A coalition of nine northeastern energy associations has appealed to U.S. Treasury Secretary Henry Paulsen to speed relief from the credit crisis now threatening small businesses and consumers across the country.
‘We’ve written to U.S. Treasure Secretary Henry Paulsen to request an immediate meeting to discuss the nation’s banking crisis and the effects that crisis is having on small businesses and consumers,” Gene Guilford, the executive director of the Independent Connecticut Petroleum Association, said. ‘Whatever the federal government may have designed to increase the nation’s banks willingness and ability to lend, it has not yet worked for consumers or small businesses.”
The problem, Guilford said, is that during the summer, speculators drove energy prices to historic highs, and Wall Street insiders like Goldman Sachs routinely ‘predicted” that crude oil prices would soar even higher, to as much as $200 per barrel.
As a result, he said, many consumers demanded to be protected from future price increases, which seemed inevitable, given the Wall Street prognostications. When consumers demanded protection, local retailers went to wholesale suppliers and locked in prices for their customers.
Instead, Guilford said, since mid-July prices have fallen 55 percent. Yet, many retailers are still locked into contracts that require them to pay nearly double the going rate for home heating oil.
‘These dire predictions from financial speculators created a demand for guaranteed pricing from heating oil consumers,” Guilford wrote in a Nov. 3, 2008 letter to Paulsen. ‘We now have millions of consumers across the country who locked in their prices at over $4.50 a gallon this summer, who can now see a retail price substantially lower than that. The only way our retail companies can swap out their higher-priced wholesale futures contracts for newer, lower-cost supply agreements is to literally buy their way out of them and pay their wholesalers.”
Because state law requires retailers who sell fixed-price contracts to, in turn, have their own fixed-price contracts with wholesalers in order to be in a position to fulfill their contractual obligations to customers, dealers have no capacity to simply let customers walk away, Guilford said.
The retailers asked Paulsen to provide access to capital under the auspices of the recently enacted Wall Street bailout legislation, the Emergency Economic Stabilization Act, so that retailers could work with consumers to get out from under the burdens imposed by the fixed-price contracts.
‘The only way our retail companies can swap out their higher-priced wholesale futures contracts for newer, lower-cost supply agreements is to literally buy their way out of them and pay their wholesalers,” Guilford wrote.
Banks increasingly want 100 percent protection from state and federal agencies and want to completely avoid risk, Guilford said. As a result, the banks have constricted their lending and are making the conduct of business increasingly difficult as the nation continues to slide into a recession.
‘We seek no bail out. We seek only to be able to borrow funds and then try to construct relief for consumers,” Guilford said.