Blog

Gasoline prices have been falling in recent weeks, but they’re still close to their five-year high after climbing steeply for three years. For every penny increase at the pump, $1.4 billion per year leaves our collective pockets, creating a drag on the sluggish “recovery.” Where does it go and what caused the price explosion at the pump?

It’s a common belief that oil prices are set on the world market by supply and demand. Less supply and/or more demand causes prices to rise. Oil is getting harder to find; OPEC is holding back supply; China and India are guzzling it up; Iran is threatening to blow it up. And regulations are getting in the way of drill, baby, drill — end of story.

But this fixation on blind market forces ignores the fact that Wall Street is financializing the commodities markets – especially oil – as it seeks new ways to pick our pockets. The same greedy swindlers who puffed up the housing bubble and then milked it dry are now hard at work doing the same with gasoline.

What is financialization and why is it coming to the oil industry?

Here’s a chilling definition provided by economist Thomas I. Palley (PDF):

Financialization is a process whereby financial markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes…..Its principal impacts are to (1) elevate the significance of the financial sector relative to the real sector, (2) transfer income from the real sector to the financial sector, and (3) increase income inequality and contribute to wage stagnation.

In short, we’re talking about the spread and growing supremacy of financial gambling – the ability to bet on the prices of goods produced in the real economy without actually owning those goods.

The vital activities of manufacturing, resource extraction and agriculture are turned into financial instruments that can be rapidly bought and sold. More to the point, financialization allows financial gamblers to extract profits from the real economy to enrich themselves without producing any real economic value for our economy.

When markets are financialized, they offer a myriad of ways for Wall Street firms to bend or break laws to manipulate markets and haul in enormous profits. In effect, financialization extracts a hidden tax from the real economy which is then passed onto us in the form of higher prices, economic hardship and then government bailouts when it all comes crashing down.

The oil markets have become just another profitable Wall Street casino. Why? Because, as the infamous outlaw Willie Sutton said, “That’s where the money is.” Oil markets as well as other commodity markets require a certain number of speculators. Oil producers and end users go to these markets in order to lock in prices for the products they use or sell. From refiners to shippers to airlines, oil markets provide a way to obtain price certainty for a specified period of time. To make these markets function, speculators are needed to take the other side of those trades. For more than a century about 30 percent of these commodity markets involved speculators and 70 percent of the participants in terms of volume were real producers, distributors and users. That’s what a healthy commodities market looks like.

But once financialization metastasized, the proportions flipped. Now 70 percent of the action comes from speculators, while only 30 percent comes from those who really produce, distribute and use the actual commodities. The casino has taken over. (more…)

Kevin Hensil, broadcast specialist with Pennsylvania House Democratic Communications, created this video describing what will happen if the ConocoPhillips refinery in Trainer, Pa., and the Sunoco refineries in Marcus Hook and Philadelphia are permanently shut down.

Steelworkers who work at refineries on the East Coast conducted a candle light vigil at Gov. Corbett’s mansion on Feb. 8 seeking his support for saving jobs at the refineries slated for closure.

By Mike Hall
AFL-CIO Senior Writer

After an explosion at a Tesoro refinery in Anacortes, Wash., killed five United Steelworkers ([1] USW) members and severely injured two other workers, the petroleum industry claimed its safety record is exemplary. Says USW President Leo W. Gerard:

It’s incredible this industry brags about its safety record just after five people were killed in a refinery explosion.

After the April 2 explosion, officials of the American Petroleum Institute told reporters that the industry was not getting enough credit for its health and safety record, citing drops in injury and illnesses rates during the past several years.

Also, says the USW, National Petrochemical & Refiners Association officials bragged that the industry has a lower injury rate than the U.S. manufacturing sector as a whole.  Says Gerard:

The problem is the injury and illness rates the trade associations cite are misleading and do not give the full picture of health and safety within the refining sector. The recordable injury rates that [Occupational Safety and Health Administration] OSHA collects measure items like slips, falls, sprains and fractures, not poor safety practices that lead to incidents like explosions and fires. There’s a difference between a sprained ankle and an explosion that kills five people.

The USW members killed were Matthew C. Bowen, 31; Darrin J. Hoines, 43; Daniel J. Aldridge, 50;  Kathryn Powell, 29, and Donna Van Dreumel, 36. Two others are still hospitalized with severe burns. They are USW member Matt Gumbel, 34 and Lew Janz, 41, a supervisor and longtime USW member.

According to the USW, Tesoro has a history of serious health and safety violations. The [2] Associated Press reports that Washington Department of Labor and Industries

Fined the company $85,700 last April for 17 serious safety and health violations, defined as those with potential to cause death or serious physical injury. The fine was lowered in a settlement with the company, which required Tesoro to correct hazards and hire a third-party consultant to do a safety audit.

Also, inspectors found 150 instances of deficiencies and said the company did not ensure safe work practices and failed to update safety information when changes were made to equipment.

USW Vice President Gary Beevers, who oversees the union’s oil sector says “it is obvious that this industry still has not learned from other refinery disasters and near-misses.”

They are more concerned with their image than taking appropriate action on safety…There have been too many accidents and near-miss incidents in the oil refining industry. In honor of our brothers and sisters who were killed and seriously injured at the Tesoro refinery we urge the industry to take steps to ensure an incident of this type never happens again.

For more on refinery safety, visit the USW’s [3] Oil Bargaining Campaign website.

***

Re-Posted from the AFL-CIO Now Blog

By Leo W. Gerard
USW International President 

            No more than a thimbleful of hydrofluoric acid killed 37-year-old Alcoa technician John L. Dorton in fewer than seven hours from the moment he inhaled the mist at the plant where he worked in Port Comfort, Texas.

            It’s that deadly.

            Its transportation to factories and its use there imperils workers and nearby residents. Environmental, safety and advocacy groups have for years demanded that manufacturers substitute safer chemicals or processes whenever possible.

            As far back as 2003, U.S. Public Interest Research Group (PIRG) issued a report called “Needless Risk,” detailing how oil refineries using hydrofluoric acid to increase octane in fuel unjustifiably jeopardize workers and surrounding communities, especially in a time of potential terrorist attacks.  

            Only about 50 of the nation’s 148 petroleum refineries boost octane with hydrofluoric acid. The others use sulfuric acid or a different process. Sulfuric acid is hazardous as well, but a tanker spill is more easily cleaned and doesn’t form a potentially lethal, hovering cloud that defies dispersal. In addition, exposure to sulfuric acid manifests instantly as a burn on the skin. So does hydrofluoric acid in high concentrations. But hydrofluoric acid is insidious. A dilute hydrofluoric acid doesn’t immediately burn. Blistering may be delayed by 8 to 24 hours. In the meantime, hydrofluoric acid penetrates the skin, destroying soft tissue and decalcifying bone. If inhaled, it devastates lung and esophagus tissue. After any exposure, chemical maker DuPont recommends treatment occur “within seconds.”

            In just the past five months, accidents at three refineries involving releases of hydrofluoric acid injured 13 U.S. refinery workers, two of them critically. One is a 34-year-old member of my union, a husband and father of two. He’s in a San Antonio hospital clinging to life after 10 surgeries and an amputation.

            Refinery workers and their communities pay too high a price for high octane fuel created with hydrofluoric acid.  The United Steelworkers (USW) union joins groups like PIRG, Clean Water Action and Center for American Progress in demanding that refineries using hydrofluoric acid switch to sulfuric acid or another safer method to enhance octane.

Clean Water Action of Pennsylvania repeated its call for conversion to safer technologies in March after two spills occurred in one month in Eastern Pennsylvania, one forcing evacuation of 5,000 residents. Myron Arnowitt, Pennsylvania Director for Clean Water Action, said then, “It just goes to show that we need to get away from this dangerous chemical before the refinery itself or one of its trucks has an accident inside the City of Philadelphia.”

“We’re getting closer to a real disaster,” he said.

Here’s what prompted that statement:

            First, on March 11 at the Sunoco refinery in South Philadelphia, release of hydrofluoric acid sent 10 workers to two hospitals for exposure to vapors.

Then, just 11 days later on March 22, a truck carrying 33,000 pounds of hydrofluoric acid to a refinery overturned in a town north of Philadelphia called Wind Gap, causing a small spill. Because the acid is so dangerous, police and fire officials evacuated 5,000 residents for nine hours.

Two more episodes followed in quick succession:

            On July 19, a fire and massive release of hydrofluoric acid at the CITGO  Petroleum Corp. refinery in Corpus Christi, Texas, critically injured the 34-year-old USW member. CITGO estimated that 4,000 pounds of hydrofluoric acid escaped.

            Less than a month later, on Aug. 6, hydrofluoric acid escaped again, injuring two workers, critically wounding one, at the ExxonMobil refinery in Joliet, Ill.

            A year earlier, in yet another incident, a hydrofluoric acid leak at the Holly refinery in West Bountiful, Utah, injured a worker on Aug. 15, 2008.

            And a year before that, in Sarnia, Ontario, just over the border not far from Detroit, a Suncor refinery accident sent oil and hydrofluoric acid into an open trench, where construction workers stood 200 feet away. Twenty-three suffered breathing problems and nausea and were treated at a hospital.

            In any of these cases, this lethal chemical could easily have killed workers or members of the community.

            In recent years, the refinery industry has installed safety devices, including water curtain and cannon systems, rapid acid dump systems and a vapor suppression additive to mitigate the possibility of a Bhopal cloud.

            But John L. Dorton died for lack of a couple of trivial pieces of equipment, any of which may have saved his life. A U.S. Department of Labor investigation determined that Alcoa required maintenance workers to wear hydrofluoric acid cartridge respirators and face shields and provided them with special tools to prevent discharge of hydrofluoric acid during the stem valve cleaning procedure Dorton was conducting when he got sprayed. But, the investigation concluded, Alcoa didn’t do the same for technicians like Dorton. It failed to give them the tool or instructions to use the respirator and face shield.

            Because corporations cannot be trusted, because they continually make such errors, hydrofluoric acid must be eliminated whenever possible.

Safety consultant Paul Orum put it this way: “Adopting safer chemicals is the only certain way to protect American communities from a toxic gas release.” He was hired by the Center for American Progress, a nonpartisan research and educational institute, to prepare a report issued last fall, called “Chemical Security 101, What You Don’t Have Can’t Leak, or Be Blown Up by Terrorists.” 

            It lists the 101 most dangerous chemical facilities in the U.S., including eight petroleum refineries using hydrofluoric acid. Among those is the Sunoco refinery in Philadelphia that released hydrofluoric acid in March. It’s listed partly because the surrounding population is 4.4 million. Others include PDV Midwest Refining (CITGO) in Lemont, Ill., with a nearby population of 3.1 million; Marathon Petroleum in St. Paul Park, Minn., with 2.2 million residents, and Chalmette Refining (ExxonMobil)  in Chalmette, La., with 1 million neighbors.

            When confronted with demands to convert to safer octane boosting methods, the likes of ExxonMobil and CITGO – both of which had spills this year – cry that they can’t afford it.

            Excuse my French, but: Baloney.

            As Chemical Security 101 points out, switching to a safer process enables a facility to stop complying with costly, federally-mandated security measures to prevent terrorism. In addition, the manufacturer’s insurance premiums for liabilities, for deaths, injuries, contamination and property damage in the event of a major toxic gas release would decline.

            Really, though, for ExxonMobil to cry poor is galling. This is the corporation that reported the largest annual profit in U.S. history for 2008 — $45.22 billion.

            This is Labor Day 2009, a time of tribute to the contributions of workers. The refineries in this country still using unnecessarily hazardous hydrofluoric acid need to make sure their workers and the residents of their neighborhoods live to see Labor Day 2010 by making the conversion now.