy-theory foolishness and to call it “skeptical” is an insult to every reader of this site, not to mention the other contributors.

  6. John H says:

    And yet we refuse to temper our demand for the commodity. For all but the poorest segment of American society, the increasing cost of gas is no more than an irritant.

    • Daniel says:

      Who is the poorest? A family that has a combined income of $60,000, which is above-average for virtually the entire industrialized world and an order of magnitude above the truly poor countries, a 40 percent increase in the price of gas makes a very big impact, especially for people that have to drive to work. (That doesn’t even get into the higher prices that people would have to pay for everything else as a result, since high gasoline prices impact the cost of an airline ticket, trucking, etc.).

      Of course if we were a truly enlightened country, we’d have more bike paths, or at least that’s what we’re told by Prothero.

  7. Daniel says:

    Translation, right wingers always point to a conspiracy, but this is the REAL conspiracy.

    Gas prices are up everywhere, which is the point people have been making. By concentrating on Enron, which went bankrupt a decade ago (right as it was able to get into the carbon trading market), and California and whatever it’s unique problems are, Prothero creates a nice red herring.

    Prothero’s greatest hits:

    “Because California’s anti-pollution laws make it necessary to refine special gas for California alone, the oil companies have deliberately kept their refining capacity just barely above the minimum, so any short-term disruption means a huge price spike.”

    This should read, “Because California’s anti-pollution laws make it necessary to refine special gas for California alone, the oil companies ARE IN A POSITION to keep their refining capacity just barely above the minimum….”

    If California could get its gasoline from any refinery, there would be increased competition, which would not allow, or at least greatly hamper, this type of manipulation to occur in the first place. Why doesn’t this market manipulation happen anywhere else in the country, because no other state has California’s onerous anti-pollution regulations. Note, those regulations might be necessary or otherwise a good thing, but they obviously have consequences to California consumers and other trade-offs. This point ought to be uncontroversial.

    “We don’t allow aircraft companies or airlines to build or fly planes without multiple backup systems and strict safety regulations, so if one part fails, the plane doesn’t crash. It’s in public’s best interest to prevent this, even though it means a greater cost to build, maintain, and fly each plane.”

    Airplane back-up systems for safety purposes being compared with forcing private companies to expand refining capacity, presumably at the private companies’ own expense? That’s a whopper. A better comparison, at least if Prothero were being intellectually honest would be comparing a non-existent regulation to require airlines to purchase a certain amount of planes to, maybe, get lower prices, with a non-existent requirement that an oil company have a certain amount of refining capacity.

    Prothero proves once again that he’s by far the weakest contributor to this blog. There’s a place for ranting about oil company conspiracies, robber barons, “unfettered capitalism” (whatever that means) and economic preferences. I just fail to see what place those sorts of things have on a blog that ostensibly is devoted to skepticism.

    • Miles says:

      Well said, Daniel. I’ve reached the point where I tend to pre-emptively cringe while starting to read the next Prothero article. It’s nice to know I’m not alone.

  8. bobco85 says:

    Reading your article, I found myself wanting to nod my head along but stopping myself because of a lack of evidence and explanation. I liked your mention of the Enron scandal as it does relate to this topic. While I understand your point about oil companies having a financial advantage to restricting supply and having a possible corruptive interest in doing so, but do not think you proved it with your assertions.

    To prove your argument, I would relate the difference in seasonal price changes to price changes after historical refinery incidents. An explanation of production rates (seasonal and after historical incidents) at refineries would also help. With some financial figures from the oil companies, you could show that the oil companies would have a motivation to restrict production and lower supply for the purpose of increasing profits.

    It’s the two cents of an armchair skeptic, but I hope you take the constructive criticism. That said, you did gain my interest in researching this subject further to uncover the truth and track this story including the federal investigation.

    • Daniel says:

      Oil companies always have a motivation to restrict production and lower supply. That’s what OPEC does. US oil companies do not have that sort of power on their own. The reason that suppliers are able to do shenanigans in California is because California’s environmental regulations have the effect of restricting the number of suppliers.

      • Miles says:

        Also, notice that these accusations of conspiratorial price-gouging expectorated by Prothero and his kin only seem to flare up over a single commodity: oil. Observe that when such prices fluctuate in other industries (even regionally), such as sugar, there is no automatic reflex of demonizing greedy sugar-barons conspiring to fleece the populace. It is simply assumed that rises in other commodities are simply the result of something contributing to increased costs to the producer. Why is that I wonder? Are oil executives inherently more greedy and less moral than metal executives according to this theory? The “evidence” given for oil-baron price-gouging is that they have an incentive to do so, which means that’s why that must have happened. Do other executives not have the same incentives?

  9. C. Van Carter says:

    You want environmental regulations but you object to the consequences of environmental regulations. You want cheap gas, even though higher gas prices reduce consumption, which is good for the environment.

    “the rest of the U.S. has on average about 24 days’ supply of gasoline on hand; California has only 10-13 days.”

    That’s because of California’s requirements for reformulated gasoline, which are a good thing if you want to reduce pollution.

    “Why then do we allow oil companies to build insufficient refining capacity”

    We discourage companies from increasing refining capacity, for environmental reasons.

    “In the most recent spate of price gouging”

    There’s no such thing as price gouging.

  10. Carter says:

    You want environmental regulations but you object to the consequences of environmental regulations. You want cheap gas, even though higher gas prices reduce consumption, which is good for the environment.

    “the rest of the U.S. has on average about 24 days’ supply of gasoline on hand; California has only 10-13 days.”

    That’s because of California’s requirements for reformulated gasoline, which are a good thing if you want to reduce pollution.

    “Why then do we allow oil companies to build insufficient refining capacity”

    We discourage companies from increasing refining capacity, for environmental reasons.

    “In the most recent spate of price gouging”

    There’s no such thing as price gouging.

  11. MadScientist says:

    Eradicate the futures exchange – that’ll bring down the prices of a lot of commodities, especially oil products.

  12. d brown says:

    THE IDEA OF A FREE MARKET IN OIL OR GAS IS A BAD JOKE. The supply is set by OPEC governments. The English magazine the Economist said years ago that mostly Wall St bankers were using the English market to corner oil futures and it added %20 or 30 to the price of oil. In one of the last big gas shortages, it was said that shipping rerecords showed there were so many tanking going round and round that the shortage would end if they docked. But the price had to be right first. When you make gasoline you also make fuel oil. More gas or more fuel oil is made as needed. In the past it was stored for use by season. Now its sold on the international market. We exported gasoline and oil all the summer. The lack of rain has driven up the cost of corn, and dumb laws makes us use corn based alcohol in gasoline. Every one from the Pope to any engineering student knows its not just dumb but evil to burn food and make it cost more. Almost all the American oil companies were sold to two international ones who are proud to say they are not American. Enron for one and what their shareholders make is whats important. One of the first things they did was close down all most all the old refineries and use two big ones. If anything at all happens to them the gas supply is lowered and the price jumps up. They also took out all the tank farms. So there is no stored backup oil or gas. They said the tank farms were not needed thanks to the wonderful two big refineries. But they don’t say that if anything at all happens at one the price of gas jumps. The Right keeps saying that the oil companions are not allowed the permits for new refineries. In fact there were many given. Nobody wanted to use them. Special gas alone has never been shown to help. In fact one study showed it, did nothing that could be found. It may just be a con to make more money.

  13. sillyMe says:

    Who is really behind it? The crazy radical environmentalist (as opposed to the reasonable environmentalist) who have forced California to “one up” the EPA (which is also run by crazy radical environmentalist) on every regulation. Gee, who could have guessed all these crazy rules and gasoline blends and NIMBY could have caused higher prices and shortages?

  14. Nyar says:

    If you don’t like the price, you don’t have to buy the gas. Ride a bike, you may even lose some wieght.

    • Canman says:

      The reality for most people is less driving or taking a bus. There’s a tradeoff between environmentalism and standard of living.

  15. Max says:

    “For example, one right-wing pundit blamed it on illegal aliens filling up their gas tanks as they head back to Mexico before Romney’s victory!”

    The canned laughter that followed should’ve been a clue that this was a joke. Poe’s law doesn’t even apply here because of the “blatant display of humor.”

    • Max says:

      Oh, and she didn’t say, “before Romney’s victory,” she said, “after 4 years of the Obama economy,” though I can understand why you’d equate the two.

  16. d brown says:

    Its not Obama’s economy, its Bush’s and the Right-Wing in Congress. Can you say sabotage.

  17. Steve Robinson says:

    Yet another left wing political piece on skepticblog. Is it just me, or have you taken it up a notch with a looming election?

    You are entitled to your view, but I wonder if it would better be expressed on a political blog. One thing it is not is objective or “skeptical”

  18. sillyMe says:

    The day the democrats took over was not January 22nd 2009, it was actually January 3rd 2007 the day the Democrats took over the House of Representatives and the Senate, at the very start of the 110th Congress.

    The Democrat Party controlled a majority in both chambers for the first time since the end of the 103rd Congress in 1995.

    For those who are listening to the liberals propagating the fallacy that everything is “Bush’s Fault”, think about this: January 3rd, 2007 was the day the Democrats took over the Senate and the Congress. At the time:

    The DOW Jones closed at 12,621.77
    The GDP for the previous quarter was 3.5%
    The Unemployment rate was 4.6%

    George Bush’s Economic policies SET A RECORD of 52 STRAIGHT MONTHS of JOB GROWTH Remember the day…

    January 3rd, 2007 was the day that Barney Frank took over the House Financial Services Committee and Chris Dodd took over the Senate Banking Committee.

    The economic meltdown that happened 15 months later was in what part of the economy?
    BANKING AND FINANCIAL SERVICES!

    Unemployment… to this CRISIS by (among MANY other things) dumping 5-6 TRILLION Dollars of toxic loans on the economy from YOUR Fannie Mae and Freddie Mac FIASCOES!

    Bush asked Congress 17 TIMES to stop Fannie & Freddie – starting in 2001 because it was financially risky for the US economy.

    And who took the THIRD highest pay-off from Fannie Mae AND Freddie Mac? OBAMA. And who fought against reform of Fannie and Freddie? OBAMA and the Democrat Congress. So when someone tries to blame Bush…

    REMEMBER JANUARY 3rd, 2007…. THE DAY THE DEMOCRATS TOOK OVER!”
    Budgets do not come from the White House. They come from Congress and the party that controlled Congress since January 2007 is the Democrat Party.

    Furthermore, the Democrats controlled the budget process for 2008 & 2009 as well as 2010 & 2011. In that first year, they had to contend with George Bush, which caused them to compromise on spending, when Bush somewhat belatedly got tough on spending increases.

    For 2009 though, Nancy Pelosi & Harry Reid bypassed George Bush entirely, passing continuing resolutions to keep government running until Barack Obama could take office. At that time, they passed a massive omnibus spending bill to complete the 2009 budgets.

    And where was Barack Obama during this time? He was a member of that very Congress that passed all of these massive spending bills, and he signed the omnibus bill as President to complete 2009.

    If the Democrats inherited any deficit, it was the 2007 deficit, the last of the Republican budgets. That deficit was the lowest in five years, and the fourth straight decline in deficit spending. After that, Democrats in Congress took control of spending, and that includes Barack Obama, who voted for the budgets.

    If Obama inherited anything, he inherited it from himself. In a nutshell, what Obama is saying is I inherited a deficit that I voted for and then I voted to expand that deficit four-fold since January 20th.

    • Max says:

      What’s that got to do with price of gas in California?

      • Steve Robinson says:

        The article was a political opinion piece and totally un-balanced. sillyMe is responding appropriately.

        I am not an American and generally do not follow US politics. However, even I know enough to see the bias in that article. I expect a much higher standard of thought on a site like this.

      • Daniel says:

        Prothero could have actually made a sensible political or economics point, biased or unbiased. The problem is, it has very little to do with what an objective observer would think this site is about.

        Prothero’s political-schtick is tedious for the same reason that a sports writer or food critic that chose to devote their columns to political commentary would be.

        But hey, it’s his blog, so he’s free to post whatever’s on his mind. Doesn’t mean we have to like it though.

  19. d brown says:

    This is on gas price? To do much in Congress you need a super majority, not just a majority. 16 Democrats have been voting with the right wing and stopping Obama.

  20. Tom says:

    Who’d have thunk that Matt Taibbi, BA (possibly) Bard College, would be the guy to cite in an Argument from Authority? Prothero keeps raising the bar!

  21. d brown says:

    Back in 1927 Hitler wrote how he was going to gain power. He was going to lie. He said that people would not believe small lies. But they could not believe that anyone wold tell them a really big lie such as the exact oppose of the facts. Its works and has and is now happening. I will now stop posting about Obama or Congress here.

  22. Cameron says:

    Just as an added perspective: here in Ontario (Canada), our gas prices are along the same lines as California but our high gas prices are the cost of 1) just being in Canada, 2) unscrupulous gas giants, and 3) taxes. #3 is the most forgotten here, and probably in some of the states as well. In Ontario, our total gas price includes roughly 45% embedded taxes of various types, which means that gas would be nearly half the price it is if weren’t for additional taxes. Whether this is a good or bad thing is arguable, but in any case, dont’ forget to enumerate those taxes if you want a clear picture on gas prices.

  23. MadScientist says:

    [OT] In a victory for ignorance, scientists are convicted of negligence for not doing the impossible: predicting the precise circumstances of an earthquake. http://www.bbc.co.uk/news/world-europe-20025626

  24. d brown says:

    In the late 70′s the Scientific American magazine had a piece on converting nature gas to a liquid fuel that burned better than gasoline. It said it would cost 16 cents a gallon then to make. There had been several companies working on it. I guess the low price of oil stopped them. A South African one had to and it is the only one making the refiners today. They cost more than a oil one. Guess who owns most(?)of the nature gas here today. It is not a circular argument. Its a disagreement over historical facts.~ Adolph Hitler, “Mein Kampf” 1927 “The primitive simplicity of their minds renders them more easy victims of a big lie than a small one, because they themselves often tell little lies but would be ashamed to tell big ones.
    Such a form of lying would never enter their heads. They would never credit others with the possibility of such great impudence as the complete reversal of facts. Even explanations would long leave them in doubt and hesitation, and any trifling reason would dispose them to accept a thing as true.
    Something therefore always remains and sticks from the most imprudent of lies, a fact which all bodies and individuals concerned in the art of lying in this world know only too well, and there fore they stop at nothing to achieve this end.”

    • Daniel says:

      What you just said is not a circular argument. (I can’t speak to what exactly is in Scientific American article, and you’ll need a little more specifics about who owns most of the natural gas, etc., but that’s not really the point).

      The circular argument is when people support an argument by referencing the “big lie.” That is, when you’re arguing that someone is lying, it is circular to argue, the more one repeats the lie, the more people believe it. Kind of like when a prosecutor, in trying to prove that someone is guilty, argues that the defendant has shown no remorse for his crime.

  25. d brown says:

    errr no. “The circular argument uses its own conclusion as one of its stated or unstated premises. Instead of offering proof, it simply asserts the conclusion in another form” T. Edward Damer, Attacking Faulty Reasoning. Wadsworth, 2001

    • Max says:

      -The moon landing is a big lie.
      -But it’s inconceivable that the U.S. government, the media, other governments, and scientific bodies would all lie about it.
      -That’s because it’s a big lie.

    • Daniel says:

      I.e., concluding that someone is lying by arguing that the more that one repeats the lie the more one is to believe it.

      In another form, “the more people repeat the lie that global warming is real and caused by humans, the more people will believe that lie.” Okay then.

      The “big lie” is an interesting observation of human nature that may or may not be true. It does not establish that someone is lying.

  26. Pooneil says:

    “And the next time you hear someone raving about the virtues of unfettered capitalism, just remember the pirates of Enron—and the robber barons of the oil industry that still hold the nation’s largest state as a hostage.”

    Oh, please. The energy business is tightly controlled and regulated. Long term planning is highly integrated with the regulators. There is no reasonable criteria by which it could be considered unfettered. Further there are at least 15 refiners in California plus product pipelines that bring refined products into the state, under what tortured logic does this constitute a monopoly. A little skepticism of your own prejudices is in order here.

  27. Pooneil says:

    “Back in 2005, Shell attempted to bulldoze some of its refining capacity, and they were stopped by Sen. Barbara Boxer and Attorney General Bill Lockyer. Internal Shell documents released later showed that these refineries were very profitable and not losing money, so the only reason for Shell to destroy them was to tighten supply even further.”

    This is exactly the type of sentence I would expect form a conspiracy promoter. Someone did something, it wasn’t for some obvious reason, so it must be for this particular nefarious purpose. Evidently it did not occur to you to provide proof Shell was doing it for the reason you suggest. Your post hints that you believe there is some collusion between the refiners, but have not proof. So I’ll just go ahead and call this as a post from just another conspiracy theorist.

  28. d brown says:

    “It does not establish that someone is lying.” well no. it takes real facts not what you want to be. global warming is real and many caused by humans. Saying its not is the big, huge. lie.