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A Project of The Annenberg Public Policy Center

Obama’s ‘Truth Team’ Wrong on GOP Donor

The Obama “Truth Team” blames GOP donor Thomas O’Malley’s refinery company for helping to “drive gas prices up this year by curtailing gas production.” But the facts are the exact opposite. The Energy Information Administration credits PBF Energy for preventing a price spike in the Northeast this year by opening a refinery in Delaware — partially offsetting the loss of production from two other Philadelphia-area refineries that have closed.

The “truth team” also claimed that one event — a March fire at the company’s Delaware refinery — “directly contributed to a spike in gas prices.” But that fire was under control in about an hour and had a “minimal impact” on production — despite published speculation that it might hurt production and affect gasoline prices.

Obama’s ‘Enemies List’?

We came across these bogus claims while following the name-calling going on between the Obama campaign and GOP donors — a dispute that reached new heights (or depths?)  when the president’s campaign published a “brief history” of some major GOP donors. Some — including Democratic pollster Doug Schoen — compared it to Richard Nixon’s “enemies list.”

In a May 31 Politico story, headlined “Mega-donors: Quit picking on us,” one of those donors claimed that the Obama campaign got his “brief history” wrong. “I think somebody screwed up,” O’Malley told Politico. We decided to take a look at what the campaign wrote about O’Malley, who is the chairman of PBF Energy Inc., which operates three refineries (one each in New Jersey, Ohio and Delaware).

Obama campaign, April 20: Thomas O’Malley is the CEO of PBF Energy, America’s fourth largest petroleum refining company, and gave $100,000 to Restore Our Future. Not only did PBF energy help drive gas prices up this year by curtailing gas production, but it spilled 6.6 million gallons of oil at a refinery in New Jersey. The release of toxic gas and eventual explosion at another of its refineries in Delaware also directly contributed to a spike in gas prices.

O’Malley indeed gave $100,000 on Feb. 7 to the pro-Mitt Romney super PAC Restore Our Future, although that pales next to the $3 million given by Houston builder Bob Perry, who isn’t on Obama’s list. It’s also true that there was a storage tank leak at PBF’s Paulsboro, N.J., refinery on Feb. 24 that resulted in a spill of approximately 157,000 barrels of oil, which is equal to about 6.6 million gallons. For the record, PBF identifies itself as the nation’s fifth largest petroleum refining company, not the fourth, in a May 14 registration statement filed with the Securities and Exchange Commission as part of its plan to go public.

But what about the claim that PBF is helping to “drive gas prices up this year”? Or that an “explosion” in Delaware “directly contributed to a spike in gas prices”? On more than one occasion, we have found fault with those who blame Obama for high gasoline prices. But is PBF to blame? No.

Let’s start with the claim that PBF Energy helped “drive gas prices up this year by curtailing gas production.” When we asked about that claim, the Obama campaign referred us to a Feb. 7 article in the Calgary Herald that no longer appears online and a March 16 Reuters article that appears on the New York Times website.

The brief article in the Calgary Herald was written by Bloomberg News, which surveyed oil analysts and traders and found that U.S. crude oil supplies were at the highest level in four months “as refineries used less crude because of weakening gasoline demand and closures for maintenance.” Bloomberg mentioned that Hess and PBF “have curtailed processing” without further explanation. The Reuters article in the Times a month later was about a sharp rise in consumer prices — driven largely by a “surge” in gasoline prices in February.

Reuters didn’t say what caused the spike in gasoline, but the Obama campaign in an email to us blamed it in part on PBF (and Hess, we have to assume) for curtailing processing in February. But that’s nonsense. The EIA’s Office of Petroleum and Biofuels Statistics issued a 133-page report this month that explained the global pressures and national factors that caused gasoline prices to rise so much in February.

The EIA said regular gasoline increased 35.8 cents per gallon in February. It blamed high oil prices on “international political and economic issues” and high U.S. gasoline prices on rising oil prices and the introduction of summer gasoline fuels. In particular, the EIA cited:

  • Tensions with Iran over its nuclear program
  • An “ongoing dispute” between Sudan and South Sudan over “crude oil transit fees” that “shut down all production activity at the end of January”
  • Political strife in Syria and an oil workers strike in Yemen
  • The euro-zone debt crisis in Greece

It added that in the U.S., “gasoline prices were influenced by the transition” to gasoline “used in warmer weather months” that is slower to evaporate in hot weather. The only mention of U.S. refineries in the report involved the West Coast. The report said a fire in late February at a refinery in Washington and “other refinery maintenance work in the region provided additional support for the sharp increase in gasoline prices.”

In fact, in a separate May report, the EIA credits PBF Energy specifically for helping to avoid a spike in gasoline prices in the Northeast. That’s because in October 2011 PBF opened a refinery in Delaware that helped offset the loss of production from three other refineries that supply the East Coast.

EIA, May 11: Since September 2011, two refineries in the Philadelphia area (ConocoPhillips Trainer refinery and Sunoco’s Marcus Hook refinery) and one major Caribbean export refinery supplying the East Coast (HOVENSA’s U.S. Virgin Islands refinery) have closed. … Those closures have been partially offset by the startup of PBF Energy’s Delaware City refinery in October 2011, which had been shut down in late 2009 by Valero before its sale to PBF Energy.

PBF’s Delaware refinery has a capacity to produce 182,200 barrels per day — which is enough to replace about half of the capacity lost with the closure of two Philadelphia-area refineries. The EIA is now worried that a third, much larger Philadelphia-area refinery may close in July, if no buyer is found. It warns that the Northeast market could be “significantly impacted.” But PBF Energy may help to offset those losses in the future, too. The EIA says: “Beyond 2013, there is the possibility of expanded refinery capacity in the Northeast; e.g., PBF is exploring the expansion of its 182,000 bbl/d Delaware City facility.”

‘Explosion’ Caused ‘Spike in Gas Prices’?

PBF Energy had a fire at that Delaware City facility on March 16 — the one that Obama’s “truth team” says was an “explosion” that “directly contributed to a spike in gas prices.” But the incident actually caused a temporary increase in futures contracts on the New York Mercantile Exchange — not necessarily a jump in prices at gasoline pumps — because of unfounded speculation that the fire could cut production at the Delaware plant.

The Obama campaign cited a March 20 article in the New Brunswick Times & Transcript that said, “U.S. gasoline prices rose 1 per cent after a fire hit PBF Energy’s Delaware City, Delaware refinery, adding to concerns about fuel supplies in the Atlantic Basin where several plants have been shut due to poor margins over the past year.” We could only find a reference to that article online. However, Reuters had a similar report that same day that said the fire added 4.5 cents per gallon to the April futures contract on the New York Mercantile Exchange. Reuters also said the fire — which occurred in a heater in one of the plant’s four desulfurization units — was put out in less than an hour.

The next day Reuters quoted industry sources as saying the fire had a “minimal impact” on production and the damaged unit was “still operating around its normal rate,” so whatever impact the fire had on prices was temporary. For the record, the average price of regular gasoline on the East Coast went up 4 cents per gallon for the week ending March 19 — which would have been after the fire — but so did the national average for regular gasoline. And, as we explained earlier, there were a lot of other factors that caused gasoline prices to go up.

Let’s be clear: We welcome all efforts to shed light on major donors to groups seeking to influence the 2012 election. We do it ourselves. We call it the “2012 Players Guide,” which profiles an ever-growing list of deep-pocketed organizations from across the political spectrum. These are the groups that are behind many of the ads you see on TV, hear on the radio and receive in your mailbox.

But, in this case, the Obama campaign got it wrong. O’Malley is right: “[S]omebody screwed up.”

— Eugene Kiely