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Theft at the Pump
by Andrew Pollack / June 2006 issue Socialist Action
Consumers angered at steep price hikes
since last year's hurricanes and the resulting well and refinery damage—including
prices at the pump of over $3 a gallon—were shocked when Big Oil's latest
profit reports came out. In January, Exxon Mobil reported the highest
profit ever made by any U.S. company: $36 billion in 2005, up 43 percent
from the year before.
These profits were used to pay $144,000
every day to its CEO, Lee Raymond—and then to fund his $400 million
retirement package. A week earlier, other major oil companies reported
profit hikes of 20, 50, or even greater percents over the previous year.
The timing of these reports were doubly
embarrassing for the companies and their Washington allies, coming just
after Venezuela had announced yet another extension of its program to aid
low-income households in the U.S., in this case providing cheap heating oil
to 25,000 Philadelphia-area residents. A former Exxon Mobil executive said,
"This helps Chavez portray America as fundamentally weak. We are
supposed to be the world's only superpower, and we're taking charity from a
very poor country."
This spring, The New York Times reported
that no royalties will be paid on about $65 billion worth of oil and
natural gas extracted from federal territory because of a law supposedly
intended to spur exploration and drilling—a law later amended by Bill
Clinton to extend the largesse even further.
The Times also exposed billions more in
foregone royalties through fraudulent reporting of oil and natural gas
revenue, thanks to “an often byzantine set of regulations largely shaped by
the energy industry itself.”
One Interior Department official said that
"these companies had knowingly been cheating on oil for years, if not
decades. To ignore the likelihood that the same thing is happening on the
gas side is absurd." Yet the department dramatically cut the number of
auditors responsible for energy companies, forced out the most aggressive
and rewarded the liars for “creativity”!
But this is no surprise from an administration headed by
former oil and energy execs, which in its first days brought top energy
CEOs (including Enron’s Ken Lay) to the White House to tell Dick Cheney's
energy task force what to do. (This same task force also pored over
pre-invasion maps of Iraq’s oil sites.)
Oil industry executives said they were too
busy to show up to Senate Judiciary Committee hearings provoked by the
price hikes and profit reports (the same execs had previously lied to
Congress about their participation in Cheney's energy task force).
The hearings discussed whether a windfall profits
tax was necessary. Ironically in a country in which the sacred rights of
property are holy, Big Oil’s sins have been so frequent and flagrant that
the heresy of such a tax can pass the lips of even the most devout
believer, Republican or Democrat. Although the actual passage of such a tax
is rare, one was passed as recently as 1980—but it coincided with Jimmy
Carter's deregulation of oil and gas prices, a gift to these same companies.
Congress also told the Federal Trade
Commission to investigate price hikes. Not surprisingly, the FTC concluded
that most of the price hikes were due to market forces related to hurricane
damage rather than price-fixing. And anyway, the market had worked: “Price
spikes after Katrina resulted in more fuel getting to market.”
Wisconsin Attorney General Peggy
Lautenschlager testified before the committee that “upward volatility of
natural gas prices over the past several years cannot be simply explained
by traditional supply and demand.” Consumption is virtually unchanged from
10 years ago, contrary to media reports that routinely refer to “soaring
demand.”
Lautenschlager denounced the role of
financial markets for natural gas, which lead to wild, irrational price
swings even when supply and demand are stable. (These are the kinds of
markets that recently-convicted Lay and co-conspirator Jeff Skilling
specialized in creating, markets used to purposely cause rolling blackouts
in California.)
Lautenschlager also described the
interwining of oil and gas firms: “Four companies (three of which are major
oil companies) control about 50 percent of the natural gas market, and the
concentration of ownership continues to increase.”
These firms are in turn intertwined with
electric utilities, and are becoming more so. An example is the pending
creation of the country's largest utility, merging New Jersey's Public
Service Enterprise Group with Illinois’ Exelon. The merged company would
cover 18 million electric and gas customers and is expected to raise rates
even beyond its drastic hikes of last winter.
Exxon Mobil et al. have tried to defend
themselves with a media blitz as well as stepped-up lobbying, spending
$28.8 million in 2005, up 44 percent from 2004. In addition to hiring
former Republican legislative aides, they've reached across the aisle:
Exxon Mobil hired as a lobbyist David Leiter, former chief of staff to 2004
presidential candidate John Kerry and chief of renewable energy in the
Clinton administration.
Impact on workers
Soaring gasoline costs have meant cutbacks for both
essential and leisure travel. This is especially so because of the longer
commutes to work than in the past, given the dispersal of the working class
from urban centers to suburbs. And rising energy costs come on top of
growing indebtedness, mortgage pressures, higher health-care premiums (or
lack of insurance), etc.
The New York Times profiled middle-class
Long Island residents who sought help from the federal home energy
assistance program. All those interviewed had been turned away for having
incomes exceeding federal limits of $41,616 for a family of four, or
$28,296 for a family of two. Lawmakers estimated that about $5 billion
would have been necessary to meet the needs of those applying for aid last
winter. Contrast this to the far greater profits reported by Big Oil.
An economist in the U.S. Energy Information
Administration said energy prices in real dollars are the highest they’ve
been since 1981 and pointed to pre-hurricane trends—since 2002-3, home
heating fuel prices have increased 50 percent and natural gas 100 percent.
Other researchers tell of people struggling
with heating bills who are going without food or medical care, missing
mortgage payments, and doing without heat or hot water. A social worker
told The Times, "people come to our food pantry because they're paying
for their utilities and their oil."
New York City recently started imposing new
fees on public housing residents to help make up for soaring fuel costs.
This came soon after Venezuela’s CITGO announced it would help some of the
same city’s poor in the Bronx and Harlem.
Energy profits have hit not only workers’
pocketbooks but also their jobs, wages, and benefits. Between 1990 and
2005, as the number of major energy companies shrank, so too did the job
rolls, the number in oil and natural gas extraction dropping from 189,000
to 128,700. They're also frequently being replaced with nonunion workers
who get lower pay and usually no benefits, and are often housed several to
a room in hotels near refineries.
"Those enormous profits have come at
the expense of our jobs," Don Gosney of Plumbers & Steamfitters
Local 342 told the San Francisco Chronicle. "What's a reasonable
profit? We're not talking about retirees with a couple shares, we're
talking about institutions and individuals with millions of shares. I'd
like to think in this country that government represents all of us, but I'm
not so sure anymore."
This is the kind of sentiment, by the way,
that led the main union in the energy industry—the Oil, Chemical and Atomic
Workers, now part of the Steelworkers—to take the lead in forming the Labor
Party.
Not surprisingly, manufacturers are using
energy costs as another excuse to move production offshore—which would mean
more laid-off workers with less income to spend. This further fuels the
drop in consumption that some fear may finally kick off the recession long
expected to happen when the real estate bubble bursts.
U.S. natural gas prices are among the
highest in the world. Yet, in general, prices for natural gas are cheapest
in the countries that produce the most—and most of U.S. natural gas is
produced domestically. But even among some non-producing countries prices
are far cheaper. In parts of Europe gas sells for about half the U.S. price.
Oil-producing countries—again, except for
the U.S.—also generally charge their own consumers far less at the pump.
Gasoline in Venezuela is 12 cents a gallon. In fact, it was mass revolts
against price hikes that led to the first steps taken by Chavez’ Bolivarian
Movement in its eventual rise to power. Once in office, it was the program
of energy subsidies and use of oil and gas revenue for a vast array of
social programs that have made the government so popular.
Washington’s “solutions”
The predictably irrelevant response of Congress and the
White House has been a mish-mash of bills calling for increases in
fuel-economy, development of alternative fuels and cars, reducing taxes at
the pump, and mild tax hikes for Big Oil (after years of mammoth tax breaks
supposedly for use in new investment but rarely used for such).
Consideration is being given to expanding
the areas in which offshore drilling can occur. The House also voted to
revoke some of the lease giveaways described above. Nothing has been passed
yet, but you can be sure no bill will pass with any measures strong enough
to alienate any potential campaign contributors.
Even Big Oil’s best friends in Congress are
putting up a show. Joe Barton, Republican chair of the House Energy and
Commerce Committee and former employee of Atlantic Richfield, is second
only to Tom Delay as recipient of energy company funds. Yet he felt
compelled to call hearings and issue stern letters to BP, which now owns
Atlantic Richfield, and Exxon Mobil, chastising them for their policies and
prices.
But Barton’s real fire was saved for those
actually doing something about the crisis: he accused CITGO of antitrust
violations by donating cheap heating oil, and demanded to see their
records. (Barton earlier demanded to see the records of government
scientists who dared to say global warming was real.)
Populist Ralph Nader, long active on energy
issues, resurrected the tired-old "break 'em up" antitrust
panacea, first tried to no effect against Rockefeller’s Standard Oil trust.
This "solution" ignores the ability of corporations to refashion
themselves endlessly in the face of antitrust action and regulatory
changes, always emerging bigger and stronger, and often with the same core
of big shareholders.
It also ignores the inevitable trend of
concentration and centralization in a capitalist economy, which forces
companies to swallow smaller competitors or go under—a trend that will only
be ended not by another spurious "breakup" but by their expropriation
and subjection to workers' control.
Nader correctly denounces the closure of
refineries, which become an excuse to jack up prices, and exposes the
price-fixing abilities of vertically integrated corporations. But the idea
that a more competitive industry would solve these problems—or even that it
could long stay competitive—is a pipe dream. And rather than call for the
abolition of speculative energy-trading markets, Nader calls on Bush to
raise their margin requirements.
He does make one good suggestion, calling
on truckers to encircle Congress and the White House with their rigs.
Certainly the West Coast troqueros who've been organizing for their rights
on the job and against high fuel prices—and who shut down L.A. ports on May
1—could lead other truckers and workers from other industries in such
actions.
Latin America
Washington's inaction stands in stark contrast to what's
happening south of the border.
On May Day, Evo Morales sent soldiers and engineers to
occupy foreign oil company sites in Bolivia, and issued a decree requiring
them to accept minority partnerships with the state. Morales declared this
was a natural reaction to five centuries of foreign pillaging, and that
“now Bolivia belongs to its own people, particularly its indigenous peoples.”
He exposed how foreign oil firms had
benefited from unconstitutional, secretly negotiated contracts, and gave
them six months to renegotiate contracts or pull out. In the meantime,
Bolivia will keep 82% of revenues, virtually reversing the former corporate/state
shares.
Venezuela also recently drastically raised
income taxes and royalties on foreign oil companies, and took majority
control of 32 oil fields. And since Chavez's movement took power, the prime
battleground between the revolution and counterrevolution has been over who
will control the state energy company, PDVSA: the government and the
company's workers, or bureaucrats in alliance with domestic and foreign
capital.
So far, the answer has been the former
(although workers are still fighting against recalcitrant bureaucrats for
more control), which is why the country has been able to use energy
revenues for jobs, services, and development.
Bolivia has joined Venezuela and Cuba in
the Bolivarian Alternative for Latin America (ALBA), a non-market
cooperation treaty. Through this and other agreements, the three countries
have begun exchanging energy and other commodities and products, for badly
needed health, education, and other services on the basis of solidarity
rather than profit. Contrast this with Washington's repeated use of
military force to maintain control over other countries' energy resources!
Without an invitation, much less any
thanks, from Bush or Congress—in fact, in the face of repeated lies about a
lack of democracy in Venezuela—the latter has extended this solidaristic
use of energy resources to poor neighborhoods in the U.S. Venezuela's
government-owned and U.S.-based CITGO last year began distributing
discounted heating oil to poor U.S. communities in seven states.
At the South Bronx launch, Democratic
Congressman Jose Serrano said, “If this is scoring [political] points, ...
I invite every major American corporation to come and score points.” Of
course they won't, and his party won't force them to. Only a mass movement
and independent political action can exercise such compulsion.
The example set by Bolivia and Venezuela is
inspiring others in Latin America. In mid-May the government of Ecuador,
under pressure from indigenous, student, and other groups, cancelled the
contract of Occidental Petroleum and seized its assets. The movement is now
demanding nationalization of the rest of the industry.
What can working people do?
We can't count on politicians of either party to do
anything serious against the energy companies. The recent convictions of
Lay and Skilling is certainly heartwarming. But under this system neither
illegal market manipulation nor legal oligopoly control can be ended.
It's worth remembering that in Venezuela it
was the workers at PDVSA who were key to stopping management's sabotage
during the coup attempt in 2003. So too workers in the U.S. energy
industries, workers in industries depending on their products, and
financially hard-pressed workers in our neighborhoods are the key to
confronting energy industry capitalists.
Ultimately, the only solution is
nationalization under workers’ control of the energy industry. The first
steps in popularizing such a program can include demands to open the
account books of the energy companies and their big shareholders.
Committees of workers and community
activists—starting with energy workers and the communities who've seen the
CITGO alternative, and gradually broadening out to other workplaces and
working-class neighborhoods—can demand access to those books, and on the
basis of what they see can propose rational prices and develop plans to
reorganize energy production and consumption. This newfound information
will also help such committees decide what taxes and royalties should be
imposed on these companies and on their executives' income and stolen
wealth.
Only such a democratic process can solve
even more complex questions, such as how to conserve energy use and
restrict pollution to turn back global warming, without unnecessarily
restricting workers' living standards. A massive, national public transit
system is one obvious first step.
Nationalize the Energy Industries Under
Worker and Community Control!
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