Sunday, June 22, 2008

Bursting Bruce's Bubble

Bruce Lunsford has pumped gas at stations around the state as part of his effort to understand how high gas prices affect Kentuckians. And though Lunsford claims he wants to "protect[] consumers" from "Wall Street speculators who are driving up oil prices," Lunsford himself is one of those Wall Street speculators who profit as the price of gas soars.

Lunsford's most recent financial disclosure form, dated April 17, 2008, makes clear that at least as of that date, he owned substantial assets in hedge funds that invest in oil and gas.

Take, for example, Lunsford's interest in Goldman Sachs Capital Partners V, LP, an $8.5 billion private equity fund for "high net worth individuals." Lunsford valued his assets in that non-publicly traded fund as between $1,000,001 and $5,000,000.

Lunsford's financial disclosure forms list GS Capital Partner V's investment as including: CVR Energy, Inc.; Knight, Inc.; McJunkin Red Man Corporation; SunGuard Data Systems, Inc.; and Cobalt International Energy.

CVR Energy, as the name implies, is in the oil business. It "operates a 113,500 barrels-per-day-throughput-capacity oil refinery in Coffeyville, Kansas, and a crude oil gathering system in Kansas and Oklahoma." Given that CVR is a petroleum refiner and transporter, its investors -- which indirectly include Lunsford -- cannot be too dismayed about the price of gas.

Likewise for McJunkin Red Man Corporation. "Exclusively geared toward the distribution of industrial and oilfield PVF products, McJunkin Red Man Corporation has a significant presence in the oil and gas industry," according to the company's promotional materials.

Knight, Inc. owns the general partner of Kinder Morgan Energy Partners (NYSE: KMP), "one of the largest publicly traded pipeline limited partnerships in America with an enterprise value of approximately $20 billion." KMP "is the largest independent transporter of refined petroleum products in the United States."

Perhaps the very gas that Lunsford pumps in his photo-ops was transported by Knight, Inc. It's the ultimate in multi-tasking: Lunsford grows richer as he panders to the voters.

Lunsford's Goldman Sachs fund also owns an interest in SunGard Data Systems, Inc. , which acquired FAME Energy. SunGard FAME provides "data services to support energy traders, research analysts and risk managers of energy companies and financial institutions." Sounds like it helps the very energy speculators whom Lunsford blames for raising gas prices.

And then there is Cobalt International Energy, LP. The Carlyle Group describes Cobalt :

Cobalt International Energy, L.P. is an oil and gas exploration and development company focused on pursuing niche opportunities in the Deepwater Gulf of Mexico and offshore international areas.

That is, Cobalt correctly wants to drill some of that oil that the Cubans and Chinese are extracting just miles from our shore. Lunsford might have been thinking of this investment when he named his racehorse "Drilling For Oil."

Lunsford recently said he opposes oil drilling off American shores. Yet he would profit from a company that exists to do just that. He therefore has a financial interest in flip-flopping on the issue. But even if he doesn't, when an investor is as rich as Lunsford, it's good to have some losses to offset all those capital gains.

With respect to Lunsford's interests in Lone Pine Capital, his financial "disclosure" form states, Lone Pine's "Individual investments not disclosed." The form therefore gives less guidance about the extent to which the fund speculates in energy commodities, but it is clear that Lunsford has picked another good investment.

Lone Pine's hedge fund manager (and Obama supporter) Stephen Mandel "took home $710 million last year,"according to the New York Times. Lone Pine looks to expand its profits by expanding its energy holdings. That's undoubtedly good news to Lunsford, who will use his vast wealth to finance his campaign.

As he pumps gas and pretends to empathize with the little people, Lunsford criticizes an energy bubble from which he profits. An owner of extensive hedge fund assets, he blames gas prices on hedge funds. It's pointless for Lunsford to wash his hands after he pumps gas for the cameras. Lunsford gets gas all over his hands every time he goes to the ATM.

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