economy

“Unconscionably excessive” prices for oil? Hell, yeah!

~ Michael Stevenson ~ Leave a comment

Heather Cox Richardson | Letters from an American

HCR
Heather Cox Richardson

June 14, 2022

Today the White House announced that President Joe Biden will visit the Middle East next month. His first stop will be in Israel, and then he will go to Saudi Arabia, where he will meet with Crown Prince Mohammed bin Salman (MBS), the man responsible for the murder and dismemberment of Washington Post journalist Jamal Khashoggi. MBS recently invested $2 billion in Jared Kushner’s new investment fund against the advice of the funds’ advisors.

In 2019, Biden promised to make Saudi Arabia a “pariah” in part because of the Khashoggi killing, but administration officials have been quietly visiting for months, in part to urge Saudi Arabia to increase oil production to help ease gas prices in the U.S. While the White House maintains that it is looking for a “reset” with the Saudis in order to promote peace talks between Israel and Palestine, end the war in Yemen, and address human rights violations, it acknowledges that oil production is on the table. 

Inflation is high in the U.S., as it is all over the world, because of demand, supply chain problems, the soaring costs of transportation as the world’s few carriers jack up prices, and so on. But that inflation is driven in large part by higher oil prices, which have driven up the price of gasoline and diesel in the U.S., which in turn makes everything more expensive. 

Since the first public hearing of the House Select Committee to Investigate the January 6th Attack on the U.S. Capitol last week, much of the traffic on right-wing social media has been about gas prices, blaming them on President Biden. Republicans see gas prices and inflation as key issues both to distract from the hearings and to enable Republicans to take over control of Congress in the November midterm elections. 

In fact, according to a piece by E. Rosalie in the newsletter Hoaxlines, U.S. production of crude oil during Biden’s first year was actually higher than it was in Trump’s first year. To encourage production, Biden’s officials have issued more permits on federal lands than were issued in the Trump administration’s first three years, at a pace that approaches that of George W. Bush’s administration. Only 10% of all U.S. drilling takes place on federal land, but the Bureau of Land Management confirms that more than 9000 drilling permits on public land are currently approved. Not all would be productive if they were developed, and none of them could start producing immediately, but this undercuts the argument that gas prices are high because the Biden administration has choked off permits.  

Russia’s war on Ukraine has also driven up global oil prices, but the U.S. gets less than 2% of its oil from Russia. 

What appears to be driving U.S. gas prices is the pressure investors are putting on oil companies, whose officers answer to their investors. Limited production creates higher prices that are driving record profits. In a March 2022 survey of 141 U.S. oil producers asking them why they were holding back production, 59% said they were under investor pressure. Only 6% blamed “government regulations” for their lack of increased production. 

Oil companies are seeing huge profits and are using the money for stock buybacks to raise stock prices. BP, Shell, ExxonMobil, Chevron, TotalEnergies, Eni, and Equinor will give between $38 and $41 billion to shareholders through buyback programs this year. As EOG Resources wrote to its shareholders: “2021 was a record-setting year for EOG. We earned record net income of $4.7 billion, generated a record $5.5 billion of free cash flow, which funded record cash return of $2.7 billion to shareholders. We doubled our regular dividend rate and paid two special dividends, paying out about 30% of cash from operations…. This period of high oil prices allows us to further bolster the balance sheet. To support our renewed $5 billion buyback authorization and prepare to take advantage of other countercyclical opportunities, we plan to build and carry a higher cash balance going forward….”

But congressional Republicans appear uninterested in adjusting the disjunction between supply and demand that is creating such high consumer prices. In May the House passed the Consumer Fuel Price Gouging Prevention Act by a vote of 217 to 207 with only Democrats in the yes column and all Republicans and four Democrats voting no. The bill provided a vague warning that it is unlawful to charge “unconscionably excessive” prices for consumer fuel during presidentially declared energy emergencies, and it gave the Federal Trade Commission more power to punish price gouging. 

The Senate has not moved forward with the bill. Republicans there can kill it with the filibuster and will do so, despite the fact that a Morning Consult/Politico poll shows that 77% of registered voters—including 76% of Republicans—like such a measure. Only 13% of voters outright oppose such a law (10% have no opinion). 

Biden has sought to address the issue with the tools at his command. After trying to ease pressure by releasing oil from the strategic reserve, he has set out to reduce the nation’s demand for oil products by identifying the conversion to clean energy as a national security issue. On June 6 he vowed to “continue…pushing Congress to pass clean energy investments and tax cuts” but also authorized the use of the Defense Production Act to speed up the domestic production of solar panel parts, building insulation, heat pumps, and power grid infrastructure like transformers. He will also lower tariffs on solar technology coming to the U.S. from Southeast Asia for two years. These measures should ensure a reliable supply of solar panels while creating more jobs in the green energy sector, which currently employs more than 230,000 people in the solar industry alone.  

In addition to Biden’s measures to ease oil prices, lawmakers are trying to curb inflation by imposing the sorts of limits on carrier prices that they refuse to on oil prices. 

On Monday the House passed the Ocean Shipping Reform Act of 2022 to hamper unfair business practices among shipping carriers. The measure passed the Senate in March. Although the bills were introduced by Democrats, the votes that passed them were bipartisan, reflecting, perhaps, that the nine shipping companies that dominate the world market are multinational rather than domestic. According to Representative John Garamendi (D-CA), shippers have raised prices on U.S. businesses and consumers by more than 1000% on goods coming from Asia, enabling them to make $190 billion in profits last year, a sevenfold increase in one year. This bill, he said, “will help crush inflation and protect American jobs.” Biden has praised the bill and promises to sign it. 

And tomorrow the Federal Reserve is expected to announce an interest rate hike of three quarters of a percentage point, its highest since 1994, to combat inflation. Higher interest rates will make it more expensive to borrow money, which should cool down the economy, although getting inflation down to the 2% the Fed prefers will likely slow consumer spending, dampen wage increases, and slow economic growth.

And of course, next month, Biden will visit the Saudis, who can increase oil supplies quickly if they believe it is in their best interest to do so. 

And finally, a heads up: tomorrow’s hearing of the January 6 committee has been postponed. The next hearing is now scheduled for Thursday at 1:00 pm.

Biden economy is “booming”

~ Michael Stevenson ~ Leave a comment

Heather Cox Richardson | Letters from an American

HCR
Heather Cox Richardson

December 1, 2021

The U.S. economy is booming.

Federal Reserve Chair Jerome Powell testified today before the Senate Committee on Banking, Housing, and Urban Affairs, saying that although the rise in COVID cases due to the Delta variant had slowed recovery, the gross domestic product is still on track to grow about 5% in 2021. According to Christine Romans, CNN’s chief business correspondent, the last time we had that kind of growth was under the Reagan administration forty years ago.

Unemployment is also down. The economy added 531,000 jobs in October, dropping the unemployment rate to 4.6 percent, the lowest rate since November 1969. The recovery is not even, though, with jobs harder to find for Black and Brown Americans than for White Americans.

Meanwhile, the American Rescue Plan is restoring the nation’s basic social safety net. According to Treasury Secretary Janet Yellen, food insecurity dropped 24% for families as a result of Biden’s Child Tax Credit, creating “a profound economic and moral victory for the country.”

Powell also noted that inflation is up, from the 2% level for which administrations aim to about 5%. He predicted that inflation will ease as supply chains smooth out and as the administration takes measures at its disposal.

In illustration of what sort of measures those might be, Biden released 50 million barrels of the nation’s oil reserves to combat the rising gas prices that have grabbed headlines. Other nations, including India, the United Kingdom, and China, released some of theirs as well, and the price of WTI Crude has dropped back to what it was in early September. That fix may very well be temporary as economic growth puts pressure on oil supplies. 

The success of the Democrats’ measures illustrates the effectiveness of the “liberal consensus” of the years between World War II and the Reagan Revolution, when members of both parties believed the government should promote economic growth by supporting those at the demand side of the economy. That meant giving those just starting out access to resources which they would, in turn, reinvest in the economy, helping all to rise. 

The Reagan years reversed this popular understanding as lawmakers claimed instead that the best way to nurture the economy was to focus on the “supply side”—those wealthy people who, officials argued, would invest their money in the economy and create jobs. To free up capital for those people, Republicans focused on cutting taxes. 

But while that system never worked as promised, Republicans have come to believe that tax cuts are the most important way to expand the economy. With the American Rescue Plan helping the U.S. to recover from the economic crunch of the pandemic faster than other nations, and with the extraordinary numbers we’re now seeing, Biden’s plan has once again illustrated the power of supporting ordinary Americans. 

And such legislation is popular, so popular that, right on cue, Republicans who voted against the American Rescue Plan and the bipartisan infrastructure bill are advertising its benefits to their constituents as if they were responsible for it. Representative Rob Wittman (R-VA) has a new ad out boasting that “Congressman Rob Wittman is Bringing Broadband to the Northern Neck.” “It’s the future,” the ad reads, and Wittman “has helped bring broadband to thousands of homes and businesses. And he will not stop until every Virginian is given an equal opportunity to connect to the future.” 

Wittman voted against the bipartisan infrastructure bill.

The headline-grabbing news today, though, came from investigations into the events surrounding the January 6 insurrection. 

Early this morning, Hugo Lowell of The Guardian reported that multiple sources told him that Trump had called the “war room” at the Willard Hotel several times on January 5 to talk about how they could stop Congress from counting the certified ballots that would make Joe Biden president. The team at the Willard was led by lawyers Rudy Giuliani, John Eastman, and Boris Epshteyn and Trump loyalist Steve Bannon. Trump called the lawyers separately from the others, trying to keep from jeopardizing claims of attorney-client privilege. 

Although those at the war room have maintained that they were acting only on the wishes of state legislators who worried about voter fraud, reports of phone calls from the president challenge that position. Lowell wrote: “Trump’s remarks reveal a direct line from the White House and the command center at the Willard. The conversations also show Trump’s thoughts appear to be in line with the motivations of the pro-Trump mob that carried out the Capitol attack and halted Biden’s certification, until it was later ratified by Congress.”

After the story came out, Trump’s spokesperson said, “This is totally false,” but offered no more information.

The House Select Committee to Investigate the January 6th Attack on the U.S. Capitol is looking into the Willard meetings. Today, though, it interviewed Georgia secretary of state Brad Raffensperger, the man who recorded a phone call with Trump as the then-president tried to get him to overturn the results of the election. Raffensperger testified for five hours. 

Also today, Trump’s former chief of staff, Mark Meadows, dropped his refusal to answer the January 6th committee’s subpoena and has begun to cooperate, providing records and agreeing to be interviewed. Meadows had refused to participate in the process, citing Trump’s order that he stay silent. But after a grand jury found Trump adviser Steve Bannon in contempt of Congress, and as the House considers charging former Justice Department lawyer Jeffrey Clark, who came up with a scheme to overturn the election and who has also refused to answer a subpoena, with criminal contempt of Congress, Meadows has apparently reconsidered his position.

Former federal prosecutor and legal analyst Renato Mariotti notes that this is a good move on Meadows’s part because it means that any future refusals will go to court, not criminal prosecution. Meadows is the highest-ranking official to testify before the committee and has made it clear he continues to expect to keep mum about what he considers sensitive material. Still, his participation will indicate to others that they should tell their stories before someone else’s testimony makes their information worthless as a bargaining chip. 

The House committee today voted to hold Clark in contempt of Congress and passed the resolution on to the full House. The committee wrote: “The Select Committee believes that Mr. Clark had conversations with others in the Federal Government, including Members of Congress, regarding efforts to delegitimize, disrupt, or overturn the election results in the weeks leading up to January 6th,” and it expects him to comply with the subpoena. It rejects Clark’s contention that his conversations with Trump were a “sacred trust” and wrote that Trump had not, in fact, tried to assert executive privilege over Clark’s testimony. The committee noted that “the willful refusal to comply with a congressional subpoena is punishable by a fine of up to $100,000 and imprisonment for up to 1 year.” 

A must listen: Infectious disease expert gives the most honest commentary on our current situation

~ Michael Stevenson ~ Leave a comment
Dr. Michael T. Osterholm, photo courtesy University of Minnesota

In the midst of a pandemic, governors around the country have been reopening local economies and causing concern for many health experts, including members of the White House coronavirus task force who testified before a Senate committee this week. 

Dr. Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota has long warned about the risk of pandemics. He calls the effort to reopen a “hodgepodge,” though he believes remaining locked down while we wait for a vaccine is not an option. First and foremost, he laments a lack of national leadership, frank talk about the tradeoffs ahead, and a clear direction in the fight against COVID-19.

Source: NPR “Innovation Hub”