Daily Archives: May 30, 2011

Billionaire Boone Pickens can’t understand why the Billionaire Koch brothers don’t support the slimmed Pickens Plan

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Michael Giberson

Koch Industries and various groups supported by the Koch brothers’ political donations are opposed the Boone Picken’s plan to provide government subsidies to anyone who makes or buys natural gas power vehicles. The position seems consistent with the Koch’s generally libertarian policy outlook, though the company is involved in the natural gas industry and presumably would benefit financially from Picken’s slimmed down plan.

Rather than admire their self-sacrificing political consistency, Pickens is mystified that someone would be opposed to spending taxpayer money to fund his plan.

From E2 Wire, The Hill’s Energy and Environment Blog:

Billionaire energy magnate T. Boone Pickens slammed Koch Industries on Friday for its opposition to legislation he’s promoting that provides tax credits to jumpstart use of natural gas in the trucking industry.

“They don’t ever come toe-to-toe. They don’t get up and discuss these issues or anything. They are very mysterious,” Pickens said on CNBC.

…

But in a statement earlier this month against the bill, an executive with Kansas-based Koch Industries, which is active in refining, polymers and other sectors, said the company has “consistently opposed subsidies that distort markets.”

“We maintain that the marketplace, while not perfect, is the best mechanism for allocating resources to consumers. People deciding what fuels to purchase, instead of the government, is best for consumers and our country,” said Richard Fink, executive vice president for the company. He said that Koch does not question Pickens’ “intentions or integrity,” but added:

“We believe history has demonstrated over and over that these subsidies end up undermining the long-term prosperity of the country. For these principled reasons, we oppose this bill (HR 1380) to give tax incentives to buyers and makers of natural gas-powered vehicles and related infrastructure.”

But Pickens noted the company benefits from subsidies that bolster the ethanol industry and more broadly defended the bipartisan legislation, which was introduced by Rep. John Sullivan (R-Okla.) and has over 180 co-sponsors.

“I am trying to get away from the terrorists. I think that the money that we pay to OPEC, it gets in the hands of the Taliban,” Pickens said, calling use of domestic natural gas a viable alternative.

He also noted that the bill would provide the tax credits for a limited number of years, unlike longstanding ethanol tax subsidies.

“I just want the 18-wheelers and with those I can cut OPEC in half, and my help from the government [is] a five year and out,” Pickens said.

CFTC files oil market manipulation case

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Michael Giberson

At Streetwise Professor, Craig Pirrong examines the CFTC’s case against alleged oil market manipulators Parnon Energy, Arcadia Petroleum LTD and Arcadia Energy (Suisse), all affiliates of the trading firm Arcadia. Whatever the ultimate merits of the case, he says the CFTC is going to have trouble making the charges stick. In part the CFTC must demonstrate that the manipulators were big enough the move the market, but the oil market is huge. Not surprisingly, the price data don’t always stack up in support of the CFTC story. (But be aware that attempting to manipulate a commodity market is illegal whether or not the manipulation succeeds.)

Pirrong concludes with the good news implied by the case: “CFTC has been examining the oil market with a fine tooth comb going back to 2005 if memory serves. If this is the best case they can find after all that, the oil market must be pretty damn clean.”

Also note, with respect to the public image of speculators, that the manipulation alleged intended to push some prices up and other prices down. The case doesn’t support the standard public narrative of speculators driving oil prices endlessly higher.

MORE:

At the E2 Wire blog, some indication of the current political environment within which the agency is operating:

Senate Democrats blasted the chairman of the Commodity Futures Trading Commission Thursday, arguing he is not moving quickly enough to impose new limits on investors in oil markets aimed at curbing “excessive” speculation. Such speculation, the lawmakers argue, is pushing up oil and gasoline prices.

…  Democrats have turned up the heat on the CFTC in recent weeks as high gas prices remain at the top of the congressional agenda. They blame oil market speculation for high prices and say the CFTC limits will temper pain at the pump.

Seven Senate Democrats, led by Sanders, met with Gensler in Sanders’s office Thursday afternoon to call for the immediate implementation of regulations imposing position limits, or caps on the number of futures contracts that a market player may hold, in crude oil markets.

… “All the senators present feel that Dodd-Frank provided the authority and power to the CFTC to get speculators out of the oil markets, that that’s very important to the economy, and the action by the CFTC is way too slow,” Sen. Jeff Merkley (D-Ore.), who also attended the meeting with Gensler, told The Hill. “They are in violation of the law at this point.”

Meanwhile, Republicans in the House of Representatives have voted to cut the CFTC’s budget by 15 percent.

Of course there is no reason to think that the CFTC’s filing of a complaint dealing with oil market trading in 2008 has anything at all to do with the current political pressures on it coming from Congress and the Administration. After all, the CFTC “is an independent agency of the United States government,” Wikipedia says so.