Page 1 of 2Next
America, Over Big Oil's Barrel
What's really driving up your gas prices? Oil companies say it's government regulators, foreign dictators, and those pesky polar bears.
Tue Jun. 24, 2008 11:00 PM PDT
As Americans struggle to fill their tanks for a summer trip to Disneyworld or the Grand Canyon (or just to get to work), oil companies, in a bid to fend off government intrusion, have been busy trying to convince consumers and elected officials that skyrocketing gas prices are out of their hands. Though the prospect of Americans scaling back vacations and trading in their SUVs, even while Big Oil rakes in record profits, should put the industry in a tight spot, the oil companies are trying their best to turn a PR nightmare into a possible growth opportunity. While the Democrat-led Congress, which held its latest hearing on escalating gas prices on Wednesday, has failed to reign in Big Oil, the companies themselves are using the price spike to advance a long-standing agenda: drilling for oil in environmentally protected areas, from the Rocky Mountains to the outer continental shelf to Alaska's Artic National Wildlife Refuge. And public desperation may finally make it possible to do so: Already there have been calls—from the president and GOP nominee John McCain, among others—to lift a decades-long ban an offshore drilling.
Continues Below
Continued From Above
In April and May, House and Senate committees called industry executives on the carpet for hearings, and earlier this month Congress took another run at imposing a windfall profits tax on the five major US oil companies, which together made a record $36 billion in the first quarter of 2008.
But the windfall profits bill—which also included measures to rescind some $17 billion in industry tax breaks—died a swift death in the Senate, garnering 51 votes, but not enough to overcome a filibuster. (The president also vowed to veto it.) And the hearings themselves amounted to little more than political theater, allowing members of Congress to talk tough on behalf of their suffering constituents without demanding anything that would make the lineup of oil execs—from Exxon, BP, Chevron, ConocoPhillips, and Shell—break a sweat.
To repel public hostility and government action, meanwhile, the American Petroleum Institute, the main oil and gas lobbying group, has launched a multimillion dollar media blitz. The campaign, according to the Washington Post, is aimed at convincing "voters—who, in turn, will make the case to their members of Congress—that rising energy prices are not the producers' fault and that government efforts to punish the industry, especially with higher taxes, would only make pricing problems worse."
Oil companies are trying their best to promote the highly counterintuitive idea that what's good for Big Oil is good for America. As Peter Robertson, vice chairman of Chevron, told the Senate Judiciary Committee in May, "Americans need companies that can effectively compete for access to new resources. Punitive measures that weakened us in the face of international competition are the wrong measures."
In denying responsibility for high fuel prices, the oil execs also evoked the ultimate mantra of the free market. "The fundamental laws of supply and demand are at work," said Shell president John Hofmeister—meaning, there's less oil and more people want it so the price has to go up. The law of supply and demand, however, is not a natural, immutable law, like the laws of physics. It is simply a way of describing the relationship between buyers and sellers in the marketplace. That is, sellers of an in-demand product can charge higher prices for it, but they don't have to do so; they could choose, instead, to trim their own profits—or at least pay their fair share of taxes. Before the judiciary committee, ExxonMobil VP J. Stephen Simon insisted that "it's not our profitability in this business that is driving the higher prices that consumers pay." This despite the fact that ExxonMobil alone reported $10.9 billion in earnings for the first three months of the year, up 17 percent over 2007, while BP's profits rose 60 percent, Shell's 25 percent, ConocoPhillips's 17 percent, and Chevron's 10 percent.
In fact, there's plenty that could be done to ease the burden on consumers. A proposal from the Center for American Progress, to name just one, calculated that simply by closing several tax loopholes and collecting royalties it is due on oil and gas extracted from public lands, the government would have enough to fund a substantial fuel price "reliefbate" for low- and middle-income Americans. (The Center's plan doesn't even include a windfall profits tax, which, if instituted, could be used to exponentially increase the government's investment in renewable energy.)
Nonetheless, Big Oil seems to have had some success in framing the debate over who is responsible for high gas prices, advancing not only the laws of the marketplace, but the bogeyman of the big nationalized foreign oil companies. "Government-owned national oil companies dominate the top spots," Exxon's Simon told the judiciary committee. The argument, now popular on both sides of the aisle, is that state-owned outfits control most of the supply and have their comparatively puny American counterparts over a barrel. (Only California's Maxine Waters dared, at a House hearing, to suggest that the United States might try nationalizing its own oil industry.)
It's been Big Oil's long-standing contention that the rapacious state-owned Middle Eastern, African, Asian, and Latin American oil companies are responsible for the price gouging. But this is a dubious argument. The United States is currently the third largest oil supplier in the world, following Saudi Arabia and Russia, as well as the single largest consumer. Tyson Slocum, the director of Public Citizen's energy program, says that on any given day ExxonMobil alone produces as much petroleum as the kingdom of Kuwait. US oil companies, of course, all have a hand in exploitation within many of the very state enterprises they decry, through outright contracts, service contracts, production agreements, and joint ventures. Currently, ExxonMobil, Chevron, and Shell, among other oil companies, are zeroing in on service contracts that will open the way for them to begin producing oil in Iraq.
Page 1 of 2Next
Comments
I think the gas crunch is actually a blessing in disguise. I think that it is high time that Americans came down to earth and realized what big oil has done to this country. It has repeatedly ripped off the American consumer and raped Mother Earth. We need, no have to, learn to live with a lot less oil. There needs to be change in the way that we use our energy resources and hopefully this gas crunch is a big wake up call for all Americans. We cannot rely so heavily on oil for our energy source. Please, please conserve. Buy that highbred car, carpool, get solar installed your house, do whatever it takes to help reduce our dependence on big oil.
The situation will never get any better until this nation learns to conserve or rely on alternate energy sources. I can guarantee that we will never see $2.50 for a gallon of gas ever again.
As my dad would say it....leave 'em (big oil) holdin' their dicks in their hands.
Excellent post. However, I'd take one exception. The oil & gas industry has known about peak oil for a long time. Cheney's favorite oil scientists believe the world-wide peak happened already in 2005. So was a motivator to seize 'the last of the oil." Voila, Iraq.
However, once most Americans understand that oil is a limited resource, conservation seems to be the best solution, if you do not have 'short term' goals in mind. Keeping oil in teh ground makes sense just like keeping money in the bank makes sense ... for a rainy day.
And the whole thing with the environment is 'short term' profit & monetary goals versus 'long term' changes to the energy systems. Republicans rely on 'short term' thinking for almost everything related to this. Instant gratification, immediate this, immediate that.
The argument for a 'long term' approach is hard to make in the United States, where the population has been conditioned to simple, quick solutions. But I think most people will understand it eventually...in fact mother nature will MAKE them understand it.
For right now the oil companies and their Fascist cronies in the White House and Congress have us over the barrel--legalized robbery, thanks to the Republican Fascists in our houses of government. On November 4 there will be a big payback.
These oil company executives sound just like the cigarette company executives. Both are Liars and Congress knows that, but the votes are not there to override a veto by "Thing" bush and "Thing" cheney--azzhole buddies of the oil companies.
Excellent post. However, I'd take one exception. The oil & gas industry has known about peak oil for a long time. Cheney's favorite oil scientists believe the world-wide peak happened already in 2005. So was a motivator to seize 'the last of the oil." Voila, Iraq -Elydog
Well, they have been itching for M.E. oil for sometime. www.motherjones.com/news/feature/2003/03/ma_273_01.html
And of one reads the Wolfowitz doctrine [basically Empire] any country that ha large oil reserves could become a threat to said empire.
The Rockefellers have long been involved in oil and politics, they are social Darwinists [even though they often claim to be Christians] in the business world they say its only natural to exploit their position of power.
I find it interesting those that have been cheerleaders for free-market are now realising that they are getting screwed and are growing angry. BTW Mexico has price controls and gas is about 2 bucks a gallon.
Its estimated that 60% of the high cost of fuel is related to investment banks putting huge sums of subprime bailout money into oil. As well these futures contracts and swaps are highly leveraged and as with the subprime is creating a bubble that will eventually burst when the predators move to the next bubble [hopefully]
I agree with Ely. We knew about peak supply a while back. Obviously there is a long-term strategy in mind to control all oil especially with India and China increasing their consumption. Control the oil and you control the world. We sit on our reserves and invade other countries to control theirs. This all started back around WW2 when we learned about oil in the middle east. It's painfully obvious that we'll do anything to remain in power. The gov. is doing all they can to get as much money for it now before supply REALLY starts to exceed demand and we run into some serious problems. Would it be any suprise that the demise of mankind was a result of us consuming all of our natural resources until nothing was left. Water, trees, oil, etc. We've evolved so fast in the past 100 years that we cannot keep up. Going from 3 billion to 6 billion people on the planet in a span of something like 40 years. I'm no factitian, obviously, and I'm sure some will disagree, but you cannot live in a daydream for ever. Unless we start investing in alternative energy sources ASAP we're screwed. Better buy some acres in Canada and learn to live off the land.
1. All oil fields peak.
2. All oil regions peak.
3. It took 500 million years to make the oil on the planet. We cant simply make more.
4. Most countries have already peaked starting with the US in 1971 and likely ending with Saudi Arabia in 2005 or 2006. Saudi Arabia suddenly and mysteriously became very secretive about their oil reserves starting in 1986 to hide the fact that they were about to peak.
6. Saudi Arabia has traditionally been the "swing producer," increasing or decreasing production to adjust oil prices. Since 2005, they have been unable to do this. Several signs point to the fact that they are operating at full capacity.
7. The biggest oil fields are often those found first. All remaining undiscovered oilfields are likely very small and very deep.
8. When a new deposit is discovered, the "sweet light" oil - the highest quality portion - is at the top, while the heavier "sour crude" which requires more processing is at the bottom.
9. Even in the rosiest scenario, there is very little undiscovered oil.
10. All of the alternative energy sources we have thought of thus far - wind, solar, hydrogen, wave, natural gas, coal - all require extensive metallurgy processing and energy investment - they are in fact subsidized by petroleum.
Murdoch praises Blair's 'courage'
* Julia Day
* The Guardian,
* Wednesday February 12, 2003
http://www.guardian.co.uk/politics/2003/feb/12/uk.iraqandthemedia
Murdoch:
.... "The greatest thing to come out of this for the world economy, if you could put it that way, would be $20 a barrel for oil. That's bigger than any tax cut in any country."
Maybe you should ask Murdoch what can be done about $ 140 a barrell. He might
have the solution to it, just waiting to be called in.
It's a sick co-dependency. We the people provide the addiction and the oil and gas provide the abuse and blame the addicted.
Simplified, it's a classic case of an abuser and a victim. But in this case the abuser is doing it with full knowledge of what's being done. But they are sick just the same. They believe their money can insulate them from any affect caused by their greed. It's worked well so far.
Why don't I hear your magazine clamoring for a windfall profits tax on farmers? The price of corn has tripled in the last two years, wheat and soybeans have doubled. You can live without gasoline although it may be tough to get to work but everbody has to eat. We're using 30% of our corn crop to create 3% of our transportation fuel while food prices have skyrocketed both here and abroad.
It's easy to create food, plant a seed, add some ferilizer and then water. Viola, you've got corn. To produce oil you have to invest between $1 billion and $5 billion to build an offshore drilling rig. Tow it out to sea and anchor it in water that maybe as deep as 5000 feet. Then send your drilling equipment through that water and into the seabed below for several thousand more feet. If you're lucky you find oil and gas.
Last year Exxon made a profit of $40 billion, that's an incredibly large amount of money. However in order to make it they had to sell $412 billion worth of petroleum products, that's less than 10 cents on the dollar. What's the problem with that? Exploring, producing and bringing to market petroleum produts is a very difficult thing to do but yet American oil technology does it with flying colors. When hurricane Katrina blew through the Gulf of Mexico 167 oil rigs were partially or completely destroyed yet there was no crude oil released into the environment, that's pretty impressive.
Enough about the oil industry, how about your writers direct their attention to the real culprits, the US Congress. For the last 35 years, ever since the Arab oil embargo, our govenment has totally failed the American people by failing repeatedly to create a comprehensive national energy policy. Both political parties are to blame for the enormous problem our society faces today. Nixon's answer was to impose wage and price freeze controls and Jimmy Carter told us to put on a sweater, turn down the thermostat and drive 55. Wow, I'm overwhelmed with such courageous leadership, NOT.
Speculation versus lack of supply is what the 'left' wrestles with. Well, there is an overlay of speculation, a bubble right now, but that is over the growing lack of easy-to-get oil. They are not mutually exclusive.
We have a 'market' economy and even pension funds are piling into the high profit oil/commodity speculation. I've heard of estimates of about $35 per barrell. Howewver, that still leaves oil at $105 ... and climbing.
Yet future's buyers understand that oil IS getting rarer. They have not really understood it until recently. So the future's market finally figured out a basic fact.
Speculation, or ... just factual anticipation? If you disagree, why don't you buy some airline stock then?
" Big" oil is not the problem here, although they have benefited, simply due to the massive increase in prices. Their "windfall" profits are not in line with other industries. The majority of the fault for the position America is in now is directly due to the Reagan and Bush dynasty put in place by corporate America whose policies stressed the immediate and have ignored the situation that has been developing for years now.
It have found it interesting and profitable to see how Wall Street has finally overcome their denial of the fact pointed out years ago by Dr. Steven Leeb that oil prices have had a huge contrary effect on the stock prices for many years.
Two years ago I attended a meeting heavily attended by North slope petroleum engineers who were highly skeptical of the speaker, Dr. Ken Deffeyes and his analysis of Peak Oil and its probable repercussions, and while polite, they treated him as a snake oil salesman. In the interim they have surely become believers.
We face chaos and a massive depression if we do not find amongst ourselves a leader who can grasp what needs to be done and has the will to pursue a interim strategy of oil and gas development as a stopgap measure while we immediately implement stringent and mandatory conservation measures, and also mount a scope of alternative energy development similar to the allied buildup of WWII or Rosevelt's "New Deal".
Without this type of effort and we are screwed, in the terms of Dr. Deffeyes and Dr. Leeb, and famine, wars, and chaos will result, as our economy dissolves to a survival mode that we are ill-equipped to survive.
If oil has already peaked, why are countries trying to produce more then less? The Saudi's increased production a meager 400,000 barrels a day. If oil was really a precious commodity and an unrenewable resource, then these countries would be curtailing production thus making this commodity even more scarce. By doing this , you have an increase in price, as the product has an ever increasing demand which creates a shortage , thus bringing about a price increase of the product. Yet there appears to be no shortage as production has not ceased or even decreased. So with this in mind , can one reasonably assume that there is no shortage, because we have not decreased production?
I remember writing a paper for an Economics Class in the early 1970's. My topic was "Oil Depletion Allowances" and MO JO was one of the sources utilized. All these years later, MO JO continues to consistently provide information vital to being an informed citizen. Big Oil continues to pull the strings of our vaunted representatives and they continue to dance to the tune Big Oil plays, as do we all. It is long past time to return oversight. Bless Maxine Waters, Nationalization would be a "wake-up" call. In a true free market there would be competition, Big Oil has eliminated that and is "gaming" the market.
From the point of view of the oilmen, their own self-interest, the profitability of their industry, and the national interest are one and the same. Back in the day when we had the world's biggest oil reserves (up until the late Sixties/early Seventies when the double whammy of oil discoveries in Arabia and US production peaking in 1971 altered that equation) you could make a case for this concept. Now, however, the major resources lie elsewhere and Big Oil is forced into controlling other nations' resources in order to maintain their economic dominance. (And please remember that mechanized warfare requires oil to feed the machines.) If you look at recent history: our Middle Eastern policy in particular, but the dozens of tin-pot dictators (including Saddam) that we supported, through the lens of oil resources, you'll see a consistent pattern. Google the name "Miles Ignotious" to read Kissinger's 1975 plan for Mid-east domination.
Predatory Free Market Capitalism (neo-feudalism) has ruled the US since the puritans landed, believing in this same system because it proved who God loved and who he didn't. Free Market capitalism is a failure, as is the American system that is based on it. The statistics bear that out - 43 million living in poverty and growing, 47 million working poor who cannot afford health care (is that not "national defense" too, to protect us from the terrorism of disease?), militarism, materialism, neo-colonialism, one of the most violent and crime-ridden societies on earth, the highest infant mortality in the "developed world", 52nd in the world in freedom of the press (according to Reporters Without Borders), homophobia, fundamentalist nuts waving their Old Testaments at everything - what a madhouse. So glad we have left it behind and moved to a freer, more tolerant and progressive country in Europe - the hope of the future. If nothing comes along to balance the negative warlike forces of the US the world is doomed to live in perpetual conflict with these greedy oil barons (and other big business fat cats) ruling the whole world. That is their goal. Google Project for a New American Century and see what your conservatives are really up to, no matter the waving flags, apple pie and anti-everything else. Everything that is happening now was planned even before Dubya's original coup.
Interesting article-- seems ignorant toward how capitalism and speculation of futures really works. What do you think would happen if the government restricted orange groves in Florida like they do oil. Then offer leases to land that can not grow oranges and claim that the farmers are being greedy for not using that unfurtle land.
If the Congress showed sincerity to drill for oil off shore, the speculators would drop the price the next day because the risk of their oil futures would be in jeopardy.
I think Mother Jones should get real when it comes to Capitalism rather than the mantra of big government.
Boy, what a bunch of trained seals. Propaganda passed on as facts. Try blaming the real culprits: those who SPECULATE, especially on 5-6% margins.
No world wide gap between what's available and new demand caused a 3 fold price increase in a YEAR. It's all BS. Deliberate increase in ME tensions caused by this administration sets off the speculation.
looks like Congress has a new target for their hate-- Speculators. I would like to see them define who they are and where is it written as to how much speculation in the prices. I looks like if you are a Democrat speculators are the problem and if you are a Republican supply is a problem.
Oil, gasoline, and other fossil fuels have literally supplied the engine of
American economic growth over the past century. To abandon their use prematurely would be a massive mistake, weakening America just as it needs to be at its strongest. America has weathered energy crises in the past, and will do so again. As long as U.S.
policy makers maintain an open and competitive economy, we can continue to meet energy challenges well into the future.
Gotta blame policy-makers for doing nada about oil companies as well. Note the recent rightwing corporate activist Supreme Court decision to reduce Exxon’s payout for damages done in Prince William Bay. Yes, just having them for actual damages and not punishing them is a great way to go. They won’t do it again now I’m sure and good job Exxon in waiting until a lot of the people hurt by your actions died as you drew the litigation. Come on, these people only care about money and will do whatever it takes to bleed the public dry.
And let's face it, while it is OK for them to profit, it's the margin and scale of the profit that is the problem. And all those people who think it's in-line with other corporations, guess again. In economic downturns, while many companies see a decline in profits, 2 industries come out on top, the health 'care' industry and oil companies. Why? 'Cause everyone needs them. What's interesting is how useless these two 'industries' really are. Most research in heathcare is done by universities and the NIH, while healthcare providers pay themselves massive salaries as part of a useless bureaucracy and acquire free research from the government and universities anyway. What a wonderful market based system we have that rewards merit! Not.
Now as far as oil companies are concerned, they are the ardently opposed to changes and are similarly USELESS. Nationalize ‘em and gas prices would drop and the people running oil extraction would get paid a civil servant’s salary, which is more than fair considering how much work they put in. Oil companies need to be closely regulated, monitored and their profits taxed and redirected away from bloated CEO and financial officer salaries and into alternative energy. These bloated monstrosities aren't even happy with last year's windfalls but have INCREASEING profit margins and for what? Are they providing a better service? Did we suddenly double our population and number of vehicles? Get real. They raise prices as they see fit. Their massive profits and salaries are NOT justified and this has nothing to do with a free market since this country doesn't really have one or believe in one anyway. Everything is subsidized by the government through taxes from the masses. Always has been and always will be. So if they can so readily take from consumers, I see no reason consumers can't ask for some of that hardly earned cash back. Of course, if we have McCain in office, expect things to get worse. Hell, Obama too for that matter, BUT I’m hoping he’ll be willing to raise taxes on ‘em at the very least.
you are a moron. any one who believes in this "peak oil" nonsense is a stooge. We heard the same thing in the 70's. The world is awash in oil. We have enough to last centuries. This is all about greed. Nothing more, nothing less. Nationalizing oil is the forst step. Prison terms is the second.
There's a few ways you can operate an internal combustion engine without giving Exxon any money at all. And, they're not real keen on the idea, for obvious reasons. Further, there's other ways you can propel a motor vehicle without even using an internal combustion engine, and, chances are, they aren't on tippy-toe to find out how you'd do that. Exxon et. al., AKA 'big oil', are probably pondering their futures as energy companies, as more and more people tune in to the idea of producing their own energy, and conservation, the old consumer model is starting to show its' age and seamy side. They've boosted prices to maximize their revenues, and, the more they do that, the more Murkinsumers are going to turn their attention to other transportation methodologies that don't involve making rich fat people moreso. I'd say, if they're interested in keeping some of their customer base, now would probably be a great time to start working the prices back down. They may have Uncle Dick in their corner, but their franchise isn't long for this world. If it's not the pollution, it's Iraq, if it's not that, it's the sleazy D.C. poltix associated with energy, or it's the people getting whacked in africa etc., and, last but not least, AlBore and his carbon credits and polar bears and the rest of global whining. Yeah, 21st century's going to be passing strange from the gas station perspective...hypermilers, steam cars, electric cars, bicycles, more buses, and less customers overall...I guess I'd be trying to maximize my profits too, in that situation...
Back in the 70's when I was in the Red River area of Texas I noticed a great number of oil pumps not pumping, later in the day I ran into someone who looked as if he were inspecting one of the pumps, I asked him why they were not pumping oil and he replied almost as if it were common knowledge "That we get paid not to pump". Yeah how many billions of dollars, our tax dollars have been given away to store surplus oil. How much is still being given away at our cost while were being choked at the pump! We The People Of The United States of America are being screwed at both ends. My next car is already ordered, yes it is electric if they want to choke me I'm good at choking back!
Jon Dunn; you are overlooking the fact that the egregious agri-businesses have boosted the prices of fertilizer to cover any increased profits the average farmer. I would be in favor of such a tax on Archer-Daniels Midland, Conagra, Monsantoand all of the other "real" beneficaries of the Farm Subsidies.
lets say the TOP REPUBLICANS landed a contract with al malaki,minister of iraq,to receive brokerage fees from all Iraqi Oil.I know who,when and how!How do I know???because the Lawyer they used is my Lawyer also.HE TOLD ME!!!!!!!I have proof?Supply and demand is A LIE!!!!!!!!!!you will read about this shortly in the newspapers!!!
What this article fails to mention and many more do is the simple supply and demand equation at work with oil prices. The demand for oil is very inelastic, meaning that a large increase in the price oil will lead to only a small decrease in quantity demanded.
However, what we can do to lower the price of oil is to yes, drill.
Conservative estimates put the total amount of recoverable oil in conventional deposits at about 39 billion barrels within the United States. Offshore, we have another 89 billion barrels or so. In ANWR, 10 billion barrels await drilling.
In oil shale deposits, we have more than 1 trillion barrels of oil. In perspective, that's about four times the total reserves of Saudi Arabia. And if estimates of shale reserves as high as 2 trillion barrels prove true, we'll have about a 300-YEAR supply of oil just from shale. The best way to get off foreign oil is to drill at home. Nuff said.
Right on Oxford.
Who and what is the inspiration behind the speculation and the speculators? I thinks it might be more than individual investor greed,hedge fund managers,commodities traders,Wall St..or the finite resources for global energy consumption and the oil companies,nationalized centralized powers or their respective executives.It is unadulterated power of a nature probably not understood by the majority of the global govt officials,oil executives or the voting populace.The "facts" are fragmented illusory deflections, reflections,conjectures of a greater truth behind the historical causalities,the economic dualities of supply and demand,the World Bank,the International Monetary Fund,American policy-formation,wars,terrorism.Social Darwinistic concepts of natural selection might be a more apt metaphor to explain the existential whys regarding the current oil crisis or non-crisis??? The evolutionary changes are the results of the desire to survive,to not become an adaptation or worse yet extinct.We want life,we want influence and we want fundamentally "deterministic" power to control the global "organism".This is a simple truth yet so very hard to conceive through the machinations and mechanisms of "facts","truths" and contextual realities.
Until we embrace a "global consciousness" of assistance,collaboration and mutual survival we will "intuitively" cling to the perception that only the "strong" will survive.
"The argument, now popular on both sides of the aisle, is that state-owned outfits control most of the supply and have their comparatively puny American counterparts over a barrel. ... The United States is currently the third largest oil supplier in the world, following Saudi Arabia and Russia, as well as the single largest consumer."
While you try to imply the latter fact refutes the former fact, both points are true. The U.S. is one of the largest producers of oil. However, it produces only about 10% of world production.
