While Oil Front Group Touts Cheap Fossil Fuel to Low-Income Families, Industry Negotiates Deal to Drive World Oil Prices Up


Fueling U.S. Forward, an oil industry PR group, has spent the second half of 2016 running an on-the-ground campaign targeting African-American communities and spreading a message focused on energy prices, a front-page New York Times investigation reported on January 5.

The organization’s tactics included sponsoring a Richmond, VA gospel show where a few lucky families could win up to $250 off their household energy bills — though the music was paused mid-concert for a panel discussion about fossil fuels.

“[A Fueling U.S. Forward rep] discussed what high energy costs could mean for households in Richmond, which has a large African-American population,” Times reporter Hiroko Tabuchi wrote.  “And he encouraged audience members to contact their legislators to lodge concerns about energy costs, according to Clovia Lawrence, a local journalist and radio personality who helped host the show.”

That Richmond event wasn’t the only event Fueling U.S. Forward threw with the same basic theme. “Since its start in the spring of 2016, Fueling U.S. Forward has sent delegates to, or hosted, at least three events aimed at black voters, arguing that they benefit most from cheap and abundant fossil fuels and have the most to lose if energy costs rise,” the Times added.

Fueling U.S. Forward is funded by oil refinery and pipeline operator Koch Industries, as DeSmog reported this summer, and by an as-yet-undisclosed collection of other sponsors.

As the Times noted, Fueling U.S. Forward says it will focus on “people of diverse backgrounds …[including] low-income families — and share their stories.”

But at the very same time that the oil industry front group was out cheerleading low gasoline prices to low-income families, behind the scenes, the international oil industry was negotiating a deal designed to raise the price of oil worldwide.

Two major oil deals, announced in November and December, are expected to push oil prices higher — meaning that the relatively low gasoline prices touted by the industry right now might be very short lived.

The drilling industry is famous for its heady economic booms — and equally famous for its devastating financial busts. Gasoline prices have broken records over the past decade, with American drivers at times finding themselves paying $4 or even $5 a gallon at the pump repeatedly since 2007.

The price of oil started out relatively low this year — dipping below $30 a barrel in January, which meant that on average U.S. drivers paid $1.99 for a gallon of gasoline that month, according to AAA.

But those prices for consumers also had the oil and gas drilling industry wailing about the financial squeeze that low prices were creating — for their bottom line profits.

The reasons for the price drop were complex. Some pointed to a glut of oil from fracking U.S. shale in places like Texas and North Dakota, while others pointed to decisions by countries like Saudi Arabia to keep oil flowing when markets expected them to cut back. By June 2016, the oil industry had laid off over 350,000 workers worldwide since oil prices started falling in 2014, many drillers had declared bankruptcy, and the top 40 U.S. onshore drilling companies had lost their investors over $66 billion.

At the tail end of 2016, many oil producers worldwide — in Organization of Petroleum Exporting Countries [OPEC] and non-OPEC countries — announced they had agreed to slash oil production, with countries like Saudi Arabia, Russia and Khazakstan promising to limit production from their oil reserves by a total of over 2 million barrels a day for six months. Drillers in the U.S. did not agree to domestic production cuts (though U.S.-based companies that operate abroad, like Exxon in Russia, are expected to potentially pull back on drilling as a part of that agreement).

After those deals were announced, oil prices began rebounding. Oil futures were up almost 45% compared to the start of 2016, MarketWatch reported at the end of December — marking the largest annual rise for oil since 2009.

American consumers are already feeling the impact of oil’s rise. U.S. gasoline prices have begun creeping up, rising 12 cents a gallon in just three weeks.

No one was more excited about those deals than the U.S. oil drilling industry, commentators noted, because the recent dip in oil prices had driven many U.S. drillers to aggressively tighten their belts or risk bankruptcy.

“If anyone is cheering the news of an OPEC deal it is U.S. shale producers,” OilPrice.com reported after one part of the deal, in which members of OPEC agreed to slow down production to boost oil prices, putting an end to a roughly two-year trade war, was announced. “Surely there were champagne corks being popped in Texas as OPEC announced its decision. The share prices of more than 50 U.S. oil and gas companies shot up by more than 10 percent on Wednesday.”

The rush to drill and frack American shale helped create sudden gluts of oil and gas — and abrupt shortfalls as infrastructure failed to keep pace with drilling — since the shale rush first began, leaving fossil fuel consumers confronting extraordinary price volatility.

Since 2000, the price of oil has repeatedly made wild swings, with prices dipping down to an inflation-adjusted bottom of just over $26/barrel in 2001 and spiking to over $154/barrel in 2008. Drivers might recall paying $4 or even $5 a gallon at the pump back in 2014 or 2015, roughly double the prices at the start of last year.

By contrast, renewable energy sources have shown a steady pattern of price declines. To be sure, the prices of renewables started out higher, but wind and solar energy have a history of steady declines rather than the oil and gas industry’s track record of repeated booms and busts.

The falling cost of renewable energy means that those fuels are on track to become the cheaper source of energy for consumers – even cheaper than coal, long the lowest-price fossil fuel. “Since 2009, solar prices are down 62 percent, with every part of the supply chain trimming costs,” Bloomberg reported on Jan. 2. “By 2025, solar may be cheaper than using coal on average globally, according to Bloomberg New Energy Finance.”

Meanwhile, in response to the bust for oil prices in the past couple years, oil producers worldwide spent the end of 2016 negotiating production cuts designed to push the price of energy higher.

That’s a message that groups like Fueling U.S. Forward don’t mention when they talk about the relatively low prices of oil and gas in 2016. Yesterday’s low oil prices might not be here to stay. In fact, if history is any indication, the most predictable thing about oil and gas is that low prices will eventually be followed by higher ones.

And that means — much like the energy bill sweepstakes that Fueling U.S. Forward held at the Richmond, VA concert — fossil fuels are a risky gamble, for investors and families alike.

Photo Credit: Roy Sawhill, Play Lottery Here, via Flickr

Sharon Kelly is an attorney and freelance writer based in Philadelphia. She has reported for The New York Times, The Guardian, The Nation, National Wildlife, Earth Island Journal, and a variety of other publications. Prior to beginning freelance writing, she worked as a law clerk for the ACLU of Delaware.

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