Worse Than Enron? Goldman Sachs Accused of Fixing Oil Prices or The Ionizing of America

[McCamy Taylor]

I. The Ionizing of America

The pieces just keep falling into place. The so called Cheney Energy Bill of 2005 had something for just about everyone (read “ethanol” to get the Congressmen from the corn belt to sign on) but it mostly had giveaways for the oil and nuclear industry. Here is a summary of its provisions from wikipedia

http://en.wikipedia.org/wiki/Energy_Policy_Act_of_2005

Note that Texas Companies were particular beneficiaries. Also note that the nuclear power industry received assurances of cost overrun support (they always go over cost and over projected planned time guidelines) and the old liability cap was extended for a few more decades (Who will pay if a plane crashes into a nuke and wipes out NYC? The tax payers.) and other incentives to start building new plants.

The last plant to begin production in the U.S. was the River Bend plant in 1977. Three Mile Island happened in 1979.

http://www.nrc.gov/reading-rm/doc-collections/fact-sheets/3mile-isle.html

And then Chernobyl happened in 1986

http://en.wikipedia.org/wiki/Chernobyl_disaster

And no one has even talked about building another nuclear power plant---until last year, when the first site approval request in 30 years was ok’d.

http://www.ens-newswire.com/ens/mar2007/2007-03-09-04.asp

WASHINGTON, DC, March 9, 2007 (ENS) - The Nuclear Regulatory Commission Thursday approved the first Early Site Permit for a nuclear power plant - demonstrating a new and previously untested licensing process for locating new nuclear plants in the United States. Critics say new nuclear plants are not needed if energy conservation is implemented.
The approval - for Exelon Generation Company's Clinton site, in central Illinois - was hailed by U.S. Energy Secretary Samuel Bodman as "a major milestone" in the Bush administration's plan to expand the use of nuclear power.
"NRC approval of the Clinton Early Site Permit represents a major accomplishment in this administration’s effort to address the barriers and stimulate deployment of new nuclear power plants in the United States," Bodman said.

Did I mention that presumptive GOP presidential nominee John McCain sees eye to eye with Bush when it comes to nuclear energy?

http://www.seacoastonline.com/apps/pbcs.dll/article?AID=/20071204/NEWS/712040393

Republican presidential hopeful John McCain wants America to get serious about nuclear power.
"How can you possibly talk about alternative energy sources without nuclear power?" said McCain, who will take part in a candidate forum Thursday hosted by Seacoast Media Group, the parent company of the Portsmouth Herald. "It can have a real impact on decreasing greenhouse gases."

Just keep telling yourself Nukes are green as you glow in the dark. Here is a full color brochure from the NRC of all the new plants that are coming to an area near you. Note the Luminant (times 2) at Comanche peak. Those are owned by Goldman Sachs which bought the company formerly known as TXU back in 2007 and changed the name to Energy Futures Holding Co.

http://www.nrc.gov/reactors/new-licensing/new-licensing-files/new-rx-licensing-app-legend.pdf

II. The Enron/California Type Electricity Price Gouging of Texas

Texas is one of the southern states that is being targeted for several new nuclear power plants. Don’t get me wrong. The people who live in the Lone Star State do not want three eyes babies. We just want to be able to afford to run our air conditioners in the summers when the heat commonly tops 100 for weeks at a time.

Remember when wholesale electricity prices used to spike for no particular reason in the western energy grids of the United States---only later we found out that there was a particular reason? Energy dealers were manipulating wholesale supplies on purpose and creating rolling black outs in California in 2001. The FERC refused to intervene. The guilty energy wholesalers bankrupted energy retailers. They killed people. They made a fortune. And no one has been prosecuted. Instead, the Republicans used the manufactured energy crisis as an excuse to drive a Democratic governor out of office and install the Terminator---ensuring that justice that will never be done, since he terminated the civil suit which was the last chance to determine how Bush, Cheney, Rove, Thomas White and their hand picked Federal Energy Regulatory Commission aided in the price gouging of California.

http://en.wikipedia.org/wiki/California_electricity_crisis

Well, someone is doing the same thing in Texas. Here is the Fort Worth Star Telegram with a summary that sounds like a case of déjà vu. Wholesale energy prices go from $100 to $2250 a megawatt hour. Four smaller energy companies are forced out of business in rapid succession. 30,000 customers are forced onto high cost providers of last resort in our new and improved “deregulated” electricity market that was supposed to save us money. Note that during the last legislative session, Republicans who controlled the legislature refused to set any controls, and they may suffer for it this election, but the state’s utilities need not fear, they still own Gov. Rick Perry who will veto anything that is not good for Big Business---United States you are officially warned, Perry is W. II, so never vote for him for any national office.

http://www.star-telegram.com/business/story/695376.html

Texans were not born yesterday. They watched the Enron saga unfold, especially down in the Houston area where it took a lot of jobs. They know that they are getting ripped off by an unholy alliance of big business and state government. This is wholesale price fixing, just like that which was done to the state of California back in 2001. Someone wants something. What?

III. To Hell With Three Eyed Babies, Texas Does Not Want to Pay Big Bucks For Over Priced Nuclear Energy

Texas has a reputation for being the reddest of red states, 100% behind Bush, ready to sell its soul and suck up any form of pollution if it is good for the energy industry. This is not exactly true. Texas is a bit like the United States of America. It is a very big state, and some parts are on a different wavelength than others.

For instance, The Dallas Morning News does not sing the praises of new nuclear energy plants. Here are some examples of stories from their newspaper.

http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-nukes_21bus.ART.State.Edition1.35ab368.html

Support for new nuclear power plants deteriorated slightly during the past two years among people living close to existing reactors, according to a survey by the Nuclear Energy Institute.

And then there is this:

http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-nrgcost_27bus.ART.State.Edition1.15de092.html

NRG Energy Inc.'s estimate of the cost to build two nuclear reactors in South Texas keeps climbing.
Last summer, officials with the power plant developer said the reactors at the South Texas Project would cost between $6 billion and $7 billion. Then the estimate moved to $7 billion. On Wednesday, executives said the reactors will probably cost $8 billion.
Snip
Some anti-nuclear groups have warned that building a new round of nukes could be very costly.
Some existing Texas nuclear reactors ended up costing more than power companies had expected.
Since the last round of reactors was built, Texas deregulated its power industry.
A nuclear reactor developer can no longer pass along higher costs to consumers in electricity rates.
Instead, NRG must pay for the reactors now and hope to recoup the cost when it sells electricity into the Texas power market in a few years.

In other words, electricity from a nuke is going to be expensive .



http://www.quickdfw.com/sharedcontent/dws/news/texassouthwest/stories/061308dnbusnuclearbrf.5376d8.html

And regarding Luminant or Texas Energy Holdings proposed new plants from June 13, 2008

A number of community leaders voiced support for the reactors. A few environmental activists expressed concern about the safety and cost of nuclear plants.
State Rep. Lon Burnam, D-Fort Worth, said he fears people in Dallas and Fort Worth will end up paying higher electricity prices to cover the cost of the plants.

Ouch! That kind of reporting is not going to increase local support is it? Quick, someone raise those wholesale electricity rates some more and maybe get some rolling brown outs going. Make those consumers beg for nuclear energy.

You do realize that Luminant does more than build nuclear power plants. It is also an energy wholeseller.

http://www.luminant.com/about/energy.aspx

Luckily for Luminant, there is Jim Fuquay of the Fort Worth Star Telegram. Fuquay is the man who writes business stories from the point of view of business, and he is the one who always manages to put a positive spin on anything. When Harris HMO, a local managed care plan was illegally bribing doctors to deny necessary services to patients back in the 1990s, Fuquay made it sound as if Harris HMO was doing just fine, thank you, lulling members into a false sense of security so that they were completely unprepared when the state finally stepped in to discipline the organization (as member physicians had warned that they would). He writes about how the people who rely upon the exiting reactors at Comanche Peak for their tax base are glad to see their tax base expand. Well, yes, they would be, wouldn’t they? Double the tax base, double the fun if you are a small community. But the overpriced electricity will still be overpriced.

http://www.star-telegram.com/news/story/696809.html

Speaking of overpriced, exactly why is oil, still America's number one fuel source, so damn expensive?

IV. McClatchy Speculates that Market Speculators Like Goldman Sachs (Owner of TXU) Are Driving Up Oil Prices

Oh man, sometimes The Math just jumps out at you and grabs you by the shoulders and will not let go. This morning, I sat down with a nice cup of cinnamon tea and my morning paper. The McClatchy stories are the best, and today’s McClatchy business story by Kevin G. Hall at the top of the business section is a doozy.

http://www.star-telegram.com/business/story/706704.html

Almost all the economists studying today’s high oil prices think that financial speculators are helping drive up those prices, but hard data is lacking as to whether they’re a factor, and if so, how big.
Michael Greenberger said speculation is a major factor, and he knows a lot about the complex global oil market. He directed trading and markets for the Commodity Futures Trading Commission from 1997 to 1999. That body regulates the trading of contracts for future deliveries of commodities, including crude oil. The contracts, called futures, drive oil prices. Greenberger, a law professor at the University of Maryland, told McClatchy why he thinks financial speculation is driving up prices.
Snip

Who are these speculators? Do they have names and addresses?
I really cannot answer that with certainty because these unregulated markets are so opaque. Many say that Goldman Sachs & Co. and Morgan Stanley are primary traders on the principal market outside of direct U.S. supervision, the Intercontinental Exchange, otherwise known as ICE.
Snip
How much of today’s record oil price is attributable to speculation?
There are many estimates being made by observers of these markets, economists and industrial energy consumers suggesting that the price of a barrel of crude oil could be anywhere from 25 percent to 100 percent in excess of what market fundamentals would dictate. For example, (the Organization of Petroleum Exporting Countries) has recently said that a barrel of crude should not be in excess of $70, and it has opened its own investigation into excessive speculation in these markets to find out what interests are causing the price to be almost double that.

V. Time Out for Some Math

After I read the above, one of those General Electric light bulbs lit up inside my head.



(General Electric makes nukes too)

Goldman Sachs owns TXU/Luminant/Energy Future Holdings which will be one of the few companies left standing (I can predict this with 100% certainty) no matter how high wholesale electricity price manipulators manage to jack up prices in Texas in their attempts to create an artificial energy crisis.

Luminant is attempting to build more nuclear power plants. However, there is local resistance because people know that the things 1) use water which is scarce right now in the South and 2) are expensive to build and operate and therefore the price of their electricity will be expensive and Luminant will use its political clout to pass its cost overruns on to consumers and 3) where do we put the radioactive waste and 4) what about Three Mile Island and Chernobyl?

And now Goldman Sachs is accused of manipulating the market to drive up the price of oil. If true, this means it can decide how much it will charge for the oil that it sells from its refinery, Coffeyville Resources LLC

http://en.wikipedia.org/wiki/Coffeyville_Resources_LLC

And it can make sure that the deal between its subsidiary Cogentrix Energy and Intel to develop new solar technology is profitable since oil prices will stay high, no matter how much the Saudis decide to increase production, meaning that energy prices will remain high, meaning that investment costs will be reimbursed as profit from continued high energy prices down the road even when peace is achieved in the Middle East.

http://www.gather.com/viewArticle.jsp?articleId=281474977375454

Through its East Coast Power holdings, which supply energy to other oil company refineries, it could conceivably enable the oil industry as a whole to create bogus oil shortages by staging brownouts or blackouts of power to refineries, which could then throw up their hands and exclaim “It’s not our fault, man!”

And, of course, it can manipulate Texas electricity markets to ensure that utility subscribers will eventually agree that something has to be done about the Texas electricity crisis, and since Arnold is already the governor of California, that means we will have to build more nuclear reactors.

Exorbitant profits, unlimited investment opportunities, the ability to set prices the way the seller wants them to be----who knew business could be so much fun? Obviously Enron didn’t have the smartest guys after all.

VI. How Does TXU/Luminant Get Away With It in Texas? They Own the Government

Right below the article about market speculators driving up oil prices in today’s Fort Worth paper, there is another article about how the Texas Secretary of State is leaving office in midterm to go work for….Luminant.

http://www.star-telegram.com/business/story/706703.html

Phil Wilson will continue to work on behalf of citizens through July 6, earning an annual salary of $117,000. The next day, he’ll flip a switch and start working on behalf of Luminant, the wholesale power unit of the former TXU Corp.
So if you have a problem with your electric bill this summer, you know whom to call.
There wasn’t a huge outcry about Wilson’s move or the obvious conflict of interest — or the effect it might have on the debate over electric deregulation.
If Texas is to make dereg work for consumers, as well as power companies, it has to make real improvements, and we have to believe that lawmakers and industry are working in good faith. Although Wilson doesn’t oversee utilities as secretary of state, he has been in the governor’s office since 2002, and electric dereg has been front and center much of the time.
Snip
Wilson, 40, was an aide to Gov. Rick Perry, serving as communications director and deputy chief of staff, and he oversaw the Texas Enterprise Fund that gives away money to companies expanding in Texas. Perry appointed Wilson secretary of state about a year ago.
Snip
Luminant says it simply wants to hire the best people to help navigate the political waters in Austin.
Not to worry. Last year, when the utility kept the Legislature from blocking the TXU sale or adding tough conditions, it spent about $6 million on lobbying.
And it enlisted some of the most powerful people in the state, including James Baker, former U.S. secretary of state; Don Evans, former U.S. commerce secretary; and Ron Kirk, former Dallas mayor.
Consumer advocates and many residents are already losing faith in the state’s willingness to stand up to electric companies. While others have backed away from deregulation, Texas is staying the course despite soaring prices.
If the system is going to last, we have to tweak it and fix it. Hiring a sitting state official looks like you’re trying to game it.

VII. The Feds Claim They are “Investigating” Yeah. Right. What Is Congress Going to Do About Manipulation of Oil Prices?

Wow, look at who was the biggest donor in political contributions in 2004. That’s right, Goldman Sachs.
http://www.usatoday.com/money/industries/retail/2004-02-02-walmart_x.htm

And look at how much money they have given before and after---and most of it goes to Democrats. Sigh.
http://opensecrets.org/orgs/summary.php?id=D000000085

I guess we will have to wait to see any action on this one.