Transcript: Peter DeFazio. Gas prices. Jun 11th 2008
Congressman Peter DeFazio explains why the high oil price does not mean we need to drill in ANWR. There's no shortage of crude oil - the price is rising when demand is falling. The oil companies have chosen not to expand refinery capacity, and are not drilling many of the places for which they already have leases. Speculation. The Enron loophole. Collusion by OPEC.
Thom Hartmann interviews Congressman Peter DeFazio, 11 June 2008
[Thom]: I really want to get into the issue that I think is, you know, clearly the war is a big issue and in fact I would say the war is a large part of the issue of the economy. It's ultimately always the economy, stupid, as the old sign from the Clinton campaign. And I want to get into these issues around what's going on with the economy. And to some extent that means what's going on with oil and also as I said, what's going with impeachment. And one of the most progressive members of the House of Representatives is Peter DeFazio. He's the representative from I believe the fifth district of Oregon, Congressman Peter DeFazio?
[Thom]: Fourth district, thank you very much. I live in the fifth district, yeah.
[DeFazio]: I always mix the numbers up, too. Except mine. I know mine.
[Thom]: Yeah, well, and that's a good thing, that's a very good thing. So Congressman Peter DeFazio is with us and defazio.house.gov is his website and Congressman, I have, I am being inundated and I suspect that there are boiler rooms running this thing. I'm getting emails, mostly, though what I'm seeing is postings on web sites, on blog sites, and calls to talk radio shows both left and right. And I've been noticing, and I'm a fairly heavy consumer of talk radio and we're also noticing that here, particularly on the local show on 620 KPOJ, people who seem, it almost seems like the operation has been rolled out again, where people are paid for every time that they can get on the air or every time they make a blog posting. And during the election of 2004 there was a group associated with the Republicans who were paying people ten cents a post for every post that they got on a national blog. We had one of those guys who was, you know, spamming our blog and he eventually came clean about it after the election. In fact, he tracked us back to some of the information on it.
This time it seems to be from the oil industry saying that, you know, we need to open up ANWR, and the reason oil prices are so high is because we haven't given away enough to the oil industry and they need more giveaways, they need more land. Do I hear you chuckling in the background?
[DeFazio]: Yeah, there's no shortage of crude for one thing. Remember oil went up eleven bucks a barrel on Friday while demand is plummeting for the finished product. The immediate crunch in the US is shortage of refinery capacity and Exxon Mobil says, "hey, we're not going to build any more refineries, in fact we've been closing refineries". Bolero, second largest producers, saying "we're doing very well the way it is, we're not going to build refineries". Yet the Republicans say, "Well, Democrats are preventing refineries". No, the industry has been colluding to close refineries, make them more profitable, restrict supply, use it as an excuse to drive up the price.
The second big factor is speculation. We don't know big it is, the estimates are fifty cents a gallon. That's the Enron loophole. Ken Lay, he's dead. Enron, they're bankrupt. But the loophole they got for energy commodities trading lives on.
[Thom]: This was in the last year of the Clinton administration, wasn't it?
[DeFazio]: Yeah, Clinton signed it, to his discredit. The Republicans put it through Congress. But Clinton did a lot of bad things and that was one of them.
[Thom]: Yeah. I didn't mean that as a gratuitous swipe at Clinton, I just, you know, his...
[DeFazio]: Yeah... He did. I mean, he shouldn't have. I mean, I voted against it. It was pretty clear to see what totally deregulating these bodies, markets and allowing them to create these incredible speculative instruments. I mean, it's driving up the price of food, driving up the price of fuel.
Then third, you have collusion by OPEC and instead of filing a complaint under the WTO, which they're violating article twenty of GATT, you know, Clinton goes over a whole handful of Saudi princes, begs, and then they say no.
[Thom]: You mean Bush?
[DeFazio]: I'm sorry, I've got Clinton, Bush! And so, here we are, those are the major factors, and what are they talking about? They're saying. "well need more leases". Well, gee, if we need more leases, why don't they first develop the ones they have? Remember, in this buzz wagon, Clinton on the brain, Clinton leased the Naval Petroleum Reserve to the oil industry eight years ago. 25 exploratory wells, we know there's a sea of oil under there. We've been sitting on that for 75 years. And we know, we don't know if there's oil on ANWR. They haven't developed one producing well. None!
[Thom]: Why not? You think they're just sitting on this stuff until the price goes to 250 a barrel?
[DeFazio]: Why not?
[DeFazio]: And then the same thing offshore. They've got 10,000 permits onshore and offshore that they haven't developed. The estimates from our own Mineral Management Service is that 80% of the available or potential oil offshore is already available under existing permits. But 6,492 of them are not yet developed. There's other estimates that the 68 million acres of land that they've leased, well land and water, that are currently idle could produce another 4.8 million barrels of oil a day, 44 billion cubic feet of natural gas each day. That would double our production.
[DeFazio]: Yeah, of oil. Now, why aren't they developing those things? They don't need a whole bunch more leases to get a property right on to sit on forever. What they need to do is go out and develop stuff.
[Thom]: So the question: why aren't they developing it?
[DeFazio]: Because they're making a pile of money. Why would they develop it?
[Thom]: Right. Why should they bring more product onto the market and drive down the price?
[DeFazio]: Right, right!
[Thom]: But you just pointed out when we first started that there is more product on the market, that demand is dropping and the price is going up, so it seems that even bringing more product on the market would not necessarily hurt them as long as they control the price at the market.
[DeFazio]: Well, even, you know, even the Bush Administration is beginning to investigate collusion in the commodities markets regarding energy prices. I mean, even the Bush administration. We should just close this darn loophole and not allow them too do that, but even they feel that they have to investigate this. And I had the independent petroleum distributors in, there's a few of them left, and they said to me, okay, "who's the largest holder of oil and gas right now in the US?" And I said, "Exxon Mobil" and they said, "no, Morgan Stanley".
[Thom]: You're kidding!
[DeFazio]: I don't know if that's true or not.
[Thom]: Morgan Stanley is the largest holder of oil and gas in the United States?
[DeFazio]: Because the contracts that they are holding.
[Thom]: Oh, so they're holding the leases on the land that have not been developed.
[DeFazio]: No, not the leases, no, no, the contracts for oil.
[Thom]: Oh, the contracts for oil. Right. So than they are speculating on oil. They're buying this stuff up, they're buying low and planning to sell high, and as long as the price keeps being driven up, as long as they keep buying it drives up the price, as long as the price goes up they have an appreciating asset. What we're seeing here, could it be, Congressman, we're talking with Congressman Peter DeFazio, his web site defazio.house.gov.
Could it be that we have actually seen an economy that is simply a series of bubbles? There was the dot com bubble, then the real estate bubble and now we're seeing this commodities bubble, and that what it is, is that there's all this investment cash, there's all this money looking for homes, and basically it's being churned. We're just going through, because we no longer manufacture anything in the United States. We don't have a core economy that anybody can invest in any longer so instead it's all become Las Vegas.
[DeFazio]: Kevin Phillips' "Bad Money", I recommend the book.
[Thom]: Yeah, I've read it and I've talked with him and that's the basic thesis of his book and I was just looking to you for a congressional validation of it.
[DeFazio]: Yeah absolutely, oh no, I mean absolutely that's going on. But remember, again, back to the Enron loophole. We have made the commodities markets and derivatives totally opaque. They can trade off the books. They can collude with a number...
[Thom]: Right, we can see nothing.
[DeFazio]: A number of trading companies say, "hey let's ratchet up the market today", just like Enron did with electricity, "let's set the price skyrocketing". And that's what happened last Friday. They, you know, there was that kind of collusion going on where they beat on each other's ? back and forth.
[Thom]: So here's a political question, then. To the extent that it's to the advantage of Rex Tillerson and his buddies, the CEO of Exxon Mobil, and his buddies in the oil industry for there to be a Republican in the White House, why would they be doing this at this point of time in the election cycle, or do you expect that in August or September we're going to see the price of oil start dropping precipitously?
[DeFazio]: That's an interesting question but you also talked about this unbelievable coordinated effort. Last week they killed off a critical issue for western counties, particularly my district, county school payments, over the issue of offshore drilling and ANWR drilling. The mess...
[DeFazio]: Every bill that has come up at the last two weeks; the bill that will allow soap box derby on Capitol Hill, the bill to support nanotechnology, county payments, the Republicans get up and they say, the "Pelosi premium", drill, we have to drill more, we need more leases, we need to drill on ANWR", and that's, so that's, this is a very coordinated campaign. I think they've got a focus group. They say Newt is now writing the playbook again. And they think that maybe they can pin these high oil prices on the Democrats and scramble back into power.
[Thom]: Ah, okay, so they keep the oil prices high and they all point it back to Nancy Pelosi. Amazing, amazing. Well, you know, if they're cynical and craven enough, and they certainly have demonstrated that in the past, it might work, which is a horrible thought.
[DeFazio]: Until people see the quarterly profit statements from the oil companies.
[Thom]: Yeah, yeah. Peter DeFazio, Congressman Peter DeFazio, defazio.house.gov, thanks congressman for being with us.
[DeFazio]: Thank you, Thom.
Transcribed by Sue Nethercott.