The Checks and Balances Project commissioned Colorado pollster Chris Keating to conduct research that shows that 79 percent of Coloradans favor a crackdown on oil price speculation and market manipulation to reduce gas prices. The survey showed 77 percent of Colorado voters think reducing oil consumption through efficiency would also be an effective way to reduce prices.

“Coloradans are tired of paying for their gas twice: once at the pump and again through their taxes,” said Matt Garrington, deputy director of the Checks and Balances Project. “It’s clear car and truck drivers in this state want solutions to this problem now, including a crackdown on market manipulation, a balanced approach to energy development and an end to taxpayer handouts for oil companies.”

Garrington told The Colorado Independent that the surveyors asked open ended questions along the lines of “Why do you think oil prices are so high? and What could be done to bring prices down?”

“We didn’t lay out policy options to choose from. We just asked people what they thought,” he said.

According to Garrington, Coloradans strongly favor ending taxpayer subsidies for oil companies. Seventy-two percent of Coloradans say ending oil company subsidies and transferring those subsidies to companies that are developing wind and solar power would be an effective strategy for the nation.

Garrington pointed to a ThinkProgress study that shows how market manipulation affects the price of oil. The study shows that while the effect of speculation varies, it can increase the price of oil substantially.

“It’s time for oil and gas companies to stand on their own two feet,” said Garrington. “Coloradans understand that we simply can’t afford to pay billions in taxpayer subsidies to Big Oil. It is simply immoral to continue the Big Oil gravy train when Americans have been asked to sacrifice billions in cuts to Medicare.”

To reduce gas prices, he said seven of 10 Coloradans favor diversification of the sources of energy by creating a national renewable electricity standard that requires 20 percent of electricity to come from sources like solar, wind and geothermal power.

The live telephone poll conducted May 24-26, 2011 by Keating Research, Inc. as an internal messaging survey. It was released to the public on the eve of the Americans for Prosperity “Running on Empty” Colorado tour stops that promote increased oil drilling. The Checks and Balances Project criticized the group as a front for Big Oil and noted that billionaire oil refinery tycoons David and Charles Koch fund the organization.

“The Americans for Prosperity tour is running on empty ideas. Instead of investing our energy dollars into drilling deeper and putting Colorado land and water at risk, we need to build cars that can go further on a gallon of gasoline and to tap into the clean energy of the wind and sun – energy sources we have right here in Colorado that never run out,” said Garrington.

Results of the survey were based on 603 interviews with registered Colorado voters statewide. The poll has a margin of error of plus or minus 4 percent.

Responding to additional questions by email, Garrington said this about why the poll was conducted and why it is being released now, several months after the polling was completed.

“Checks and Balances was interested in learning where the public was at on gas prices and subsidies in the context of the larger political debate happening in Washington. We chose to release the poll in response to the Americans for Prosperity tour, which is backed by Big Oil and the Koch Brothers. AFP is using gas prices to try and take political advantage of the American public and leverage more handouts for Big Oil – this time in the form of our public lands, drinking water, and air quality.”

The bill, titled End Excessive Oil Speculation Now Act of 2011, has been in the making for weeks as Sanders and other lawmakers in the House and Senate have investigatedwhy prices at the pump remain higher than two years ago even though supply is up and demand is lower.

The Dodd-Frank bill from 2010 included a provision that required the Commodity Futures Trading Commission to tackle the excessive speculation with a plan of enforcement by January 22, 2011. Those statutory obligations have yet to be met, and the bill would add one more piece of law to compel the CFTC to limit disruptive trading.

An email from Sanders’ office to The American Independent reads:

Dodd-Frank required the CFTC to impose position limits to end excessive speculation, but gave the CFTC the flexibility to determine exactly what those limits should be.  A majority on the commission has not determined what those exact limits should be so they have not gone into effect.

Our bill mandates the chairman of the CFTC to unilaterally impose specific speculation limits (the same as the position accountability levels NYMEX has had on the books since 2001); and 12% margin requirements. If [Chairman] Gensler can’t get that done, the Senator said he should resign.

A margin requirement is the amount of collateral the trader must deposit. It is a regulatory instrument meant to cover some of the risk assumed by a broker or exchange for taking part in the trade. The position limits in the bill would be applied to the price of crude oil, gasoline, diesel fuel, jet fuel and heating oil.

Rep. Maurice Hinchey (D-N.Y.) said in a press release, “The price of gasoline has spiked up due to record speculation, and small businesses and working people are paying the price. This legislation would immediately implement new rules to ensure the price of fuel is based on supply and demand – not the whims of greedy speculators.” Hinchey intends on introducing a companion bill in the House.

Sen. Sanders sent a letter (PDF) to the president in April articulating concerns raised in his bill:

Other experts believe that excessive speculation is driving up crude oil prices by 50 percent. This means that Americans are paying Wall Street a premium of 70 cents to $1.63 a gallon every time they fill up their gas tanks.

On the Senate floor in May, Sen. Bill Nelson (D-Fla.) dispensed with the notion market forces were to blame for the uptick in gas prices. “That reason happens to be that there are speculators out there running around, running the price up of commodity exchanges for oil futures contracts,” he said, “and those prices run up until they’re ready to dump them and suddenly [the prices] go down.”

According to the U.S. Energy Information Agency, the average price of a gallon at the pump in conventional areas was $2.315 in 2009. The EIA now puts that figure at 3.713, an eight-cent decline since May 30.

In a report last month from Dow Jones, CFTC Commissioner Bart Chilton tried to clarify the correct punitive language necessary in dealing with traders’ activity.

“Manipulation is something that is very specific in the law and has a really high hurdle for us to prove, so that’s why we’ve only had one successfully prosecuted manipulation case in the 36-year history of the CFTC,” he told Dow Jones. Speculation, on the other hand, is legal, according to Chilton.

On the Senate floor today, Nelson went on to say speculators account for two-thirds to 80 percent of the market. “They are the main player,” he said, “and this is what we need to end.”

Futures trading was established as a way of more accurately aligning the cost of output with consumer demand. For oil, prices are set in futures markets, where contracts allow oil producers to lock in prices on their future output. That makes prices predictable and secure, especially for large consumers like airline companies, who rely on the locked in prices to hedge against inflation and better plan cost of services.

Although financial indices have slumped recently because of the tsunami in Japan and a trade downturn, the S&P 500 has trended massively upward, and corporations have seen record earnings since the start of the recession.

The announcement is good news for investors, as Bloomberg reports that the cuts to shareholder dividends that many corporations enacted as the economy entered free-fall have resulted in massive cash reserves. Investors will start to see some of that money in the coming year, Bloomberg projects, with 378 of the 380 S&P companies that pay dividends to shareholders forecasted to restore dividend payouts to pre-recession levels. American corporations now have a record stockpile of $937 billion in cash reserves.

Bloomberg does report at least one aspect of the corporate financial boom that could have positive repercussions for those who don’t have extensive investments. Oil prices are projected to return to $99 a barrel in New York in coming months, a benchmark that was passed as a result of Mideast unrest — though, even after adjusting for inflation, $99 is still a level that had not been seen in American history until recent months.

Economists have long said that consumer spending needed to rise to encourage businesses to invest in new employees.

In somewhat less heartening data that may belie the idea that consumer confidence rose with spending, consumers spent that extra money on food and clothes rather than durable goods like cars or appliances. Worse yet for consumers, the good economic news sent oil prices up, which could drive inflation up for March.

Although unemployment figures for March won’t be available until later in the week, economists expect the unemployment rate to hold steady at 9.7 percent despite the addition of up to 200,000 jobs. There may or may not be pent-up demand in the market causing the rise in consumer spending, but that demand has yet to be reflected in the labor market.

The autos and the utilities could have a nice little symbiotic relationship. While the auto industry has something to build, utility companies have another place to sell their product.

The utilities are hoping for a major shift in vehicles from gasoline to electricity. If such a shift takes place, according to the Pacific Northwest National Laboratory, oil imports would drop by 52 percent.

The talks are exploratory right now, but worth watching.

Hearing the news, Sen. John McCain accused Sen. Barack Obama of being in the pockets of Big Oil, a charge Obama has repeatedly leveled at McCain in campaign ads. McCain blasted Obama for supporting tax breaks for oil companies in a 2005 energy bill.

The Arizona senator didn’t mention, however, that he and Obama recently voted for a piece of legislation — the energy package tacked onto the $700-billion bailout bill — that gave even more tax breaks to oil companies. Passage of the energy package — whose primary purpose was to bolster clean energy — was continually delayed because Republicans in Congress refused to support a bill that didn’t help fossil-fuel companies.

Neither presidential candidate has talked about how much money his campaign has received from the big, bad oil companies. Here are the numbers: The McCain campaign has received $1.3 million, while the Obama team has gotten $400,000.

Stick that in your barrel and refine it.

Flickr: Lodigs

After a summer of grimacing at the pump — with gas prices reaching an average of $4 a gallon — consumers are finally getting some relief. Just a few months ago, the cost of crude oil was as high as $140 a barrel. Now it is down below $65 a barrel, the lowest point in more than a year.

This is clearly good news for consumers — at least in the short term — and bad news for oil companies — whose stocks are plummeting. It’s really bad news for the Organization for Petroleum Exporting Countries, which Firday hastily cut daily output by 1.5 million barrels a day Friday. The oil cartel is predicting a decline in global oil demand for 2009.

Over this year, oil consumption has dropped significantly. From January to August 2008, petroleum demand declined by 4 percent, according to the American Petroleum Institute. That’s the biggest drop in the U.S. since 1982, say API economists.

Illustration by:Matt Mahurin

Faced with high energy prices, individuals and businesses had changed their everyday lives. But now that energy prices are falling, economists are asking what consumers will do next.

Some expect to see a consumers return to  their old oil habits. Others say Americans have learned and internalized an important lesson about the risks of depending on oil. Most economists and analysts agree, though, that since cheap oil comes within the context of a faltering economy, consumers will act accordingly.

“Everyone’s continually getting surprised,” said David Pumphrey, deputy director of the energy and national security program at the Center for Strategic and International Studies, or CSIS. When it comes to fluctuating oil prices, he said, “We’re in such uncharted territory right now that it’s pretty hard to get a sense of what might happen next.”

With petroleum demand shrinking, Pumphrey said, the U.S. is in an unusual situation. The continuing financial crisis and accelerating global economic crisis are also unprecedented. In this context, Pumphrey expects the price of oil to hover between $75 and $90 a barrel for the rest of this year, and probably into next year as well. Economists at the Energy Dept.’s Energy Information Admin. project the “absolute floor” for oil to be between $60 and $65 a barrel.

In an email, Adam Sieminski, chief energy economist at Deutsche Bank, discussed what realistically constitutes an extreme low in this day and age. For oil prices to return to “long-run historical averages,” said Sieminski, they would have to reach $35 a barrel. “However, we believe that important changes in the market, especially the geographic location of marginal demand and supply, suggest that $60/barrel represents a more realistic characterization of ‘cheap’ oil.” That’s largely because OPEC has cut production.

Those who study oil markets have differing opinions on how consumers will respond. Pumphrey of CSIS expects that consumers may revert to earlier behavior. “I would not be at all surprised,” Pumphrey said, “to see a return somewhat to the habits that we had before.”

This summer, he said, when gas prices rapidly climbed, “people responded very quickly.” Such a reaction could potentially take place in the opposite direction. “One of the big questions is: Have we seen a structural change in the way people behave or is it just a temporary phenomenon?” he said.

It’s probably a little from Column A and a little from Column B, he says. For example, the increase in small-car sales may suggest a structural shift, but Pumphrey says we’re also likely to see more gas-guzzling SUVs on the road if gas prices stay low over some time — which he believes they will. Pumphrey says the prospect of new oil production overseas  will bring some slack to the oil market, preventing major price spikes next year.

But some groups say the price of oil is likely to climb once the economy recovers. “Next spring,” said Sierra Club spokesman Josh Dorner, “gas is going to climb up again to $4 a gallon.”

Skyrocketing gas prices “kickstarted” efforts to reduce oil dependence, Dorner said. Americans have become aware of the extreme price volatility of oil, he continued, and it has significantly affected consumption habits.

“Obviously, as the price is lower, people are going to consume more,” he said, “but people understand that we need to make a change. I think that message got through loud and clear [this year], so I don’t think [lower prices] are going to dampen enthusiasm for moving in a new direction.”

With the current economic crisis, Dorner explained, businesses and individuals have an interest in cutting energy use. “Anytime the economy is hurting, we use less oil and less energy in general,” Dorner said.

People now realize, he added, that “cheap gas” is a thing of the past. “$2 gas is not coming back. $3 gas maybe, but that’s still not cheap,” he said.

Michael Morris, an economist for the Energy Dept.’s Energy Information Admin., agrees that oil prices won’t stay low for long. He also agrees that consumers won’t significantly increase their energy use in this economic crisis. “I think we’re entering into a recession, so oil prices are not going to do much,” he said.

In addition, Morris says the current pump price is still higher than before gas costs soared this year. The price of oil is unlikely to drop much more than it already has, he said. “I don’t think there’s much more room for downward movement in the price unless the worldwide economy really collapsed,” he noted.

Ron Planting, an economist with the American Petroleum Institute, the trade group for the oil and gas industry, says the sharp decline in consumer demand indicates fundamental behavioral changes. “Some of the changes are persistent,” he said. “People who are thinking about more fuel-efficient cars are going to keep doing that…. People changing jobs think more about their commuting patterns…. People have learned a little more about planning trips — like I’ve discovered that the train works very well.”

As for where oil prices will go next, answers vary, Planting says. “No one has a single-point forecast, because we know how volatile prices can be,” he said. “That kind of risk is just part of the business in terms of exploring for oil and natural gas.”

In the middle of economic and energy crises, says the Dept. of Energy’s Morris, the one thing that can be certain is uncertainty.

“We know this is a very uncertain time; it’s very hard to make predictions,” he said, echoing many other economists and energy experts.

With the global economy in shambles, oil demand and consumption continues to fall. It’s been on the decline since January 2008 and sharp spikes in oil prices this summer — up to $147 a barrel — certainly didn’t help.

One of the uncertain parts of this equation is the variable of what consumers will do next. How will businesses and individuals respond to oil as low as $63 a barrel and gas prices as low as $2.82?

I’ll have some of these answers in a piece later today.

The stocks of alternative-energy companies, which had enjoyed boom times, have been slashed.

In the last three months, according to a report in today’s Wall Street Journal, renewable-energy stocks have dropped 45 percent, according to New Energy Finance, a London-based consultancy. But this could change.

Congress’ renewal of federal tax credits for solar- and wind-energy companies a couple weeks ago is expected to attract tens of billions of dollars in new private investment.  But it’s unclear what will happen to these companies if tighter credit standards dry up bank lending. Green businesses that use newer technologies have the most to lose because they may entail more risk in the eyes of bankers.

I’ll be reporting more on the economic future of renewable energy. Meantime, green businesses still say that while there’s a lot to worry about, there’s also a lot to be hopeful for.