Tuesday, October 18, 2005

Wholesale Inflation Soars in September.

September wholesale prices went up 1.9 percent (or 22.8% annualized) and there was an explosion at a TX refinery the other day.

Natural gas went up 9 percent, but ignore all those extreme energy jumps, they'll be reversed imply experts when they take another look at inflation without energy costs added in. The core inflation was a measly .3% (or 3.6% annualized).

During the Bush administration energy costs have gone on the average up and up, but we are supposed to ignore it, because it's "volatile".

Now we have gone into stratospheric raises for most of 2005 and yet we still are supposed to ignore the pain.

On gasoline: A report in May 2002 at SF Gate analyses findings from an investigation by the Majority Staff of the
Permanent Subcommittee on Investigations during short-lived Democratic majority in the Senate under Bush showing how the gas companies drive up the price of gas, As I remember the full report shows that without help from the executive branch (i.e. the White House and FBI which, of course, they didn't get) exact collusion could not be proven (it wasn't a court of law or a federal investigation that could confisticate computers--the Congress must work mostly on their supoena power and public records).

...Sen. Carl Levin, D-Mich., the committee chairman, produced a series of memos that he said showed oil companies had tried to keep oil supplies low, particularly in California, to assure high prices.

"The refining market is so concentrated that oil companies can act to limit supply and from time to time spike prices to maximize profits," Levin said. "And because there is insufficient competition, if other companies supplies are also kept tight, there is little to no challenge to that action. That's the major problem."

One of the memos, a strategy report prepared by Arco officials, proposed the company send gas out of California to keep inventories low and prices high.

"Export to keep the market tight," the memo read.

Ross Pillari, a vice president in charge of U.S. operations for BP, which bought Arco, testified that he was not aware of any efforts to sell gas out of California.*

But Levin cited an Exxon memo from May 15, 1995, that he said showed company officials discussing ways to limit imports of gas from competitors into California and other Western states. "Should not do deals that supports other's importing barrels to the West Coast," the memo read.

*Unfortunately, for BP in the fall of 2000, while gas prices were soaring, the company was reported by the AP to be exporting crude from Alaska to Japan (though, if you remember, Alaskan oil was supposed to be used to help keep prices low in the U.S.--a promise we heard again this year before the energy bill fcalling for drilling in ANWR was passed).

On oil and natural gas: It looks like Big Oil is now engaging the same tactics to drive up crude as their refining divisions have been ...um...er 'refining' for years. The economic recovery of Asia was, of course crucial to this plan.

Link to Senate Report: GAS PRICES:


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