by Joe Shea
American Reporter Correspondent
August 13, 2003
ARNOLD SCHWARZENEGGER AND THE NEXT ENERGY CRISIS
TUCSON, Ariz., Aug. 12, 2003 -- Remember the phony claims of energy traders that unraveled into the Enron scandal and, as California Gov. Gray Davis said during his Los Angeles Times debate with Republican businessman Bill Simon, "We were bilked out of $21 billion..."?
The same pattern of fraud is showing up now in several Western states and in Michigan - and will probably unfold again elsewhere this year in another energy staple: gasoline. In that light, it's interesting to learn from an old AP story that would-be governor Arnold Schwarzenegger and the man who pushed him to run - former Mayor Richard Riordan - met secretly with Kenneth Lay, Enron's CEO, to hear Lay push his plan for taxpayers to take over billions in utility debt (more about that meeting in a few minutes).
The latest cities to be hit are Phoenix and Tucson, where today gas pumps I visited were padlocked at some stations amid claims by the energy giant Kinder Morgan that a company-owned pipeline headed east from here to El Paso had a vague and complicated problem. The state's governor formed a special task force after gas prices shot up 40 cents over the weekend. At least 77 Arco stations - the cheapest anywhere - reported that they were nearly out or out of gas. Some stations simply closed.
The result of the pipeline crisis is that gasoline prices are the same here as they are in Los Angeles, Las Vegas and Phoenix, a trend being set at drivers' expense by oil companies who want to standardize the price of gasoline everywhere despite the relative cost of selling it that varies dramatically from state to state.
The Motel 6 night manager here in Tucson reports that the same same is occurring in her home state of Michigan in cities like Grand Rapids, Battle Creek and Kalamazoo, where she said prices rise 20 to 40 cents every weekend - and then go down on Monday - despite fines and a public outcry that got to the state's previous governor but has not yet stirred the incumbent centrist Democrat, Canadian-born Gov. Jennifer Granholm, to action. The state's newspapers confirm the story.
In California, San Josť (Calif.) Mercury News reporter Gary Richards blamed that state's price hike on "reduced production because of maintenance work, some of it unexpected" on Jan. 13, 2003. "The problems cut gas production in California by nearly 8 percent. Production was already about 13 percent below normal, largely due to converting from MTBE to ethanol, which is expected to cost refiners about another 10 percent of their summer gas capacity. Hurting the most are independents which buy excess gas from major dealers. The refineries have reduced their supplies, and that's why an independent near me is selling gas for $1.79, up 16 cents from a week ago," Richards told a reader who wrote in to inquire about the soaring cost of gas.
But on the same day, Jan. 13, 2003, Venezuelan politics was blamed in an Associated Press story that ran in the Cincinnati Post for a mere 5-cent price hike in Ohio. The source was Trilby Lundberg of the Lundberg Letter, an oil industry publication. The governor was Republican Robert Taft.
When the same sort of thing happened in The Philippines three years ago, columnist Federico Pascual Jr. of the respected Philippine Star pulled no punches. He was asked by a reader, "Why did the oil companies think they could get away with lying to the people? Will the radio anchors defending the price increase based on alleged losses now change their spiels? Were the proper taxes paid on the oil firms' income and that of their major stockholders? What ever happened to the law putting a limit to oil profits?"
Pascual responded with this plea: "Help us find the answers to these compelling questions having to do with the continually rising prices of gasoline and other refined oil products.
"The giant oil firms claimed they have been losing heavily when they again raised their prices days ago. But their audited books showed that among themselves, the Big 3 actually netted profits running to a whopping P14 billion [pesos] from 1966 to 1999.
"Energy Secretary Mario Tiaoqui is often on radio to explain why the oil companies have to do what they do, including the raising of their prices. He also serves as runner between the oil companies and President Estrada."
On Jan. 10, 2003 - just three days before the Cincinnatti and California stories - the Taiwan daily Taipei Times reported that three oil companies there, including Esso (a division of Exxon Mobil Corp.) were looking at criminal charges and fines. Under the headline "Three oil companies warned on alleged price fixing," the United Daily News story scraped back the veil of confusion by going directly to industry sources when the country's Fair Trade Commission investigated a 2.5 percent price hike.
"FPC [a Formosa firm] and Esso explained their actions to the FTC on Thursday," the Times said. "The oil companies said that Taiwan's gasoline prices are lower than those in neighboring areas, such as Hong Kong and Singapore. The companies added that local price hikes over the past year have merely brought Taiwan's gasoline prices near global levels," the paper reported.
And the concept now being implemented across this country and wherever government and media is willing agents of the oil companies - in the U.S., media corporations may have significant energy interests, as General Electric does with NBC, for instance - was spelled out for the Taiwanese in the Times report.
"One unnamed oil company executive said the FTC does not understand the concept of business, noting that market prices are not solely a reflection of costs. The executive added that refined oil throughout the world is generally of the same quality and that competition often leads to similar pricing," the Taipei Times reporter said.
"Oil executives said the focus of the FTC's investigation should start prior to the oil price hikes. They said oil companies have not colluded on prices and that they are willing to provide internal financial information and global oil pricing data to the FTC for review. They furthermore questioned whether the FTC would allow further price increases should it find that the prices set by oil companies have yet to fully reflect costs."
From Arizona to Brazil (where Petrobras just iht drivers with a 10 percent hike last December) to Cincinnatti to Zimbabwe, the story is always a variation on the same theme.
Now, just as it was in California, the blame here in Arizona is being bounced back and forth across a multitude of state and federal energy and consumer agencies, ricocheting from one to the next like a billiard ball blown out of a cannon as outraged consumers started screaming at elected officials across the state. Should Arizona's new governor expect a recall election next year? Maybe: She's a Democrat, too.
While at least three of the states that have gasoline price issues are headed by Democrats, one California may not have one much longer. In light of all this is it interesting to read, in an Associated Press story from Jan. 13, 2001, that Arnold Schwarzenegger, the wealthy actor who is running to replace Gov. Davis in a special recall election, was apparently a pal of Kenneth Lay, head thief at Enron.
According to the Associated Press, "Lay met secretly with California Republicans at the Beverly Hills Hotel and pushed a plan that called for ratepayers to pay the billions in debt racked up by the state's public utilities. The plan contended that federal investigations of price gouging are hindering the situation." Schwarzenegger and Riordan - who pushed the actor to run in the recall - were both at that secret meeting, along with junk bond billionaire Michael Milken. Later reports put the meeting at the nearby Beverly Hilton.
Rep. Henry Waxman told much the same kind of story in his OpEd piece in the Washington Post in January 2002. "Some facts are coming to light nonetheless," he wrote. "Enron was the administration's biggest campaign contributor. The company's lobbyists met secretly and repeatedly with the vice president's energy task force. The final energy plan contained 17 provisions that Enron wanted. ... Last April , Enron CEO Ken Lay met with Vice President Dick Cheney, urging him to oppose price relief in the California energy crisis. The next day, the vice president called the Los Angeles Times and argued against price caps," said Waxman, who has served many years on the House Energy and Commerce Subcommittee.
Only those who really search, or drive from state to state, are likely to grasp the magnitude of the fraud, and fewer and fewer people are doing that. Just last year, the floating crap game that is the manipulated energy and gasoline market had Californians paying close to $2 for a gallon of the same gas that was going for $1.24 at Arco stations in Phoenix. This year, gas is $1.65 or thereabouts for regular at those stations, but most people in each state are focused on their particular price change. Soon, though, everything that is transported from one state to another may experience a sharp rise in prices - unless refiners and the Bush administration decide it would be better to postpone the political damage into his second term.
In 2002, The American Reporter disclosed that overnight, all the gas stations in Los Angeles stopped selling 89 octane gasoline at the cheapest price available and started selling 87 octane gasoline in its place. Three weeks later, the Los Angeles Times also noted the change but were convinced by industry executives that the change was due to the same set of excuses - refinery supplies and pipeline problems - that were offered this week in The Arizona Republic. Yesterday, El Paso stations sported bright new octane stickers: now its 86 octane for the same price at the former 87 octane "regular" gas.
"A temporary shutdown of the pipeline that supplies roughly 30 percent of the Valley's gasoline is causing dramatic price increases and shortages of premium and midgrade gas at many stations," the conservative daily reported. "And the price increases, as much as 40 cents a gallon since Friday, are across-the-board and not reserved for the upper-end products."
An Arco spokesman, confirming the paper's findings at the 77 station in Phoenix, said the problem was with an 8-inch pipeline that carries the more expensive gas from Los Angeles to Phoenix (and Tucson) and that the price of regular - which comes over a separate pipeline - was unaffected. Meanwhile, Arco and other retailers have asked the state's Gov. Janet Napolitano to let them use stored gas in Tucson that is not "oxygenated," a process that is applied to cleaner-burning gas as a result of new laws in California that were opposed by the industry.
The Arizona portion of the pipeline sprang a leak on July 30 that spilled 10,000 gallons into a new housing subdivision under construction. The oil companies dislike the state for not having refineries and demanding gas that will not mar the natural colors of its amazing skies.
The retailers want to use the cheaper, dirtier gas, and the Arco spokesman told the newspaper, "Right now the Tucson storage tanks are full and the pipeline is backed up to El Paso," while the governor's spokesman said, "We're working to get the pipeline open as soon as possible, but safety is our primary concern." A Kinder Morgan spokesman said "the company is working with appropriate regulatory agencies to bring the pipeline back into service," the paper reported, but added, "He could not say when the pipeline could be reopened."
It is ironic in the extreme that the concerns of the Dept. of Homeland Security do not consider the security of Americans' right and necessity to travel by car wherever they want. Instead, they are apparently focused on reducing our ability to travel by air, train and car across the country. Perhaps they don't know that the greatest enemy of democracy is a lack of communication - even the word itself originates with a Greek root that signifies the people's voice.
Now that CNN is primarily an entertainment venue - reporting endlessly today on "Gigli" and Arnold but mum on our new energy crisis - and fewer Americans want to or can afford to travel, the cross-pollination of ideas and intelligence that forms the backbone of the people's ability to evaluate the quality of their government is steadily being reduced.
Whether that's the grand design of the transnational energy companies that spawned the Bush family's wealth or a remarkable coincidence is a matter of opinion. The only certainty is that their profits, vastly higher this year than last, will rise again.