Congressmen Singlehandedly Lower Oil Prices

The Hill reported on the Superman-like abilities of a handful of Congressional representatives. They're able to lower oil prices with a single word, OK, multiple strings of words like "let my people vote," and "people have too much month at the end of their money." Let's see how these heroes did (history is from the Energy Information Administration):

March $3.258
April $3.441
May $3.764
June $4.065

This rise occurred while customers cut back their miles, 1.8% in April and 3.7% in May. The public is well aware of the record profits these prices produced for oil companies.

But a handful of elected leaders brought them crashing down by meeting in the dark in the Capital. Surely, they were powerful enough to get prices back to levels some 120 days ago? Sorry, our political heroes fell short.

Triple A reported gas prices (as of 8-4-08):

August $3.871

The nearly 20 cent decline is helpful in addressing my personal pocketbook energy glitch. But, I'm sure the yahoo's in D.C. had little to do with it, unless their political backers are trying to mollify an angry public before an election. After a similar summertime peak, October 2006 had the lowest gas price average for the whole year. Yet, Republicans lost their majority in both Houses.

Record oil company profits, not helpful. Claiming credit for the small decrease, delusional. That's America's Republican Party to the average citizen.

Carlyle Downs Booz

In a $2.54 billion swig, The Carlyle Group swallowed the government consulting and services arm of Booz, Allen, Hamilton. The private equity underwriter's press release stated:

“We look forward to supporting Ralph Shrader and his management team as we enter this new and important phase of Booz Allen’s leadership in the government services sector.”

Translation: Carlyle already has hundreds of affiliates, many firmly attached to the tit of the American government-industrial monstrosity (Eisenhower's military-industrial complex on steroids). Booz can increase the flow with their consulting recommendations. Pass the bottles, there's much to celebrate!

Celestis Remains Lost, SpaceX Now 0 for 3

The New York Times reported on SpaceX's latest rocket failure, their third in a row. This launch went smoothly, until the second stage fired with the first section still intact. Lost were three satellites and the remains of 208 people, including "Scotty" from Star Trek, James Doohan. Family members hoped for a unique final resting place, weightless space with an incredible worldview. That alas, didn't happen.

But SpaceX did get a significant investment allowing it to continue launching Falcon 1's, as cited in the CEO's update. Elon said, "There should be absolutely zero question that SpaceX will prevail in reaching orbit and demonstrating reliable space transport." While that may be true, I venture the families of the 208 celestial passengers are questioning the final flight of their loved ones' remains.

SpaceX is slated to take over cargo hauling for NASA once the Space Shuttle program ceases. Let's hope they send one into successful orbit, confirming the public-private partnership. Celestis doesn't need any more truly unforgettable memorial events.

Drive Less, Pay More

What should the public make of members of Congress chanting "Drill Now, Pay Less"? Given our second quarter experience of "Drive Less, Pay More", the public is livid and wants action. A review of miles driven and gas prices might be in order.

From the top graph, Americans dramatically increased their miles from 1992 to 2004. From 2004 to the present, the amount roughly levelled off.

So what happened to gas prices while the SUV driving public explored the blue yonder in spades? The bottom graph shows little change in gas prices at the pump from '92 to '04.

The big spike came when demand became range bound, from '04 to the present. Prices rose the most in the second quarter of '08 when drivers cut back 1.8% in April and 3.7% in May. Those sky high prices fueled record oil company revenues and profits for the third year in a row. What an odd picture? Reality is nothing like the ECON 101 dribble offered by grandstanding members of Congress and the Oilmen White House.

Supply & Demand Fiction for Gas Prices

While America's elected officials play out a theater of the absurd on energy, data pokes a hole in their foundational argument, that gas prices vary based on demand. They go up when the price of crude oil increases, but don't tick down much, if at all, when that input becomes cheaper.

What happened to demand the last 12 months? The Transportation Department noted Americans drove less than any period since 2004-2005. But the graph above shows a long term price increase, huh?

More instructive is April, when drivers cut back mileage by 1.8%, and May with its greater 3.7% decline. Demand fell significantly as Americans parked their vehicles. So prices fell right? Nope, they accelerated upward. At a time driving volume dropped some 5%, prices roared nearly 20% (as shown in the red circle on the graph above.)

Consumers adjusted demand downward and were met with racing price increases. it 's a great setup for Republican enticement of "Drill Now, Pay Less." But those who experienced "Drive Less, Pay More" should show their displeasure. A pox on political theater and corporate Congressional stooges.

Carlyle Group Blue Over Latest Failure

Hedging contributed to Carlyle's biggest failures. The latest casualty was Blue Wave Partners Management, swamped by the debt crisis which took down Carlyle Capital Corporation earlier this year.

Making bad bets sent another affiliate, SemGroup into Chapter 11 bankruptcy. Reuters reported the company "suffered $3.2 billion in losses on energy futures and derivatives trades that SemGroup says were designed to protect its physical oil trading business."

Carlyle is now liquidating its $600 million Blue Wave Partners Management while keeping its good name. They can drown their sorrows with $2.54 billion worth of Booz.

Chevron Reaches Profit Record As Well!

Add Chevron to the long list of oil companies banking record revenues and profits. Their Human Energy produced a $6 billion bottom line for the second quarter, up 11% from a year ago and 17% from the first quarter.

Demand fell, even as profits soared. Americans drove 40 billion fewer miles in 2008. A marked decline of 1.8% occurred in April. It accelerated to 3.7& in May. Fuel consumption in the past 12 months was the lowest since 2004-2005, according to the Energy Department.

Chevron's earnings report noted, "refined products sales declined 8%" from a year ago. Branded gasoline sales fell 5%.

Industry analysts note Exxon and Chevron will have to pump a lot more gas to meet their production forecasts, but you can't sell what people aren't buying. Might big oil have priced itself out of the market? It's doubtful, but it's time for some shared pain. That means the end to the three year record profit run.