Interview: Fimat USA---Kilduff, John---Vice President, Energy Risk Mgt
>> members of congress are blaming profit profiteering oil companies while the president is calling for an investigation into price gouging. is there reason to believe that either congress or the administration knows enough about the issue to lower gas prices in the short run? john kilduff with fimat u.s.a. joins me now. the problems defined by the politicians and solutions they’re suggesting, do they make any sense?
>> not really, mike. this is a problem that’s, a, crept us on us, b, has been exogenous in its foundation in terms of the geopolitical problems out there. it’s not exxon-mobil’s fault, it’s not the fault of the energy companies. we’re competing for a precious resource and 2/3 of our oil is now imported and much of that oil comes from countries that are either unstable or outright hostile towards the united states. it’s just a bad combination all around.
>> taking some of their suggestions, the president suspending deliveries to the strategic petroleum reserve which is almost full. is this going to make much of a difference?
>> no, i think this was a symbolic gesture. in the past i had myself called for releases. i thought it would help stem the price rise over some course of time but that ship set sail some time last year and if they released oil it wouldn’t do anything and it would―we would lose that lever. but the s.p.r. was filled last october. crude oil and commercial inventories are at an eight-year high.
>> is it an issue of price gouging, as the democrats are suggesting?
>> no, it’s not an issue of price gouging, either. these prices being called for by the market as we trade them on the nymex and globally in local cash markets are being paid by everyone, by everyone around the world. some governments do subsidize their domestic consumption but this is a price that’s out there and that’s borne by the market right now.
>> there is a suggestion that we are seeing speculation in oil markets , that there is a bit of a difference between the actual cost of producing oil, plus a profit, and what we’re paying on the futures markets . any validity on that?
>> that depends on whether or not you believe in the free markets and market price discovery provided by the open markets . right now, i could give you a litany of problems and potential problems with respect to future crude oil production and if you look the futures price curve, it’s reflective of that. the outward months are higher priced than the current month because of those various fears. so hedge funds are a part of it but also pension funds, employee retirement systems invest in the nymex because we have a huge vulnerability potentially with the energy picture. so you’re seeing investors come into the nymex, choose other investments to get a hedge to what could be ruinous to our economy or the stock market . where do you go? you hide out in the oil patch and gold and other commodities. >> is there anything we could do right now to brick down―bring down prices for the summer ahead?
>> a blanket waiver on the air quality standards for the gasoline, allow conventional gasoline to be used anywhere and everywhere and also, maybe repeal the tariff on brazilian ethanol, helping supplies of ethanol get rushed to market .
>> any of things politicians talking about these days not going to help?
>> the president’s e.p.a. waivers were a good start. he needs to be more aggressive and that might help bring pump prices down.
>> thank you very much, john kilduff of fimat. when we return, the latest on another energy-related story. june grasso on today’s developments in the ken lay enron trial in houston. “money & politics” returns in a moment.
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Interview: United States Senate---Cantwell, Sen. Maria---(D) Washington
hello, i’m michael mckee. welcome to “money & politics.” responding to rising oil prices and falling approval ratings, president bush today ordered the justice department to look for possible manipulation of gasoline prices and announced he’s halting deposit it’s nation’s strategic petroleum reserve. lawmakers are rushing before microphones to denounce rising prices and promise action. house energy and commerce committee chairman joe barton plans hearings on refinery outages and how oil companies determine where to invest profits. byron dorgan proposing a 50% excise tax on profits from oil sold at more than $40 a barrel and arlen specter plans hearings on legislation to tighten antitrust religions on the oil and gas industry. peter cook begins our coverage today with a look at the oil frenzy gripping the nation’s capital. he’s at the white house. peter?
>> mike, president bush concedes that none of the actions he outlined today will change the nation’s lebanon term energy picture, but he and republicans are clearly hoping that the steps today will show that this administration is at least doing something to ease american’ pain at the pump. our strategic reserve is sufficiently large enough to guard against any major supply disruption over the next few months, so by deferring deposits until the fall, we’ll leave a little more oil on the market . every little bit helps.
>> the president’s proposals may take a few cents off prices at the pump, but that’s about it, says the cato institute’s peter van doren.
>> there’s basically absolutely nothing the government can do at this point but constituents are angry and they want some action so politicians respond with the things they can say that they can do even though they’re not going to have much of an effect.
>> democrats say the president’s proposals were too little, too late, and offered their own ideas, including a 60-day gas tax holiday for drivers and windfall taxes.
>> i will offer an amendment to the supplemental to require a complete examination as to whether or not we should break up the the big oil companies. enough is enough. we have no competition.
>> the democrats’ proposal face an uphill fight. but there is one piece of legislation receiving attention as prices continue to rise at the pump. senate judiciary committee chairman arlen specter’s legislation would revise the laws ruling the oil and gas industry. that’s one of many proposals floating around on capitol hill.
>> any industry reaction to the offer of waivers?
>> yes, somewhat surprising reaction. you would think some in the industry would be open to the idea of additional waivers from the federal government and easing of rules regarding fuel specifications but i spoke to the head of the national petrochemical and refiners association and he told me he’s worried that the waivers in individual states could cause potentially more harm than good. certainty is the most important thing for the industry and if you have piece meal waivers in certain states, that makes it harder for the industry to do business.
>> one oil man thinks charges of price gouging are ridiculous. boone pickens, the dallas hedge fund manager who has made billions betting on higher oil and natural gas prices, telling brian sullivan that politicians are looking in the wrong place.
>> there’s not anything there. there’s not anybody gouging. that’s ridiculous.
>> why do you say that?
>> how would they gouge, brian? i mean, does exxon management get together and say, hey, let’s jack the price up on this gasoline today or this month or something like that? is that isn’t even prospective.
>> pickens adds the president’s move today will have little effect on oil prices and says a windfall profits tax is a bad idea, as well. you can see more of brian sullivan’s interview with boone pickens on “for the record” beginning saturday at 5:30 a.m. eastern time. is there anything congress can do to lower energy prices or is this a game of political football? senator maria cantwell has introduced legislation to make the industry more responsible for soaring costs. she joins me now from capitol hill. senator, thank you very much for joining us. there have been a number of price gouging studies by state attorneys general and the f.t.c. and others over the years. nobody ever finds anything. do you have any evidence that this is happening now?
>> well, we have listened to attorney generals and what they’ve sides when they investigate these issues, the only laws they can look at really have to do with collusion, whether, say, exxon and shell work together to set a price. what we really want to do is to have a strong federal law that says that federal―that price gouging is a federal crime, but look at the manipulation of supply, whether supply has been artificially manipulated or suppressed, thereby driving up the cost and price of gasoline.
>> do you think that’s happening?
>> well, i can tell you from the western energy crisis with electricity, i heard your previous interview with mr. pickens, he said, well, how would this happen? a lot of people said the same thing about electricity, that it wasn’t happening, that it was either environmental issues or not enough generation and when we found out that people were taking production down purposely as part of manipulative schemes, it certainly got everybody’s attention in the west because it really cost our economy. all we want now is legislation that 57 senators have already supported that basically says, give the f.t.c. and the department of justice the ability to investigate whether there’s any kind of manipulative devices or condrivances and give the president emergency power, like 23 other states have that they used in the aftermath of katrina. we have if we have those tools, the federal government will be able to do its job and protect consumers.
>> your bill would also ban profit earring. what is profit earring? define that.
>> the legislation, as i said, gives the f.t.c. the ability to look at, after the president’s declared an emergency, whether excessive prices have been charged in the aftermath of something like katrina. that’s one of the elements of the legislation. so i think that’s the part you’re referring to. the other aspect of it deals with the department of justice and attorney generals and we base this on a new york law that had looked at what kinds of price gouging had happened in other instances, again, after crises had occurred. we have seen that tested through the courts and tested language. and as far as manipulation, we want to make sure that if there’s market manipulation that has transpire, that that language is based on laws we already have on the books with the securities and exchange commission and happens to have been dealt with wholesale energy rates as it relates to electricity and natural gas.
>> democrats are suggesting a windfall profits tax that might take money away from oil companies. explain how that would lower the cost of gasoline at the pump for consumers this summer?
>> i have some concerns about the point you’re making in the sense that how do you make sure that a wynn fall profits tax actually gets back to consumers and doesn’t have unintentional consequences. so i’ve supported legislation that senator judd gregg sponsored last year that would take that money and put it into the low-income energy assistance program. that way we knew it was getting back to consumers. but i think we have to be careful on those issues not to have unintended consequences and to make sure that the benefits go to individuals impacted.
>> speaking of unintended consequences, congress essentially mandated refiners switch to ethanol from mtbe, causing some of the problems now. why aren’t you blaming yourselves and why not waive that requirement, reinstate the liability waiver for mtbe?
>> that’s a very good question but i would point you to washington state where we don’t have that mtbe issue or the ethanol issue today. so why are gas prices over $3 a gallon in washington state.
>> is it because it’s a national gasoline market ?
>> well, you know, we have gasoline―most of our oil from the west coast comes from alaska so for us it’s been an isolated market so washington and california and oregon haven’t had those same experiences yet are also seeing this price. so? is it about the cost of production or is it the larger issues? so to me, the end result of this debate ought to be legislation that promotes auto willive fuel and competition at the pump today and that’s aboutwe need to get about.
>> unfortunately, we are out of time. we thank you very much for joining us. washington democratic senator maria cantwell. also on “money & politics” today, we’ll check in on another energy-related story, the trial of former enron c.e.o. kenneth lay. we’ll talk with senate banking committee chairman richard shelby about fannie mae and freddie mac. and more on oil, columnist kevin hassett on oil and pinot noir. when we return, john kilduff of fimat u.s.a. on whether the answer to high oil prices can be found at either end of pennsylvania avenue.
