I was not going to write this piece, nope, no way, no how. Everybody has had a say on the price of gas, one more commentary just didn’t seem necessary. But, after CNN’s report on Exxon profits (which strangely seems to have disappeared, but you can read virtually the same article here) and a smart-aleck remark about Jimmy Carter’s energy policies, it became obvious I was going to have to do this to avoid internal hemorrhaging. The reader may have missed it, but Exxon announced a profit---that’s profit, not sales—of $10,000,000,000 for the QUARTER. That’s 10 billion, with a “b”, and that rhymes with ‘c” and that stands for “cartel.”
Everyone knows about gas prices over the last two weeks, but this money was made over the last three months. Here was another cute tidbit: Exxon has been spending $5,000,000,000 (yes, that’s billions again) per quarter to buy back stock. That does two things. First, it pushes the value of the stock up. Second, it makes for larger dividends for the remaining stockholder, the largest of whom, are most likely on the board and in top management. Guess what they haven’t spent money on? New exploration and refiner upgrades and expansion.
Now it seems that the government feels that impoverished concerns like Exxon need a tax break to encourage finding new oil sources and building refinery capacity. Lord knows with profits like that, they’re going to need a break to actually pay their share.
Okay, I wasn’t surprised. What surprised me was why it took a year of inflated gas prices for anyone to notice that oil companies were making obscene profits. If a company can spend $5 billion a quarter to buy back stock, it stands to reason that they’re pulling in considerably more than that
Of course, the artificial “shortage” from Katrina was galling. It was reminiscent of the nonsense of the ‘70’s when gas stations opened for two hours a day, selling gas for $2.00 a gallon (on a par, after inflation with current prices) then closing because they were “out.” Except that they opened every day, but the tanker truck only showed up once or twice a week, as always. Somehow, this has been labeled Jimmy Carter’s fault, despite the fact that gas prices began to jump during the Nixon administration, along with inflation rates that went so wild that the Republican Nixon actually attempted to impose price controls (but not on fuel). The shortage mania caught on with other suppliers, too. There were coffee shortages, chocolate shortages, and most idiotically, toilet paper shortages (which was by a joke on a late-night talk show).
All of which is why I got aggravated at the remark about the ineffectiveness of Carter’s energy policies. How the policies can be deemed to have been a failure when they were never implemented is beyond me. Carter wanted research into alternative fuels, increased auto power sources efficiency, conservation, with appropriate tax incentives for all of these things. What happened was that Congress and the Reagan administration began the process of gutting these ideas that was followed up by the Bush the First until nothing was left of them. Clinton, thanks to the fact that fuel prices had dropped, had no need to do anything, so he didn’t.
By the way, that drop is rather interesting. The previous “gas crisis” had so damaged the economy that fuel usage dropped as fewer goods were produced and shipped. The crop of fuel efficient cars didn’t help the gas boys much, either. With usage down, prices dropped. Even when OPEC tried to push up prices artificially, the use pressure wasn’t sufficient to make it stick. The economy under Reagan was stagnant for eight years (it didn’t go down much, but it grew only minimally in real terms), and under Bush it actually went into serious recession. It takes a long time for the economy to make its moves, so it was actually Bill Clinton who benefited from the improvement generated by low gas prices, low interest rates, and the expanding tech sector. If Bush had somehow won a second term, he would have been the guy who "improved" the economy.
To mangle the Santayana quote I used the other day, “Those who cannot recognize the economy are doomed to get screwed by it.”
But the seeds were being sown for our current mess. Alternative power source research simply disappeared. The big thing was “gasohol” which was basically a way for Congress to provide a subsidy to corn growers, which made corn-based fuels more expensive than good, ol’ unleaded premium. Auto maker fuel efficiency requirements were gutted by exempting pickups and – are you ready for this?—SUV’s. So, it didn’t matter how big a gas hog that Expedition or Suburban was because it didn’t count against the fleet average. And conservation? Yeah, right. People who buy 6 mpg SUV’s are buying into a lifestyle that consumes like a swarm of army ants.
So we’re getting ripped off by petroleum companies that give hundreds of millions of dollars in campaign contributions to politicians who ensure that policies are in place that must increase fuel usage. At the same time, those same politicians seem not to have noticed that the petroleum industry behaves suspiciously non-competitively. Forget the fact that much of the raw material (crude) is controlled by a cartel. In a competitive situation, some gasoline suppliers would improve refining methods to reduce costs or find ways to extract oil from other sources at lower cost than the spot market.
The solutions are all simple enough. First, real campaign reform that keeps the gas companies (and other special interests) from playing rent-a-Congressman needs to be passed. Second, bring utilities back under full regulatory control. The only way alternative energy sources will come about is if the power companies have no choice.
Oh, horrors, say the free-marketers, we can’t have that. It would never work. Well, it did for about 50 years, while de-regulation has been a marked failure wherever its been applied. The airlines are broke, yet they’ve cut service to small markets that used to mandated by regulation (when they were profitable). The phone system is rapidly turning into an unregulated monopoly as all the Baby Bells come back together, while we’ve gotten little or no benefit from the so-called “competition” between these unregulated regional monopolies, unless you consider inflated wireless charges, hokey access charges, and incredibly bad service personnel to be benefits. And, of course, there’s that ultimate deregulation success story, Enron.
So don’t groan to me about the evils of regulation.
Finally, the Justice Department needs to get off its dead butt, and start investigating the monopolistic practices of the petroleum industry. Oil companies have merged, creating an oligopoly. Oligopolies have indulged in collusion before, so it would hardly be surprising if it wasn't going on now.
Never gonna happen? Well, maybe not soon, but eventually, people will get sick and tired and vote the rascals out. It’s time, in fact, for a voter revolt, where everyone votes against the incumbent, regardless of party or philosophy. And, when things get bad enough, they can be changed. Teddy Roosevelt busted the trusts and championed land and resource conservation. A relative of his, Franklin, created the TVA and the social safety nets, among other things. Sometimes its been Democrats, and sometimes its been Republicans who are the agents of change. All it takes is the right man or woman.