May 12, 2006

View From Lodi, CA: Why Isn’t Dubya Jawboning Oil Companies?

[Peter Brimelow writes: Note to angry libertarians—I KNOW this is heretical and doesn’t acknowledge the market system’s ability to spur substitution and price rationing etc. etc. And I KNOW Public Citizen is just a Ralph Nader racket—my Forbes exposes of Nader are here and here. But, as I’ve repeatedly said, VDARE.COM is a coalition. We agree only on immigration reform. Joe is a Democrat. This is his Lodi News-Sentinel column, which we carry as a courtesy. Please direct all complaints to him—or, better, read tonight’s Guzzardi Exclusive on immigration reform.]

By Joe Guzzardi

In late April, President Bush ordered his Energy and Justice Departments to inquire if gasoline prices are illegally manipulated. 

Said Bush, “We’re acting to ensure that there is no price gouging.”

Among Bush’s other actions on gas prices, he will ask Attorney General Alberto Gonzales to send letters to all 50 state attorney generals to monitor possible price gouging.

Bush also temporarily suspended environmental regulations on gasoline that some feel contribute to rising retail prices.

Bush, according to then-Press Secretary Scott McLellan, will reaffirm with energy companies his desire to see more of their swollen profits re-invested in expanded refining capacity, developing new technologies and creating alternative energy sources.

Finally, Bush proposed ending $2 billion in tax breaks for the oil companies as well as—again—opening the Arctic National Wildlife Reserve for drilling.

The immediate results: regular gasoline at my preferred station, Flame MiniMart, has gone from $3.04 to $3.19.

All of Bush’s posturing is too little, too late. [ Bush’s Gas Plan Seen As Too Little, Too Late, by Edward Epstein, San Francisco Chronicle, April 26, 2006

In American’s battle for fair pump prices, the best chance is the November election. Voters, with fuel costs added to a long grievance list, will determine whether Republicans will control of the House or not.

If Bush acts decisively, he could save the beleaguered GOP.

Drivers cannot reconcile gas prices and oil company profits.

But that doesn’t mean that oil companies aren’t going to spin it their way.

Exxon Mobil earned $36.1 billion in 2005; first quarter profits for 2006 were $8.4 billion. In an attempt to justify those record profits, the company will embark on a massive public relations campaign to convince skeptical consumers about the complexities of oil exploration and production.

Pointing to its $4.8 billion expenditures on capital investments during the first quarter 2006, Exxon Mobil will emphasize the positive. But during the same quarter, it spent $2 billion for dividend payments and $5 billion for stock buybacks that primarily benefit company executives. To make matters worse, Exxon Mobil will spend an additional $6 billion on repurchasing its own shares during the second quarter of 2006.

"The President is basically getting down on his hands and knees and begging the oil industry to invest more in renewables," said Tyson Slocum, head of the energy program at Public Citizen, a Washington, D.C. advocacy group. "That's just not going to happen. The only way we're going to solve our energy problems is to compel the industry through legislation to increase their investment in renewables."

Slocum says that Bush’s energy proposals are toothless. Specifically, investigations into price manipulation are wasted time since the problem is not illegal but legal manipulation.

With two well-connected oilmen in the White House—Bush and Vice President Cheney—I have to wonder where the confrontational approach is.

Why won’t Bush pick up the phone to call Rex Tillerson, the new Exxon Mobil Chairman to say, “This ends now?”

History tells us that might work.

John F. Kennedy was as wealthy and his family as prominent as Bush’s.

But unlike Bush, Kennedy was a respected leader. When, in 1962, the steel companies—as powerful then as the oil companies today—threatened to raised prices an unprecedented $6 per ton, Kennedy said,

“The facts of the matter are that there is no justification for an increase in steel prices… At a time when they could be exploring how more efficiency and better prices could be obtained ... a few gigantic corporations have decided to increase prices in ruthless disregard of their public responsibility.” [News Conference, April 11, 1962]

Noting that the country was waging war in Southeast Asia, Kennedy demanded from the steel executives, “a higher sense of business responsibility for the welfare of their country.”

Kennedy:

“The American people will find it hard, as I do, to accept a situation in which a tiny handful of steel executives—whose pursuit of private power and profit exceeds their sense of public responsibility - can show such utter contempt for the interests of 185 million Americans.”

Steel prices were never increased.

Shouldn’t Bush use the President’s persuasive power to demand oil companies to cut back to 2005 price levels?

Joe Guzzardi [email him], an instructor in English at the Lodi Adult School, has been writing a weekly column since 1988. It currently appears in the Lodi News-Sentinel.