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Part 1: A Policy Based Not on Free Markets But
Government Sponsored Greed
We here a lot of 'talk' today about how the United States under the
Clinton Administration failed to adopt a suitable 'National Energy Policy'.
But the question we need to be asking ourselves is when did the
much-valued 'invisible hand' of the marketplace become the 'invisible
handout'?
The Bush Administration's National Energy Policy Development Group recently
stated: "A fundamental imbalance between supply & demand defines our
nation's energy crisis."
To back up this 'crisis idea', their report graphs the future of U.S.
energy consumption and production over the next 20 years. Consumption
rises at a steady rate, while production stays flat. These projections, the
report explains, are based on the rate of energy consumption & production
over the past 10 years. And by 2020 there's huge gap between the two.
Yet, as James Surowiecki points out in a recent dissection of the Bush
Energy Plan in the June 4th edition of The New Yorker, what is missing from
this policy stance is the most important variable of all: Price.
Americans consumed energy in huge quantities in the 1990's because it was
cheap. In the fall of 1998, a barrel of oil was going for $8.50. Today it
costs about $28.00. And American companies cut back on producing energy
because of the fact it was cheap.
You hear some people argue that the price of energy doesn't affect the way
consumers act. And while this makes intuitive sense, fitting with the image
of Americans as gas-guzzling S.U.V.-huggers, it is patently wrong.
Past energy crises have shown that price makes a huge difference in the way
people use energy, just as it affects the way they use everything else.
Sometimes people substitute one form of energy for another, or use existing
fuel more efficiently, as they did during the sharp spike in oil prices in
the 1970s.
But price also has a big impact on the supply side. Raise the price of oil
& gas and companies start figuring out how to get and sell more of it. Thus
we have calls to start opening the Arctic Wilderness Refuge to oil & gas
drilling.
This year energy companies expect to put $41 billion dollars into
natural-gas exploration, increasing spending on oil & gas exploration by 25
percent. And the number of new gas rigs is at an all-time peak.
But what is missing from the Bush Plan is the way capitalism itself is
supposed to work, because higher oil & gas prices also mean that energy
sources that have typically been too expensive to be real alternatives -
like geothermal & wind - start to look better.
So unlike Bush would have you believe, there is no "fundamental imbalance
between supply & demand"; instead, there is just a market, in which buyers
& sellers adjust to higher prices.
The best thing the Bush Administration can do to solve the energy "crisis"
is nothing. Let the market do what it does best. But the Bush energy plan
isn't pro-market, it's pro-business. And above all, it's
pro-'traditional' energy business.
Setting out a National Energy Policy suggests that companies in the energy
business are uniquely important and deserving of assistance - in the form
of either tax breaks or regulatory leniency - and that they should be
insulated from risk.
Yet, as history shows us, this is not the case. In November, 1919, coal
miners across the United States walked off the job. Not surprisingly, the
price of coal soared. Soon enough, the mine owners settled with the
strikers, but within a few years the owners tried to back out of the deal.
Again, the workers walked off the job and prices soared.
Since coal was the country's chief source of heating fuel & steam power,
the strikes created what we would call today an 'energy crisis', the first
of the 20th Century.
But what happened is that the higher prices and shaky supplies prompted
people to look for alternatives to coal. The cheapest alternative was fuel
oil. Between 1919 and 1923, fuel-oil sales jumped by almost 40 percent. By
1923, coal prices came back down, homes stayed warm, factories remained
open, and all of this happened without a National Energy Policy.
But the Bush Administration is not interested in helping foster
alternatives to the Big Oil Barons that helped him steal the White House.
And as we can plainly see, they are not interested in letting the dynamics
of the capitalist marketplace foster more efficient and less benign
alternatives
Ironically, Bush and Cheney and Abraham can rail all they want about
communism and price controls; but ask yourself, what is the difference
between government structuring an economy or private multi-national
corporations except for the fact that with government involved, in the
fictional America that our forefathers fought & died to establish, the
accountability was on the side of "the people" rather than the shareholders.
And as Benjamin Franklin noted so deftly: Capitalism without a conscience
is the greatest thing to fear.
Part II: A Legacy of Neglect & Disregarding the Law
The Bush Administration has recently advocated pursuit of expanding energy
supplies by building new refineries and easing environmental regulations
that govern their operation.
However, a strong case can be made that Bush's call to ease environmental
rules at refineries will result in even more disregard for the law than
there is now. A recent study of refinery operations in Texas suggests how
easing rules could turn what is ostensibly a public health problem in Texas
into a nationwide crisis.
One critical program called New Source Review has been sent to EPA
Administrator Christine Whitman for review and possible overhaul.
The New Source Review program, established in 1977, is intended to assure
that when an oil company expands its facilities and is going to increase
its pollution, the proper environmental reviews, controls and mitigation
are in place. But companies that don't go through New Source Review don't
have to modernize their pollution controls, and consequently emit pollution
at far higher levels than they otherwise would.
"Vice-president Cheney and the Administration's statement that we haven't
built a new refinery in 20 years is totally misleading," says Denny Larson
of Communities for a Better Environment.
"Cheney and Bush are ignoring the fact that refineries in Texas and
Louisiana have pretty much built entirely new refineries on existing sites
while avoiding the New Source Review process. The impact is tons more
pollution every day and a public health crisis in communities near the
refineries, as well as a major contribution to global warming and global
environmental crises."
Under the Clinton Administration, the EPA started the process of cracking
down on refineries and enforcing the New Source Review provisions. An
extensive EPA study found that the #1 enforcement problem at refineries was
violation of the New Source Review program and that refineries are the
worst industry in the nation for repeated violations of environmental laws.
"Basically, refineries have been illegally expanding their plants, in some
cases doubling the pollution they put out, with no check or oversight by
state or federal agencies," said Dr. Neil Carman, Clean Air Program
director for the Lone Star Chapter of the Sierra Club. "Relaxing standards
is simply going to smoke out and choke out the people who live near
refineries."
A recent refinery investigation by a Texas environmental group illustrates
the problem. Using Exxon/Mobil's Baytown Refinery as a case study, the
Sustainable Energy and Economic Development Coalition conducted a three
month intensive review of the refinery's operations and the level of legal
enforcement for violations.
The report turned up a host of problems resulting from poor management and
maintenance at the plant and shoddy enforcement by the state environmental
agency. The report, which studied thousands of records to form its review
and conclusions, found at the
Exxon/Mobil Baytown Refinery between 1994 and 2000:
o Repeated and persistent accidental release (upset) and related problems
o Failure to report problems and emissions
o Under-estimation of problems and emissions
o Failure to properly maintain emissions monitors
o Possible Violations of Federal Law on Reporting and Modifications
(pertaining to apparent major modifications at the plant's catalytic
cracker).
"The policy of environmental agencies under Bush has been to let the
polluters do what they want, whenever they want," says Peter Altman,
Executive Director of the SEED Coalition, which produced the Baytown report.
"Bush has repeatedly sent polluters the message that they can break the law
and get away with it. Until EPA stepped in, Texas refused to take any
enforcement action against refineries that blatantly violated New Source
Review Rules. If that's going to become official US policy then communities
around the US better buy their gas masks now because the air is going to
get a lot worse."
Part III: Closer To Home: How FTC Approved Oil Mergers Are Killing Our Economy
During the height of campaigning during the last Presidential Election, the
Federal Trade Commission eliminated oil industry competition and closed
refineries, consequently restricting supplies, by approving a rash of oil &
gas mergers.
Local activist Mark Adams, whose father Leo J. Adams was awarded by
Southwest Grease Division Witco for his work in research & development in
developing a better Constant Velocity Joint Grease for Saginaw Steering
Gear, has consistently filed Freedom of Information Act requests to the FTC
for nearly 10 years relating to the pattern of mergers and rising oil
prices, and has yet to receive a response.
Here is but a sample of what the FTC has wrought:
1) EXXON / SOUTHWEST GREASE / MOBIL MERGER
Exxon and other major oil companies wanted the business for the Velocity
Grease that Adam's father helped develop (approximately 15,000,000 pounds
per year), but could never formulate a product that met performance
requirements and made drive shafts last 150,000 miles in front-wheel drive
vehicles.
Consequently, Exxon, decided to "buy" the business. Unable nor willing to
compete on a level playing field, Exxon stacked the odds in their favor by
buying Southwest Grease.
"My father was soon advised Exxon planned to steal the jointly developed
formulation which they had no part in developing, and sell the grease
directly to General Motors to screw my Dad out of his mere 1.5 to 2 cent
per-pound commission royalty," explains Adams.
"My Dad suffered terrible stress at seeing the fruits of the livelihood he
worked so hard for so long NOW going into Exxon Chairman Lee Raymond's
bonus check. I wrote Mr. Raymond several times requesting that he honor
Dad's longstanding contract with Southwest, but he refused."
"GM later spun this parts component plant into Delphi Corp., Steering
Systems Div., Saginaw, MI. As a result of Exxon's "so-sue-me attitude",
and a justice system that has traditionally favored Exxon (in Valdez and
nearly every other jurisdiction), my Dad developed terminal cancer and now
has a life expectancy of 1-3 months."
"After FTC facilitated this loss of competition, fair and free trade, Exxon
is now closing several grease plants. Grease prices have increased over
30% as a direct result of FTC-approved mergers.
2) TOTAL / FINA / DIAMOND SHAMROCK MERGER
"We used to buy a hydro-treated middle distillate from Total's refinery in
Alma, Michigan to formulate a non-hazardous parts degreaser sold to GM,
various automotive garages and dealerships," continues Adams.
"This degreaser was safer to work with and could be recycled onsite,
eliminating more hazardous solvents and the cycle of pollution that results
from improper handling and disposal."
"Following the FTC-approved merger, Total's Alma refinery was closed down
permanently. The jobs are gone, many other family businesses were affected
and the new buyers have NEVER cleaned up the resulting pollution. "
"We now pay more than TWICE the price for a lower quality solvent. This
FTC-approved loss of supply and competitive pricing has not only scuttled
our business plan projections for multi-million dollar profits, but their
decisions have directly resulted in countless human exposures to more
hazardous solvents and caused irreversible pollution that will likely only
be remediated at substantial cost to taxpayers. "
As Adams views it, this is but one local example of how FTC decisions have
directly resulted in other refinery closures, further restricting
petrochemical supplies, thus "justifying" oil companies boosting prices to
today's obscene profit-making levels.
3) CATO OIL & GREASE / CITGO PETROLEUM MERGER
Ironically, Adams Oil did substantial business with Cato for nearly 18
years. Prices were stable and a number of GM lubricant approvals resulted
in good productivity and profitability for all -- until Citgo Petroleum
bought Cato.
Since that buyout, according to Adams, "we have experienced serious quality
problems that shut down automotive production lines, and catastrophic price
increases that will eventually cause us to lose the business."
"Not a single new product has been developed under Citgo's leadership.
Citgo has ended Cato's successful practice of honoring annual blanket
contracts and replaced it with quarterly pricing reviews. We have been hit
with several price increases in the past year alone that could not be
passed on to our
long-term customers."
"Thus, we have suffered $80,000 in losses this year, on top of similar
losses last year. My Dad hasn't pulled a paycheck from his once-profitable
family business for over 2 years."
4) BP / AMOCO / ARCO MERGER
TEXACO / SHELL MERGER
PENNZOIL / QUAKER STATE MERGER
Pricing of lubricant base oils has skyrocketed since FTC allowed these
mergers. The Review has learned that the FTC refused to consider
testimony not only by Adams, but other family businesses and independent
lubricant manufacturers (ILMA).
To see how major oil companies unfairly manipulate markets, fix prices and
destroy smaller competitors, FTC needed only to consult with SSDA (Service
Station
Dealers Association) and GASDA members.
What has traditionally been a bad situation for family businesses and
independents has been made unworkable by new FTC policies and oil industry
consolidation.
Today, major oil companies don't even have to leave their buildings to
"fix" petroleum prices.
"For the FTC to now ask me to prove Big Oil collusion, price fixing, and
anti-competitive practices is a Red Herring," concludes Adams, "insofar as
the FTC has single-handedly and without benefit of public hearings or
approval made this all "legal".
If you wish to fight to stop the irreversible damage being wrought by the
Bush Energy Plan, we urge you to contact your legislators and tell them to
quit subsidizing the major oil companies at your expense. Tell them to
shift the tax breaks and incentives over to alternative forms of energy
such as geothermal, wind, and solar power, and urge them to place a
moratorium on drilling in the Arctic Refuge and the Great Lakes.
Congressman James Barcia o 2419 Rayburn House Office Bldg. o Washington,
DC 20515
Senator Carl Levin - 459 Russell Senate Office Bldg. - Washington, D.C.
Senator Debbie Stabenow - 329 Dirksen Senate Office Bldg. - Washington , D.C.
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