Friday :: Aug 12, 2005

Filler Up Y'r Reg'lar

by pessimist

All over the media, even the television that too many get their news from exclusively, there are lots of stories about the rise in gasoline prices.

Because of this, there is no excuse for anyone not to know a little something about why this is. But since there are sure to be at least a few who still don't get it, I'm going to take a look on their behalf.

First, there is the reduction in the manufacturing capacity, and the increase in the demand for the raw material:

Oil charges above $66 on capacity worries

Oil prices raced to record highs above $66 a barrel on Friday as investors fretted over the world's strained capacity to refine and pump crude oil.

The list of [refining capacity] outages includes several units at BP's giant 460,000 barrel-per-day (bpd) refinery in Texas City, and the loss of capacity at ConocoPhillips refinery in Illinois. A new snag on Friday in the U.S. refining system, this time at Premcor's 175,000 barrels per day (bpd) refinery in Tennessee, threatened gasoline supplies.

Supply limitations were underscored on Thursday by the International Energy Agency which cut its estimate of non-
OPEC supply growth. Non-OPEC producers are failing to deliver as much oil as expected this year, leaving OPEC to fill the gap.

Screwing Ourselves

Record-high pump prices appear to have had little impact on demand. "There seems little standing in the way of the bullish euphoria," said Edward Meir of Man Financial. U.S. oil has risen 52 percent since the start of the year. In real terms, stripping out inflation, oil is well below the $80 a barrel on average for the year after the 1979 Iranian revolution. But at an average of more than $53 for the year to date on U.S. oil, prices are well beyond levels during the 1974 Arab oil embargo.

The stage could be set for further gains, with no let-up seen in global demand growth and no signs that $60-plus oil is harming the economy of the world's largest consumer, the United States. "We're going to have a very strong price environment until the steam is taken out of demand or until investment catches up and restores a spare capacity cushion to production and refining," said Michael Wittner, head of energy market research at Calyon.

Venting The Steam From The Demand Engine

One way to take the steam out of the demand is to take away the means to demand; that is, to reduce the available funds for purchases. One way to accomplish this is to reduce the number of high-wage jobs. This process appears to be underway due to many international trade factors:

Trade Deficit Up As Oil Imports Hit High

America's trade deficit increased sharply in June as surging oil prices pushed the cost of petroleum imports to an all-time high. More than half of the trade deterioration in June reflected America's surging foreign oil bill, which hit a record high of $19.9 billion, an increase of 9.8 percent from the May level. Analysts say that figure will rise even higher, reflecting a continued surge in global oil prices, which set a new record of $66 per barrel on Thursday.

The new trade report showed that America's deficit with Mexico hit a a record high of $4.8 billion. The deficit with Canada rose 13.7 percent to $5.4 billion in June while the deficit with the 25-nation European Union rose by 2.7 percent to $10.8 billion in June.

The politically sensitive deficit with China also set a record. America's deficit with China hit a record at $17.6 billion in June, surpassing the old mark of $16.8 billion set last October. Last year, the deficit with China hit $162 billion, the highest imbalance ever recorded with any country, but this year's imbalance is running 32 percent above the 2004 pace.

With the record trade deficits and the continued loss of jobs in manufacturingdeclines that total 3 million since mid-2000 — the administration has found it harder to sell new free trade agreements in Congress. Last month, President Bush won passage of the Central American Free Trade Agreement by a slim two-vote majority in the House after a hard fought campaign in which critics contended that the trade deals were opening American workers to unfair competition from low wage countries.

Responding to rising protectionist pressures in Congress, the administration has also increased pressure on China to revalue its currency. The Chinese last month did announce a small 2.1 percent revaluation of the yuan but American manufacturers argue that the Chinese currency is undervalued by as much as 40 percent, giving China a huge competitive advantage over American products.

OK, this information is a bit arcane for nost non-economist types, but the 'professional' hired to perform that duty for us is beginning to notice that things aren't going as well as they should:

Oil surge presents 'headwinds' to US economy: Snow

Treasury Secretary John Snow said that record-high oil prices threaten to dent US growth, although the economy has shrugged off their impact so far. Speaking after the price of a barrel of oil hit 66 dollars in New York for the first time, Snow said such high levels 'are extremely unwelcome'. "There's no doubt about the fact they create headwinds for the economy," he told the CNBC financial news network.

Several economists have warned that oil could soon return as a brake on growth, as the costs to US businesses and consumers mount. "So far the economy has really absorbed these high prices well, and I think we can continue to do so. But they certainly don't help, (they are) a negative for the economy," he said. If such high energy prices persist, "they clearly will have some negative effects on the rate of GDP growth."

Oil prices would adjust in time as the laws of supply and demand stabilize the market, Snow added. "It's the pattern of demand and supply we've seen for decades and I'm confident that we will see over the medium term and longer term, a set of adjustments here that will bring prices down," he said.

"But I would agree with you that the mood of the consumer isn't very good when he goes into the pump and sees gas prices where they are today."

DUH! Ya Think?

Maybe he got the news from reading the polls:

Poll: Many Fear Financial Hit of Gas Prices
Those most likely to be worried about the financial impact are people with low incomes, the unemployed and minorities

The pinch at the pump is starting to feel more like a punch for a growing number of Americans. With gas prices soaring, almost two-thirds of those surveyed for an AP-AOL poll expect fuel costs will cause them financial hardship in coming months. That was sharply higher than in April, when about half felt that way.

The poll conducted for The Associated Press and America Online News found that 64 percent say gas prices will cause money problems for them in the next six months, while 35 percent did not think so. In April, 51 percent expressed concerns about the cost of gas.

The AP-AOL survey of 1,000 adults was conducted Aug. 9-11 by Ipsos, an international polling firm. The survey has a margin of sampling error of plus or minus 3 percentage points.

This change of feelings toward economic security is reflected in more scholarly studies - something that doesn't bode well for the Grate Bull Mark-it-up:

U.S. consumer sentiment eases

U.S. consumer sentiment eased in early August, weighted down by soaring gasoline prices, a report said on Friday. Consumer spending makes up about two-thirds of overall U.S. economic activity and is seen as indication of strength or weakness in economic growth.

The University of Michigan said its reading on confidence fell to 92.7 so far this month, according to sources who saw the subscription-only report. That was down from a final July reading of 96.5 and below Wall Street forecasts of 96.0. The survey's expectations component was 81.3, while ratings of current conditions fell to 110.4 from 113.5 in July.

Whether from the wisdom of the common man, or from the ivory towers of academia, the general feeling is that the economy is slowing down. Could there be a reason why? Let's see what we can find out:

Gas hikes pushing up other prices

Many U.S. companies are passing on their rising fuel costs to their customers. When oil prices rose sharply in the past, prices of related products followed, driving up inflation, the measure of rising prices across the entire economy. Inflation erodes consumers' buying power.

Most large airlines charge per-ticket fuel surcharges of $20 to $87 for international travel, and many domestic fares have jumped more than $100.

Pizza makers are doing it too. Major chains such as Domino's and Papa John's have added a $1 fuel surcharge in most major markets.

I guess we're pulling the frozen Tombstone out of the freezer tonight! PARTY!

Few businesses depend more on surcharges than package-delivery companies such as Federal Express, which has seen higher costs for jet fuel for its planes and diesel fuel for its trucks. FedEx revises its surcharge monthly; for August it stands at 12.5 percent for express shipments and 2.75 percent for its slower ground service.

Online retailers may be the exception to the pass-the-buck rule. Some depend on FedEx or UPS, but many partners ship via the U.S. Postal Service. "We use the USPS. Postage rates have not changed as a result of gas prices as of yet," said a representative of Book Bizarre, an Amazon partner that sells used books.

FedEx and its rival United Parcel Service are racing to add delivery vans that run partly on electric power in a bid to cut fuel costs.
Higher fuel prices eat away at American incomes in less obvious ways, too.

Fixing A Hole Where The Rain Gets In

Take roofer Larry Michaels in Kansas City, Mo. The asphalt he uses to patch leaking roofs and as a sealant under tiles and shingles is a byproduct of refining oil into gasoline. "Almost all of our roofing materials, more than 90 percent of it, is made from byproducts of oil," Michaels said, explaining why he must pass on rising costs to customers. "We've been averaging one or two price hikes a month just on materials costs."

Soaring gas prices also forced Michaels to restructure how he gets work. "I never paid attention to the price of a gallon in my whole life," Michaels confessed. He does now. To save on fuel, he lets bid requests build up for two days or more before driving to visit several potential clients at once.

Why Don't We Do It To The Road?

Contractors who pave driveways, parking lots and roads also are raising rates to pass along rising prices for asphalt and other materials. "The price is going up due not only to the price of asphalt; even the costs of aggregates (such as crushed stone and gravel) are going up," said Kent Hansen, the director of engineering for the National Asphalt Pavement Association in Lanham, Md. "The price of everything is going up: the cost to transport it and the cost to make it."

For state and local governments, pricier asphalt forces an unpleasant choice: Scale back road building and repairs, or raise taxes.

"It's sort of a Catch-22 ... the more we put off doing overlays and repairs, the worse the pavement gets and it costs more later to repair it," Hansen said.

I guess this situation makes a mockery of the New Transportation Bill fresh out of the pork smoker!

But I digress.

For an energy man, no matter how unsuccessful a wildcatter he once was, this situation awards failing marks:

Bush's Energy Disaster

As the Senate cast its votes on the energy bill last Friday, giving Republicans a little legislative victory before everyone skipped town for the summer, Bush issued a congratulatory statement. "I applaud Congress," he said, "for a bill that will help secure our energy future and reduce our dependence on foreign sources of energy."
A nice sentiment -- except that "securing our energy future" is the one thing the bill won't do.

Money - That's What I Want

This was Bush's baby from the start, the fruition of Cheney's infamous task force, to which he invited every industry honcho he could find to write their own tickets right into the country's energy policy. After that, of course, it was larded with extra tax breaks and subsidies, like $500 million in deep-water drilling that will likely wind up in Tom DeLay's hometown, Sugar Land, and billions more that will drain straight into industry coffers.

Baby, You're A Rich Man, Too!

This at a time when high oil prices are sending industry margins soaring: Exxon-Mobil's third quarter last year was the most profitable corporate earnings in history. Boone Pickens, head of BP Capital Management, a billion-dollar hedge fund that makes people wealthy trading energy futures and related investments, sums up the high times like so: "I've never had so much fun in my life."

Across The Pork-iverse

When both sides claim victory, it's a sure sign of mediocre legislation. Republicans got to line some pockets and call it economic progress. Democrats were able to shelve (for now) a few hot-button issues like the MTBE indemnity and drilling in ANWR. (And when barely derailing a raid on ANWR is considered a Democratic victory, it only shows how much the Republicans have been able to set the agenda.) Likewise, Republicans were able to take out the fuel-efficiency standards and global-warming language that so offended them. In the end, the energy bill was a hodgepodge, a collection of provisions with no vision.

Baby, You Should Drive My Car!

We need what James Woolsey, a former CIA director, and George Schultz, Reagan's secretary of state, presented to the Committee on Present Danger about how our oil dependency makes the country extremely vulnerable. They argued that national security requires a radical change in energy policy, starting with fuel-efficiency standards.

"A plug-in hybrid averaging 125 mpg, if its fuel tank contains 85 percent cellulosic ethanol, would be obtaining about 500 mpg. If it were constructed from carbon composites, the mileage could double, and, if it were a diesel and powered by biodiesel derived from waste, it would be using no oil products at all . . . What are we waiting for?"

Good question.

If energy conservation, then, is a first line of national defense, why do so many jackasses drive their SUVs around with American flags all over them? More importantly, why did the country get an energy bill that, according to the administration's own Energy Information Administration (EIA), will actually raise gas prices and increase oil demand nearly 14 percent in just the next six years?

While My Humvee Barely Creeps

Woolsey and Schultz also dared to draw the less-talked-about blood/oil connection: that the spread of the Wahhabi ideology and a lot of terrorist planning has been funded by petrodollars. They called for a focused effort in funding and research that turns the energy equation upside down.

Instead, we're getting $10 billion more "missile defense." And an even costlier PR junket -- I mean scientifically valuable manned mission -- to Mars. Not to mention the war in Iraq, at $200 billion and counting.

Imagine how much renewable-energy development we could have gotten for all that money.
Problem solved! With the kind of funding wasted by Bush in just the past five years, we could have had a Manhattan Project for energy security several times over -- and actually made a difference in national security.


National Security would be enhanced by such energy-aware policies to the point that Homeland Security could be retired to the unconstitutional obscurity it should have been all along. But since Bu$hCo and Associates (the bin Ladens, for instance) are too busy making obscene profits from the war conditions they have created across the globe through terrorism and the exploitation of religious fundamentalism of all stripes, one has to wonder if it isn't too late to do something about the problem. One columnist takes a look at it to see what needs to be done:

Mortgaged to the House of Saud
Bush pursuit of terror stops at Saudi Arabia's borders

The only evidence you need that President Bush is losing the "war on terror" is this: Friday, Bush's father and Vice President Dick Cheney made another in a long line of obsequious American pilgrimages to Riyadh to assure the Saudis that we continue to be grateful for the punishment they dish out. On Sunday, the foreign minister of Saudi Arabia said that relations with the United States 'couldn't be better'.
Never mind the ugly facts: We are deeply entwined with Saudi Arabia even though it shares none of our values and supports our enemies.
"The relationship has tremendously improved with the United States," Saudi Foreign Minister Saud al Faisal told a news conference in Riyadh. "With the government, of course, it is very harmonious, as it ever was. Whether it has returned to the same level as it was before in terms of public opinion [in both countries], that is debatable."

Well, score one for public opinion. It makes sense to distrust the mercenary and distasteful alliance between the U.S. and Saudi Arabia. We protect the repressive kingdom that spawned Osama bin Laden, and most of the 9/11 hijackers, in exchange for the Saudis keeping our fecklessly oil-addicted country lubricated.

Yes, it has stuck deep in the craw of many of us Americans that after 9/11, Washington squandered global goodwill and a huge percentage of our resources invading a country that had nothing to do with Al Qaeda, while continuing to pander to this dysfunctional dynasty. After all, Saudi Arabia is believed to have paid Bin Laden's murderous gang millions in protection money in the years before 9/11, and it lavishly funds extremist religious schools throughout the region that preach and teach anti-Western jihad.

"Al Qaeda found fertile fundraising ground in the kingdom," noted the 9/11 commission report in one of its many careful understatements. The fact is, without Saudi Arabia, there would be no Al Qaeda today.

Our president loves to use the word "evil" in his speeches, yet throughout his life he and his family have had deep personal, political and financial ties with a country that represents everything the American Revolution stood against: tyranny, religious intolerance, corrupt royalty and popular ignorance.

This is a country where women aren't allowed to drive and those who show "too much skin" can be beaten in the street by officially sanctioned mobs of fanatics. A medieval land where newspapers routinely publish the most outlandish anti-Semitic rants. A place where executions are held in public, torture is the norm in prison and the most extreme and expansionist version of Islam is the state religion.

It's hard to see how Saddam Hussein's brutal and secular Iraq was worse than the brutal theocracy run by the House of Saud. Yet one nation we raze and the other we fete.

Is it any wonder that much of the world sees the United States as the planet's biggest hypocrite?
As insider books by former White House terrorism advisor Richard Clarke, journalist Bob Woodward and others have recounted, punishing Saudi Arabia in any way for its long ideological and financial support of terrorism was not even on the table in the days after 9/11. Instead, within hours of the planes hitting the towers, the powerful neoconservatives in the White House rushed to use the tragedy as an excuse for a long-dreamed invasion of Iraq.

Meanwhile, after two wars to make the Middle East safe for the Saudis, wars that cost hundreds of billions of taxpayer dollars and thousands of American lives, the price of oil is soaring -- up 42% from just a year ago. Federal officials project that by 2025, the U.S. will have to import 68% of its oil to meet demand, up from 58% today.

Good thing we just passed a pork-laden energy bill that will do little to nothing to ease our crushing -- and rising -- dependence on imported oil.
There are those who argue that the best rationale for invading Iraq was to ease our dependence on Saudi Arabia's massive oil fields, which might allow for a more rational or moral relationship. Yet the dark irony is that with Iraq in chaos and its oil flow limited by insurgent attacks and a bungled reconstruction, Saudi Arabia is now more important to the United States than ever.

It's scary, but these gaping contradictions don't seem to trouble our president a whit.

As the drumbeat of devastating terrorist attacks in Baghdad, London and elsewhere continue, Bush prattles on -- five times in a speech last Wednesday -- about his pyrrhic victories in the "war on terror." This is a sorry rhetorical device that disguises the fact that the forces of Islamic fanaticism in Saudi Arabia and elsewhere in the world are stronger than ever.

Tell that to the parents of those who have died in two wars defending this corrupt spawning ground of violent extremism.

As of post date, and despite the efforts of Cindy Sheehan to expose that the Chimporer has no Cause, that number of new parents on that list is higher than any month since King George decreed Iraq is to be subjugated to The Royal Will:

;_ylu=X3oDMTA2Z2szazkxBHNlYwN0blockquote--">Aug. Death Toll for Reserves in Iraq Soars

The National Guard and Reserve suffered more combat deaths in Iraq during the first 10 days of August — at least 32, according to a Pentagon count — than in any full month of the entire war. The 32 combat deaths in the first 10 days of August are in addition to one death classified as non-combat. That ranks as the deadliest stretch of the war for the Guard and Reserve, whose members perform both combat and support missions.

The previous highest monthly killed-in-action total for the Guard and Reserve was 27 in May, when there were also four non-combat deaths. In August 2004, there were six Guard and Reserve combat deaths and eight total.

More than 1,840 U.S. service members — active and reserve — have died since the war began.

Stick THAT on a yellow ribbon and plaster it on your SUV, you Yellow Elephants!

The recent surge in Guard and Reserve combat deaths comes as the Army National Guard and Army Reserve are stuck in a prolonged recruiting slump that some attribute in large measure to young people's fear of getting sent to Iraq. On Wednesday the Pentagon announced that as of July 31 the Army National Guard was running 23 percent behind in recruiting for the year and the Army Reserve was 20 percent behind. The Marine Reserve was right at its goal.

We're sure that reports from the field aren't causing parents to declare . Our Reservists and National Guardsmen are GLAD to serve Bu$hCo Nation by going back to Iraq for the third time, especially considering the pay differential compared to their civilian jobs! And how can you beat that increased death benefit!

Besides, once you're home, you know how well Uncle Sam's Club takes care of you, so you might as well go back to where your mental instabilities can be covered up by claiming a terrorist threat when you shoot someone!

It doesn't matter why - just do it! Do it for your SUV-drivin' PNAC Chickenhawk Yellow Elephant countrymen who are supporting you to the hilt every time they go to the gas pump for another $100 fillup!

You owe them that much.

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