"...rising speculation..." could be the key.
POLITICS OF OIL
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POLITICS OF OIL - Part 1
This was originally written in 2000, but much of it is still applicable. Though many conditions have changed, and we have been to war with Iraq twice, and now have access to their vast oil resources, I have decided not to alter the text. This analysis will make clear why the justification for a war, which maimed and killed Americans and Iraqis and our allies, who also contributed troops, were false reasons for war; if any reason could ever justify aggression. The U.S. policy is to defend "special" interests (those who own the oil industry and are heavily invested in the military industrial complex) and to insure that the very rich, ruling classes stay that way.
OIL INDUSTRY FRAUD
Where is the cheap gas? Why this gas crunch?
With production of cheap oil (outside the Persian Gulf) peaking, the major supply is still coming from the Gulf producers, who have 60% of the world's remaining oil ---- BUT PRODUCE ONLY 30% OF THE WORLD'S SUPPLY.
However, a shortfall is imminent beginning now and not expected to abate for several years. Why?
We are self-sufficient in oil, but business expansions require importing more of that black gold and it is business-as-usual to curtail exploration and for the oil companies to keep domestic supplies short to support a higher price to the consumer.
What is needed --- because we will eventually run out of oil, even if there is an adequate reserve now [but not sufficient investment in oil production], is to start using NATURAL GAS and the sooner the better.
This begins with conversions in buses and diesel powered engines to propane and natural gas. There should also be a shift to other alternatives and more walking, car pooling and mass transportation.
There must be a more proactive effort to implement self power and we need to do it now. We're too dependent on oil prices and oil company decisions to control the flow of oil by an industry which regulates production in favor of higher profits.
In 20 years we're going to have a serious problem if we don't take some dramatic steps now towards reducing our dependance on oil.
When the prices fell to $10 a barrel in 99, OPEC countries were faced with some severe financial crises and oil companies cut exploration and laid off workers. Marx (not Groucho), described that condition of OVERPRODUCTION leading to mass layoffs and a lot of hurt.
The oil companies have no intention of sustaining previous prices and business-as-usual has led to the shortfall which is now pushing prices sky high. Some wells were even turned off to artificially reduce the supply of oil, and this greater need has led to the higher prices.
In the U.S. oil wells were capped to accomplish this inflated price adjustment.
As a result of the announced FTC investigation of oil company collusion and price gouging, there has already been a dramatic 25 cent drop in the wholesale price of gas in the Midwest.
But, what is proposed may be just another business-as-usual conspiracy to lighten up on the oil industry by providing more access to the "Strategic Petroleum Reserve"; suspending (or amending) the new clean-fuel regulations (which is estimated to be only between 3 and 8 cents in cost to the oil industry); to opening public areas of the outer continental shelf, the Rocky Mountain states and the Alaska National Wildlife Refuge to oil and gas drilling, thus despoiling more public lands; and provide additional tax breaks (suspending the 18.3 cent federal gasoline tax) to the oil industry - thus generating even greater profits for the industry.
These proposals were favored by legislators, whereas what is needed is not more advantages for the oil industry, but more conservation and reduction in the use of fossil fuels --- and incentives for alternative energy sources.
Republicans, like Majority Leader Trent Lott has proposed that: "We need to open up areas that are now closed, like [the Alaska wildlife refuge]......We need to have incentives to get . . . oil wells that are now capped and so-called marginal wells back in production."
The major oil companies increased profits by 500% last year. Only a monopoly could realize those kinds of excessive profits. If you did that in your business, you would be accused of price gouging. The oil industry is price gouging.
What do they want? The oil companies want tax reduction and they want less regulation. How do they get it? They raise the price of oil, that's how..
Sen. John Breaux, D-La., a member of the Senate Finance Committee, said the United States is drifting into trouble because foreign imports are increasing as domestic production not only declines but disappears as domestic wells get capped.
STRIPPER WELLS
The oil industry claims that the price of oil ($14.23 a barrel) is unprofitable - so they capped all the "stripper"wells, those where the easiest-to-get oil is gone. [stripper wells produce less than four barrels a day]
The projections are that low prices will continue through next year --- so, WHY SO MUCH AT THE PUMP?
If the price is so cheap that oil companies claim they can't justify keeping those wells operational (and had to cap them), then how do they concurrently justify the price hike at the pumps?
If we perceive this as a crisis for the oil companies, government is more likely to get away with providing the oil companies with tax credits (elimination of the federal gas tax) and fewer regulations (nullifying the Clean Air legislation) -- and states to enact similar breaks for the oil industry, to keep those wells operational states to enact similar tax incentives. Try to get comparable tax breaks for your business and try to do it with a record of excessive 4-500% profits.
CONGRESSIONAL PROPOSALS
(OFFSHORE) Introduction of bills to reduce taxes and ease royalty requirements on oil produced from wells in the Gulf of Mexico and other offshore areas.
(DRILLING COSTS)Introduction of exemptions from federal taxes to defray cost of drilling new wells.
(CLEAN AIR) Abrogation of Clean Air requirements.
(MARGINAL WELLS) Tax credits to exempt oil produced by marginal (stripper) wells.
(IMPORT FEES) Additional fees for oil which is imported to equalize competition --- which would insure a higher cost at the pump but higher profits for the oil companies.
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PANCANADIAN
In Canada, Calgary-based PanCanadian, which is one of that country's largest oil (and gas) producers made 518% more than the same amount last year.
The profits came at a time when the price of crude was low and the demand for natural gas was down.
GAS PRICES DOUBLE
In 99, oil prices were up more than 50% and natural gas prices double what they were in 1998.
In a recent energy research re-port, Calgary-based Peters and Co. Ltd. is expecting a record (up 17%) 16,800 wells to sunk in Canada in 2000.
It is expected that Imperial Oil Ltd. and Shell Canada Ltd. will have earnings up 100 to 1,000 per cent from what they were a year ago.
[Source: The Calgary Sun, 10-19-1999, pp 5.]
POLITICS OF OIL - Part 2
CAPITALISM VERSUS NATIONALISM
Capitalists fear nationalization. Nationalization; that is, socialization of natural resources is a change dictated by social necessity because the imperative wants and needs of society must be satisfied. Oil reserves and public lands are natural resources.
Production based on the exigencies of a few for profit multinational corporations cannot be met by regulating it for the whims, private interests and profits of those corporations. Production should be based on need.
The fear of all capitalists is that nationalization of major industries will do away with capitalism. Only by turning ownership over to the people will class distinctions and privileges disappear along with the economic basis from which those class distinctions originated. To live off the labor of others will become history. The use of natural resources will then be organized more effectively.
Government has been capitalism's provider and protector everywhere. Big business has never been opposed to government regulations which favor them. But, it is critical of the government meddling in their affairs, when they preceive regulation to be consumer oriented.
Privatization and it's associated techniques cannot be sustained except for the privileged few at the cost of the masses.
It is a false argument that nationalism would lead to an authoritarian bureaucracy. Under capitalism there is already a central planning approach which is weighted in favor of those who control the means of production, and relies primarily on authoritarian bureaucratic methology.
INDEPENDENT PRODUCERS
The stripper wells (marginal oil wells) in the U.S. which produce about 20% of our domestic production (equivalent to imports from Saudi Arabia), are the wells which are mostly operated by the independent producers.
"Now, we have experienced a year of low oil prices - historically low prices that threaten the very heart of U.S. oil production." [Steve Layton President and Chief Executive Officer Equinox Oil Company The Woodlands, third generation independent oil producer before the U.S. Senate on January 28th, 99 - testifying on behalf of more than 8,000 independent oil and natural gas producers as a representative of the Independent Petroleum Association of America (IPAA)]
The onshore lower 48 states account for about 60 percent of total domestic oil production, 60% of which is produced by independents.
"Majors now operate in the United States primarily in the offshore and Alaska, but more and more they are seeking their new production overseas."
THE MORE THEY MAKE, THE MORE YOU PAY
The independents were devastated by the oil price collapse, earning a negative rate of return on investment for years immediately following the price collapse. When you increase supply, you drive down the cost - but when the price is driven upward, the independents and majors also see their profits driven up, and the cost at the pump is also driven up. There is nothing confusing about that. The more they make, the more you pay...
Some congressman are speaking the truth. Pursuant to the skyrocketing gas prices, U.S. Sen. Ron Wyden (Oregon, Democrat) says he has talked to industry insiders who have exposed price fixing and price gouging. Wyden wants an antitrust investigation. He says that oil companies are arbitrarily charging neighboring stations different prices for the gas and discriminate against small gas station operators.
"All this comes together to reduce choice, concentrate power among a handful of oil company giants and to exploit consumers.....The West really seems to be singled out for these kinds of practices....When you can squeeze the dealer at the pump and stick it to the consumer, you drive out competition. That's a fertile environment for jacking up the prices even more." [wyden]
MARKETPLACE OR PREDATORY PRICING?
Oil producers claim it is the marketplace. However, Wyden claims the oil companies are using predatory pricing and unfair competition to unfairly undercut competitors --- they favor their own gas stations and they are sticking it to small independent gas stations.
[Wyden said his report details substantial evidence that price fixing is going on]
It isn't for emergency use that some oil reservers have been placed off-limits. The government has reserved the largest oil respository in the U.S. to protect the Artic caribou and other endangered species.
There has also been a greater dependence on burning fossil fuel (petroleum) for electricity because of a growing awareness for the danger of nuclear power to health and the environment and unsolved problem of spent nuclear disposal.
WINDFALL PROFITS
The hype is, "it is OPEC" but the truth is, the increased dependence on oil (and summer travelling up) is just another opportunity for more windfall profits to the major oil companies.
One oil company insider has said, the price of gas this summer is determined by refining capacity and refining capacity is at it's limit -- so increased supples will have no effect.
It has also claimed that at least part of the problem is because these oil company refineries did not stockpile crude oil to produce gas when the prices were higher and the U.S. simply cannot catch up even if availability now is increased.
WHITE WASH
Whatever the investigation could determine, there is a high likelyhood that it will be a white-wash because of the support oil companies have from politicians and the money behind that loyalty.
Prices of gas, diesel, and home heating oil have soared this year.
Tom Kloza, chief oil analyst at the Oil Price Information Service in Lakewood says, "It was capitalism; that's all it was..." Gosh, Tom, that's what we've been saying all along.
PRODUCTION FOR NEED
The only way to stop price gouging is to socialize the industry and insure it is responsive to the people.
Sen. Tom Harkin (D-Iowa), says you won't hear Bush demand accountability from the oil companies because..." that's where he's getting all his money--from the oil companies, his friends."
Pro-big business congressman, like Bush, will blame the increase in prices on supply, the pipeline and environment regulations because that is what the oil companies want him to say.
"Bush campaign chairman Don Evans is also chairman of oil company Tom Brown Inc. and has seen his stock rise 73% since January. The oil and gas companies have contributed $1.5 million to Bush, versus $95,000 to Gore. All his campaigns dating back to 1978 have been bankrolled by oil money. And in his unsuccessful 1978 congressional race, Bush declared, "There's no such thing as being too closely aligned to the oil business in West Texas."" [Time Mag - 7-03-2000]
PROFIT MOTIVE
Production virtually everywhere is based on wage labor and is organized for profit.
There is an almost complete lack of any alternative system that would exclude capitalist enterprise in some regions and challenge, on either the ideological or practical level, the momentum of capitalist development.
The Third World acquired their relation to capitalism through colonial domination-capitalist relations of production.
Capitalist internationalization (Globalization) and nationalization by capitalists which exists now is the tendency to create severe inequalities and periodic crises?
Socialization of the oil industry for the benefit of the consumer would be based not for profit, but for need.
"As global growth rates slowed down in the economic dislocations of the 1970s, Third World elites found accommodations as junior partners to transnational capitalism." [William K. Tabb teaches Economics and Sociology at Queens College and the City University. -- From 1997 Socialist Scholars Conference]
"The reforms from the 1930s which stabilized U.S. capitalism are all now under attack. These include social security, regulation of banking and the security markets, labor laws (such as the requirement that employers pay time and a half for overtime), antitrust laws, and environmental regulations." [tabb]
"By the early to mid-90s, 27 percent of all U.S. workers were in jobs that didn't pay them enough to live above the poverty level, and only a little over a third of all workers had wholly employer financed medical insurance." [tabb]
"The problem is not only high disguised unemployment and the growth of part time work, but the reality that full time jobs do not pay enough to live on. The working poor work harder, live in substandard housing, and lack health coverage. Twenty percent of all full time workers have no retirement or medical coverage. The fast growth of temps and part timers means growing insecurity. Meanwhile the average CEO, who in 1960 earned 40 times the income of the average U.S. factory worker, in 1993 got 149 times the income of the average U.S. factory worker." [tabb]
"Welfare benefits to families with children which were 71 percent of the poverty line for a family of three in 1970 were 40 percent of the poverty line by 1992, and are less today. The real value of the minimum wage in 1994 was lower than in 1950. Real hourly wages in the United States were lower in 1994 than in 1968. The top one percent of American households have more wealth than the bottom 90 percent. Between 1977 and 1989 that top one percent enjoyed 60 percent of all the gains in after tax income." [tabb]
"The richest one percent pays a smaller share of their income in taxes today than in 1979, while their share of the national income has doubled." [tabb]
"Over half of all new cars are sold to the top 20 percent of the income distribution. Class division is everywhere more visible." [tabb]
"Today's Chinatown sweatshops and Third World child labor factories are the functional equivalent of colonial slavery in that the demands of the consumer and the profit drive of the entrepreneur overwhelm the rights of those whose labor actually produces the saleable commodity." [Eric Foner - "Plantation Profiteering," The Nation, March 31, 1997 p.28.]
"Americans are living with a combination of growth and uncertainty they've never seen before." [Michael J. Mandel "The High-Risk Society," Business Week, October 28, 1996 p. 86.]
POLITICS OF OIL - Part 3
SOMEBODY IS LYING
During that period when crude oil prices were low there was a loss of jobs (by one estimate 50,000 since October 1997), and an estimated 40 percent of our nation's 500,000 marginal wells have been shut down.
Now that the prices are higher, profits for the oil industry corporations are soaring. But, to the American public, they say they want lower prices. Guess who is lying?
WHO GAINS?
The American public gains with lower prices at the pump.
LOSERS
Independent stripper well operators are hurt because they say it cost them too much to extract oil and they cannot compete with the giant oil companies.
WINNERS
The giant oil companies welcomed higher prices because it meant less competition form the independents and many independents were forced out of business creating an even larger market for the multinational oil companies.
HIGHER PRICES!
Independent oil producers and governors want higher, NOT lower prices. To claim otherwise is a lie.
"In the first six months of 1998, an estimated 48,702 wells have been idled or shut in, according to a recent survey of 23 states. If these wells were plugged and abandoned, it would represent a 142 percent increase over the number of wells (20,087) plugged and abandoned in 1997......As low prices continue to shut down marginal production from the United States, each barrel lost will be replaced by imported oil. The implications on national security and the trade deficit are serious." [Testimony of Edward T. Schafer, Governor of North Dakota representing the views of the governors of 30 member states that comprise the Interstate Oil and Gas Compact Commission - IOGCC -Jan. 28, 1999]
CONSPIRACY?
Now, if prices are forced down again they can take up the slack left by those smaller producers who were forced to go out of business. It couldn't have worked out better for the multinationals if it was a conspiracy.
"During each of the past 10 years the annual shut-down rate of marginal wells has been over 17,000 wells.
The current price downturn may result in double the number of annual shut-downs. Once these wells are shut down their production and proved reserves are permanently lost, and our foreign energy dependency grows."
[Danny Biggs, vice president and co-owner of Pickrell Drilling Co., an independent oil company based in Great Bend, Kansas and president of the National Stripper Well Association (NSWA). - NSWA represents the smallest operators in our industry, producers with low volume, high cost stripper or marginal wells - January 28, 1999 - Congressional Testimony]
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ALTERNATIVE ENERGY
"We call for an end to our nation's addiction to imported oil. We call for lower energy costs for families and businesses across America. We call for more solar, wind and biomass power. We call for greater use of alternative fuels, such as methanol, ethanol, natural gas and fuel cells. We call for greater efficiency in our homes, buildings and automobile." [Senator James Jeffords (R-Vt) - Feb 25, 2000]
"By the year 2020, 20 percent of our nation's energy must be from clean, renewable power. The Jeffords- Lieberman Clean Energy Act gets us there, and it's time to pass this bill." [Jeffords]
"We need to clean up those dirty coal-fired power plants, as the Jeffords-Lieberman Clean Energy Act would do. We need more fuel efficient cars and we need to end the rider that freezes CAFE standards, and we need to close the loophole for SUVs and minivans that allow them to be more inefficient." [Gene Karpinski, president and executive director of U.S. PIRG. - U.S. Public Interest Research Group]
"We need to reduce our reliance on diesel trucks and move to newer, cleaner technologies there as well. We need to stop subsidizing the polluting oil industries. And we need to have a massive investment, as the senators have called for, in efficiency and renewable resources, such as solar and wind." [Karpinski]
"It doesn't matter how much oil there is in the Arctic National Wildlife Refuge or off the coasts of California, drilling there would be as short-sighted and as foolish as damming the Grand Canyon for the hydropower or as taping into the geothermal energy of Old Faithful." [Debbie Sease, Sierra Club]
"Raising our fuel economy standards by 60 percent will save more oil than we import from the Persian Gulf, and more than what we could find in the Arctic National Wildlife Refuge or off the coast of California. It's the biggest single step we could take to reduce our addiction to oil, and to curb the threat of global warming and to create a safe environment for our future." [Sease]
"Burning fossil fuels, such as coal and oil, contributes to urban smog and acid rain, and it's the largest contributor to the glooming threat of global warming. We need to move on to a new energy path..... based on much greater efficiency of energy use and a rapid shift to renewable energy sources such as solar, wind and biomass." [Alden Meyer, director of governmental relations for the Union of Concerned Scientists]
"The good news is we have the technologies. Advanced gas turbines, fuel cells, wind turbines, thin-film photo-voltaic modules, energy efficient appliances and cars, to name just a few." [Meyer]
"Will the president, the Congress, and state and local policy makers have the political courage to protect our children's future by taking on the fossil-fuel polluters that have so long dominated energy policy-making?" [Meyer]
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OIL INDUSTRY CANNOT BE TRUSTED
The oil industry cannot be trusted to create policy which favor people before profits.
"Social activists have long attempted to redefine corporations' objectives to include "social responsibility." Yet most economists would argue that a corporate executive's primary social responsibility is to make a profit for the corporations owners, not to appease social activists' demands." ( Sloan Management Review )
"Any manager who would put the activists' interests ahead of the shareholders' would be practicing "pure and unadulterated socialism." [M. Friedman, "The Social Responsibility of Business Is to Increase Its Profits," New York Times Magazine, 13 September 1970, pp. 32-33, 122, 124, 126.]
"The term 'social responsibility' has the advantage, from the standpoint of its proponents, that it disguises what they really have in mind: namely, that managers should deliberately take actions which adversely affect investors in order to bestow benefits on other individuals." [W. Meckling and M. Jensen, "Reflections on the Corporation As a Social Invention," in P. Cooley, ed., Advances in Business Financial Management: A Collection of Readings (Chicago: Dryden Press, 1990), pp. 17-33.]
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HIGHER PRICES
HIGHER PROFITS
"Profits for three of the largest U.S. oil companies soared in the first three months of this year because record-high oil prices drove up their income from production." [Donna De Marco, Big oil benefits; Black-gold prices bolster black ink. The Washington Times, 04-26-2000, pp B7.]
"Exxon Mobil Corp.'s profits more than doubled to $3.48 billion from the first quarter of 1999, the company reported yesterday, while Texaco Inc.'s profit increased 188 percent to $574 million. Conoco Inc. reported net income of $399 million, up from $83 million a year earlier. [de marco]
The oil companies credit the high price of crude oil - about $15 more per barrel over the comparable period last year - for the upswing in profit. [de marco] |
