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How Big Oil Greases the Political Machine By Robert Martin, Mark Adams & Public Citizen While much press has been given to the subject of the Microsoft anti-trust suit, a far more nefarious 'merger' was allowed to occur late this Spring when Exxon and Mobil were allowed to merge forces. As most Americans know, oil prices surged right after these two giant oil companies were allowed to merge forces. Despite rhetoric concerning OPEC cutting production, today, as a result of FTC-approved oil mergers, there is only the illusion of fair competition and free enterprise. When Michigan residents fuel up at a Total, Speedway, or Marathon station the prices are all the same because the gas all comes from the same refinery. Many stations are disappearing altogether, with no new oil companies coming online to restore competition. When the government does its job of assuring free & open competition and preventing monopolistic forces from joining forces, benefits towards consumers are a direct and immediate result. Ironically, right after the Federal Trade Commission (FTC) announced a recent 'official investigation' of oil prices, gas prices dropped substantially and the price of crude followed. Unfortunately, prices still remain some 20 cents per gallon higher than pre-FTC approved merger prices. FTC corruption involving oil industry mergers is responsible for not only increased inflation, but also extreme hardship on people forced to live on mandated fixed incomes. Several citizen groups petitioned the FTC to release requested public documents prior to the mergers, but refused on the basis that the subject was under 'official government investigation. Indeed, FTC or the Republican controlled Congress held no public hearings before approving oil industry mergers. Moreover, the FTC promoted no public comment periods before announcing the approved mergers. What most Americans do not realize is that the FTC, with the stroke of a pen behind closed doors, reversed the original court order from the era of Franklin Roosevelt, mandating the split-up of the original Standard Oil (thus successfully creating healthy competition between Exxon, Mobil, Amoco, Chevron, etc. for generations following FDR. The merger between Exxon and Mobil will lead to non-competitive practices that will harm consumers for decades to come. The trustbusters were right 90 years ago. Lack of competition was bad for consumers then and it will be bad for consumers today. Looking at the Facts In testimony given by Wenonah Hauter, Director of Public Citizen's Critical Mass Energy & Environment Program, perhaps the clearest depiction of the affect of oil monopolies was presented. Public Citizen, founded by Green Party candidate Ralph Nader in 1971, is a non-profit research, lobbying, and litigation organization based in Washington, DC. In 1999, oil provided 41 percent of our nation's energy needs. Americans consume more oil than ever before; we consumed 38 quads (quadrillion Btu) in 1999 and 34 quads in 1990, an increase of 12 percent. Since 1985, domestic production of oil has been declining, which means that the U.S. is more dependent on imported oil. In 1974, imports of oil provided about 35 percent of our oil needs; today the United States imports 55 percent of its oil. The U.S. Energy Information Administration projects that our dependence on imported oil will keep growing during the next 20 years, reaching about 60 percent by 2010. Increasing Oil Prices The year-and-a-half long increase in price for crude oil has been caused by many factors. So much oil was available during 1997 and 1998 that prices for a barrel of crude oil reached historic lows of $9.06 in December 1998. In order to increase oil prices, oil companies, OPEC members, and non-OPEC members reduced their production of oil (oil companies have tried to place all the blame for higher prices on foreign producers, especially OPEC, even though the companies have very close ties with most producing countries). Meanwhile, with prices for oil products at near all-time lows in the United States, Americans sharply increased their use of oil, the use of which grew in 1999 by 3.2 percent when compared to 1998, the largest year-to-year growth since 1998. With a cutback in oil production and increasing demand, the excess oil of 1997 & 1998 was quickly consumed, and oil prices started rising through 1999 and into 2000, hitting a peak of $31.13 in March 2000. Although OPEC and non-OPEC producers announced increases in oil production in late March, which helped reduce oil prices for several weeks, prices began rising again, as the announced increases do not appear to be large enough to meet growing demand. Ironically, stocks of reformulated gasoline sold in the Midwest appear to be increasing when compared to previous years. Midwest monthly stocks for reformulated gasoline in May are 9 percent higher than in May 1999; 1 percent higher for April, 114 percent higher for March, 235 percent higher for February, and 155 percent higher for January. In other words, when compared to previous years, more reformulated gasoline has been available in the Midwest for the five months from Jan.- May than was available for similar periods during 1999 and 1998. This refutes oil company arguments that there are shortages of reformulated gasoline in the Midwest. Oil Companies Are Making Record Profits The profits of most of the world's major private oil companies rose dramatically during the 1st quarter of 2000 (Jan.-Mar.) when compared to the 1st quarter of 1999. BP Amoco, Coastal, Conoco, ExxonMobil, and Shell set all-time record quarter profits. Texaco led the pack with a 473 percent increase in 1st quarter profits, followed by Conoco with 371 percent, BP Amoco with 296 percent, Chevron with 291 percent, Phillips with 257 percent, ARCO with 136 percent, Shell with 117 percent, ExxonMobil with 108 percent, and Coastal with 30 percent (Marathon went from a net loss in the 1st quarter of 1999 to a profit in 2000). Although Big Oil has been trying to blame OPEC for the price increases, there is no question that many consumer dollars are flowing straight into the greedy hands of the oil companies. Presidential Politics May Be Influencing Oil Prices and Policy As oil and gasoline prices have quickly risen, so have calls from Republican members of Congress, such as Senate Majority Leader Trent Lott (Miss.) and Energy & Natural Resources Chairman Frank Murkowski (Alaska), to increase oil production from Alaska by drilling in the Arctic National Wildlife Refuge, and by drilling in the off-shore oil fields in the Gulf of Mexico and the West Coast. Similarly, Republican Presidential candidate George Bush echoed the same sentiment in the first Presidential debate. Accompanying these environmentally irresponsible suggestions are attacks on state and federal gasoline taxes, which provide funding for road repair and mass transit; attacks on clean air regulations, which help reduce harmful pollution that kills and injures thousands of Americans each year; and attempts to provide additional taxpayer subsidies for domestic oil producers, who already receive massive subsidies (while harvesting record profits! Big Oil has made similar demands. Is it just a coincidence that Republicans and Big Oil share the same agenda? With massive campaign and soft money contributions by the oil & gas industry one must be blind not to see they have been influencing national energy policy in ways that benefit Big Oil at the expense of consumers, workers, and the environment. Republicans running for federal office (excluding the race for president) have taken in $680,000 in Oil & Gas PAC contributions versus $180,000 for Democrats, while the Republican Party has collected $1.4 million in soft money contributions compared with $510,000 for Democrats), as compiled by the Center for Responsive Politics. Interestingly, Republican presidential candidate Governor George W. Bush has received PAC contributions from Big Oil totaling $1.5 million so far, an amount much greater than that received by Democratic candidate Vice President Al Gore ($100,000), Green Party candidate Ralph Nader ($0), or Reform Party candidate Pat Buchanan ($7,600). No doubt Big Oil considers Gov. Bush a friend, as Mr. Bush previously owned Arbusto Energy, Inc., an oil exploration firm, and who also supports policies called for by the oil companies. What Can Congress Do To Protect Consumers? Except for the recent price spikes and the ones that accompanied the Gulf War in early 1991, gasoline prices have been near historic lows for the last half of the 1980s and most of the 1990s. In other words, for around 15 years, U.S. energy policy has encouraged the provision of heavily subsidized gasoline and other oil products. Policy makers have ignored efforts to conserve energy, making U.S. consumers vulnerable to the apparent price fixing and gouging of large oil companies and oil producing countries. Increased pollution, sprawl, and traffic congestion have all been made worse as policy makers from both Republican and Democratic parties ignored responsible energy policy while providing huge subsidies to oil & gas companies. However, by stopping oil company mergers, by making investments in energy efficiency, mass transit, renewable energy, by eliminating oil company corporate welfare, and by changing campaign finance laws, Congress can help protect consumers from future oil shocks. What Can Be Done? Stop Oil Company Merger Mania. The past year saw a merger of Exxon and Mobil (previously, the 1st and 3rd largest private oil companies in the world) and a merger between BP Amoco and Atlantic Richfield (previously, the 2nd and 7th largest private oil companies). While mergers give greater power to individual companies, industry consolidation makes the industry itself more influential as power becomes concentrated in the hands of the very few. Efficient Automobiles. Contributing to the current oil spikes is the fact that Congress has for years prohibited the U.S. Department of Transportation from even studying whether the fuel economy of cars and light trucks should be changed. Corporate Average Fuel Economy (CAFE) standards have remained unchanged since 1985, and the highway fuel economy of cars peaked in 1991 at about 21 miles per gallon, which is about where it stands today. The standards should be raised for all cars, especially light trucks (which includes vans, pickups, and sport utility vehicles), since these vehicles now account for more than half of all new car sales. The American Council for an Energy Efficient Economy and the Sierra Club estimate that by increasing the efficiency of cars and light trucks, we could save more oil than what would be produced by drilling in the Arctic National Wildlife Refuge or off-shore in the Gulf of Mexico or the West Coast. Mass Transit. Congress should increase investments in mass transit, such as light rail systems, subways, and buses. Not only do mass transit investments help save oil, they make it easier for everyone to get to and from work, and they reduce sprawl and environmental degradation. Eliminate Oil Company Corporate Welfare. As shown in Table 6, the oil & gas industry receives many tax-payer subsidies, as identified by the Green Scissors Coalition, www.foe.org. Big Oil currently receives subsidies of $2.4 billion for "intangible drilling costs" and $7.1 billion for "non-conventional fuel production credits," among others. Congress should follow the advice of the Green Scissors Coalition and eliminate the tax breaks for the oil & gas industry. Windfall Profits Tax. Congress should impose a tax on excessive profits harvested out of the pockets of hard-working Americans by Big Oil. Revenues from such a tax could provide rebates to people who buy ultra-efficient cars, or could help reduce mass transit fares, or could help increase the availability of mass transit options. Renewable Energy. Congress should encourage the development of alternative fuels for vehicles (such as biofuels derived from agricultural products) and for generating electricity, such as wind, solar, and biomass technologies. Energy Innovations, a report issued by a group of non-profit organizations, shows how a combination of renewable energy and energy efficiency could save tremendous amounts of money and pollution. Campaign Finance Reform. For over a century the oil and gas industry has engaged in a scheme of legalized bribery of local, state, and federal officials. The oil industry has poured almost $3 million into year 2000 federal campaigns (not counting the race for president); nearly $900,000 in "hard money" contributions and $2 million in "soft money" contributions. So far, the oil & gas industry has given George Bush $1.5 million and Al Gore $100,000. Oil & gas federal lobbying expenditures from 1998 totaled nearly $30 million. Campaign contributions and heavy lobbying encourage politicians to support massive subsidies that enrich oil and gas companies on the backs of consumers, competitors, and the environment. Congress should enact laws that take private money out of public elections. |
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