Who’s Watching Oil Watchdog?

NEWS RELEASE

November 14, 2007

“Consumer Advocacy” Group Under Investigation

Group Charged with Deceptive Journalism and Misrepresentation

Santa Monica, CA — Judy Dugan, Research Director for the Foundation for Taxpayer and Consumer Rights (FTCR), again finds herself defending against allegations of misconduct. Dugan is being investigated for consistent misleading press releases originating from the FTCR’s Oil Watchdog project. Oil Watchdog ostensibly exists to protect consumers from rising oil and gas prices. However, an investigation has revealed that the organization is actually funded by trial lawyers, and that the misleading information promoted by Dugan’s organizations is aimed at stirring anger toward corporate interests. Dugan, who could not be reached for comment on these allegations, clearly understands that angry consumers are litigious consumers.

Factual Errors

Dugan’s outlandish claims consistently undermine the credibility of both Oil Watchdog and FTCR. For instance, in a recent Oil Watchdog press release, Dugan claimed that “oil companies are reaping profits of up to $75 a barrel on $95-a-barrel oil.” Such a notion is preposterous, notes Dugan’s critics.

“For Western firms, it can cost as little as $5 to $7 a barrel to pump the most easily accessible oil from places like Venezuela or Azerbaijan,” said Fadel Gheit, a senior energy analyst at Oppenheimer. “The costs don’t stop there. On top of the $5-$7 production costs, there’s also the money it took to build the pumping facility. At several billion dollars a pop, capital costs typically add another $5 to $7 a barrel. And that’s the cost of producing oil in the cheapest regions of the world. Factor in expensive fields like the deep water Gulf of Mexico, the tar sands of Canada or water-laden output of Texas, and the average production and capital cost is somewhere in the low teens to mid $20s,” said Gheit.

Still not bad, considering the selling price. Enter government. Gheit said taxes and royalty payments can range from 40 percent of profits in places like the United States to 90 percent or more in places like Russia or Libya. “It’s a very complex equation,” he said of trying to figure out just how much it costs oil companies to produce oil.

A very complex equation? Not according to Dugan, who assures readers that oil and gas prices are not dictated by market forces, but instead by the profit levels oil companies wish to make. Dugan claims that oil and gas prices are easily manipulated, and if there is an energy bill being debated or an upcoming election, oil companies simply drop prices in a direct attempt to hijack the political process.

Frequent Dugan critic Robert Rapier scoffs at that notion. “Dugan has a clear lack of understanding of market forces,” Rapier said. “The world is much easier to explain if you ignore the underlying complexities. Primitive people could just conjure up gods to explain things they didn’t understand. Dugan conjures up evil oil companies to explain the ups and downs of the oil markets. This may not be surprising, given the qualifications of FTCR staff members: Lawyers and philosophers, political and social scientists. There is no technical expertise on their staff, and this makes it hard to take them seriously when they try to discuss technical topics.”

Inconsistencies in Reporting

Oil Watchdog has a history of inconsistent reporting. They have complained that oil companies are producing a polluting product, but they have also ironically complained that the price is too high, making it more difficult for consumers to afford that polluting product. They have complained that oil companies are greedy, yet they also complained about oil company donations to charities or universities, charging that they are attempting to “greenwash” their image.

They have complained when gas prices rose, but then when gas prices fell they complained that oil companies were trying to influence public opinion. They have complained that oil companies aren’t making biofuels, yet they have also complained that oil companies are making biofuels. They have complained that oil companies fund research into finding more oil, and then again complained that oil companies fund research into alternative fuels. Their history of complaints – regardless of the actions that oil companies are taking – supports the contention that they are merely paving a litigious path for their trial lawyer backers. Perhaps the ultimate irony is that the FTCR demands transparency from politicians, universities, and corporations, yet they refuse to publicly disclose their own source of funding.

Censorship of the Opposition

While Dugan and company have presented themselves as knowledgeable about the inner workings of the oil industry, their actions tell a different story. When Oil Watchdog was launched, readers were encouraged to comment following the essays that were published. However, as technical challenges to points were raised, Dugan started hiding comments by default. Shortly thereafter, she attached the following label to each of her critics: “This commentor has been flagged as a suspected shill for BigOil. You can view the history of their comments by clicking on the user’s screen name at the end of this entry.” Finally, they simply started locking comments after most stories. It is as if they are saying “It is better for us if it looks like we are open to comments, but we simply don’t have the technical expertise on staff to address them.”

Oil Watchdog’s Future

Oil Watchdog could evolve into a legitimate consumer organization, but they are going to have to change tactics. Presenting themselves as “watchdogs,” while showing a juvenile grasp of the oil industry, does not serve consumers. If they spent some time trying to understand how the world oil markets work, and showed some balance in reporting, over time they could rebuild their lost credibility. Time will tell if the interests of consumers win out over deceptive journalism designed to reward Oil Watchdog’s backers.