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How McCain and Crist Help Big Oil Change the Subject
Here in Florida, there has been a bipartisan and historical agreement that oil drilling off our coasts is a very bad idea. Even our last Governor had told his brother president that lifting the drilling moratorium wouldn't sell in Florida. If it weren't for presidential politics, it would be hard to understand why John McCain, much less Charlie Crist, would u-turn down this road. But four-dollar gasoline has our attention, and people living in states without beaches are being told that more drilling will help them right now.
Many of the arguments against drilling off the Florida coast are obvious, and have been made. The risks of environmental disasters are real. There are already millions of acres under lease elsewhere that the oil companies haven't touched. And any minimal "relief" created by new drilling is at least a decade away.
But what's being lost in all of this is that John McCain and Charlie Crist aren't just trying to create new profit centers for the energy industry. They are also carrying the public relations water for big oil by arguing that gas prices are unnecessarily high not because of profiteering, but because of government regulation stifling the oil companies from boosting supply. According to the oil companies, our problems can be laid only at the feet of the oil producing nations, and our own government tying their hands behind their back, keeping us from being a real "oil producing nation". This, of course, is nonsense.
The truth is clear, and is reported every quarter in public reports by the oil companies. As the OPEC price for oil has climbed from less than $10 a barrel just 9 years ago, to nearly $150 a barrel now, the profits of the oil companies have increased dramatically. How can that be? If you are selling hamburgers, and the price of ground meat goes up, you would expect your profits would shrink. Unless, of course, you raised the price of your burgers. But to make your profits actually grow while your cost of beef goes up, you would have to raise the price more than the additional cost of the beef. If you did this too much, your customers would just go across the street to the hamburger guy who wasn't profiteering off the rising prices. If you and the guy across the street both did it, your customers would go down the street to the deli.
So why isn't this happening at the gas station? Unlike the hamburger scenario, when Exxon increases its profit margin and raises prices more than it can really justify, we drivers go across the street and find that Chevron and BP are doing the same thing. And there's no deli further down the street. Our cars only run on ground chuck, not turkey and swiss. The truth is that over the last decade there has been a dramatic consolidation of market power over all areas of oil competition -- exploration and production, refining and marketing. The few remaining players in the industry just wink and make more money. And they basically admit it.
Two years ago, Red Cavaney, the President of the American Petroleum Institute, gave his "State of the U.S. and Natural Gas Industry 2006" address. He claimed, as the industry often does, that "contrary to a widely held perception, the industry's earnings are very much in line with other industries". He said that for the previous five years, the oil and natural gas industry's earnings averaged "5.8 cents per dollar of sales", and that for the third quarter of 2005, the industry averaged "8.2 cents for every dollar of sales", and that other industries earned more "per dollar of sales".
A few weeks ago on the Today Show, the CEO of Exxon made the "profit per dollar of sales number" argument to Matt Lauer, but said that the profit number was now about ten cents "per dollar". It still might sound reasonable until you really think about what these fellows are saying. They're not talking about cents per gallon. They're talking about cents per dollar. So, using the industry's own figures, one can see the profiteering. A few years ago, when gas was selling at about two dollars a gallon, Exxon and its "competitors" were making about 11 cents for delivering to you a gallon of gasoline. (5.8 cents times two dollars), or about $1.65 for your 15 gallon fillup. Now, for delivering that same gallon of gasoline to you at $4.20 per gallon, Exxon and its "competitors" are making about 42 cents per gallon, (10 cents times four dollars) or about $6.30 for your 15 gallon fill-up. Repeat this a few million times a day and you begin to understand how Exxon had over $30 billion in annual profits. They can do this because there's no one around to undercut them.
The oil companies don't want us to focus on this math, so they change the subject. They tell us the problem is with supply. "If we only had more oil to drill, it would be cheaper!", they tell us. Sometimes, they tell us, the problems are with the drilling and refining capacity. You may remember that in the third quarter of 2005, the oil companies warned us that Hurricane Katrina would impact supply because of damage to rigs and refineries along the Gulf Coast. The result? Capacity went temporarily went down, but as old Red Cavaney told us, industry profits that quarter increased from about six cents "per dollar" to over eight.
In fact, Big Oil has increased its power to manipulate prices at the production and refining level, because it has used the last few years to consolidate both vertically and horizontally. By controlling the production and refining, the major oil companies control the spigot, and they make it harder for the off-brand companies to underprice them at the pump, because those little guys now have to buy their gas directly from the big boys.
I'm certain that the oil companies will tell us that this analysis doesn't tell the whole story and that it's much more complicated than this, but it isn't. Back in 1999, when Exxon and Mobil first announced its plans to merge, William J. Baer, then Director of the FTC's Bureau of Competition, expressed concerns about the impact of a loss of competition in refining. Pointing to a fire in one California refinery which led to a 30 percent price increase, Mr. Baer noted that "even a small reduction in supply in a concentrated market can cause substantial price increases", and that "even small price increases can have a direct and lasting effect on the entire economy."
Notwithstanding these concerns, the Exxon/Mobil merger was approved, and there has been even more concentration of market power in the oil industry, more apparent manipulation of supply, and more profiteering in the absence of real competition. To be sure, the OPEC cartel is even more culpable than the oil company cartel. But the oil companies are clearly piling on, and the debate about drilling off our beaches is just an attempt to change the subject. We shouldn't be so distracted.
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It's not just the oil companies destroying our lives; it's the so-called free market. I'd like to see statistics on the decline of locally owned businesses, deli and coffee-shop alike, let alone our neighborhood gas station. Competition, indeed. We are such sheep. Putting our heads together in a circle and breathing the same air passes along deadly germs and decreases the available oxygen. First they debilitate us, with the help of Congress, then they fleece us. Next, mutton!
The biggest increase in the price of oil is inflation. Every shortfall in Government revenues (called overspending) is covered by just printing more money. There was a reason throughout history why paper currencies were pegged to a weight of gold. Today, an ounce of gold will still buy the same amount of oil as it did 50 and 100 years ago. The same is true for bread, milk, diamonds, and every other commodity (and if they aren't there yet, then they will eventually be there). Since the dollar is pegged to nothing, the Gov can print it at will and destroy the value of every other dollar in circulation. The problem isn't really the greed of capitalists, although I know there is a certain amount of greed, the problem is the worth of our currency, which will soon equal the value of the peso. 8 years ago, if you can remember, the Euro traded at 88 cents. Today, it is trading at $1.60, and the dollar is still losing value. The Euro didn't get twice as strong, the dollar got twice as weak! Put the blame where it belongs, on CONGRESS, who controls the purse strings of the nation.
Go back to the Gold Standard. Now there is a progressive idea.
But gold is not quite so stable as you imagine.
Ever hear of James Fisk and Jay Gould?
What they tried was kind of like what the Oil Monopoly is succeeding at today.
I was disappointed the day that I realized that being a capitalist society had overshadowed being a democratic nation that supports the will and interests of the people. Bush has done very bad things and dthe price of oil is just one symptom of the disease of his administration. Hopefully 2009 will be the start of the healing and we can tell corporations that they can no longer do this to us.
The fundamental point of this article, which no one seems to be commenting on, is that regardless of the supply arguments, the oil companies have been increasing their profit margins -- which has nothing to do with the actual price of oil itself -- disproportionately and are profiting wildly. There should be a lot more focus on this and attendant outrage.
The problem is that during the deregulation cycle of the last 30 years, we've basically made ourselves impotent to do anything about it.
Good job America.
See Alan Fein's Profile
Great comment, kjdwyer! That was indeed the fundamental point!
It is a hell of a business model isn't it?
Rockerfeller would be SO proud!
Also remember that oil prices have gone up alongside our invasions in the middle east. Our military is partly responsible for the rise in oil prices. And now we have just auctioned off Iraq's oil pumping to our gas companies - Exxon, Chevron and Shell own most of Iraq's oil now.
On top of that, the US refines most of the oil drilled in the world, and the refineries are owned by those same companies. And on top of that, they haven't built enough refineries, so gasoline is in even more demand.
And who do the oil companies blame for the price of gas? Government regulations. The same Government regulations that allowed those same companies to reduce supply, jack up prices and take in more profit than any company or industry in the history of the world.
See what else Charlie Crist has been up to in the Florida Everglades.
http://riverofgas.evergladesearthfirst.org/powerplant.htm
Can one of the huge liberals on this board explain to me who big oil is and who profits from big oil? Last I checked it is a public company and millions of Americans are big oil.
So your solution is for everyone to contact their stock broker and by Exxon/Mobil? Yes, millions of Americans are big oil and hundreds of millions aren't.
Gasoline prices are really hurting the American consumer, but what makes it worse is that so much of that money is going overseas to enhance the bottomlines of the REAL "Big Oil": the huge national oil companies of Saudi Arabia, Venezuela, Nigeria, etc.
We do drill off the Texas coast. The state earns lots of money from the royalties, and the production companies provide lots of high-paying blue-collar jobs. That used to be something Democrats were in favor of.
The Texas coast is home to more bird species than anywhere else in the US. The drill rigs cause an increase in the number of fish, because fish love living around them. In fact, when Texas rigs are decommissioned, they are towed over to Florida and sunk there for the fish. This is the Rigs-to-Reefs program.
One of the biggest cause of destruction of wildlife habitat is development: vacation home developments, big resorts, etc. The Texas coast has a lot of tourist trade, but it also has vast stretches that will never be developed because they've been protected by conservation easements or the governments.
Overall, experience shows that it's more important for wildlife to control development than to prevent oil/gas production.
Not only do we drill off the Texas Coast, we also drill of the La, Miss and Alabama Coasts. We do it with the utmost caution for the environment and the safety of the employees working on drilling rigs and production platforms (there are approx. 4000 of them). The efforts of lots of companies and hard working employees results in 21% of the natural gas and 30% of the oil produced domesticaly coming from the western and central gulf of mexico. The Eastern Gulf of Mexico (offshore Florida)which covers approximately 11.5 MM acres contributes nada, zip, zero to the US domestic production. See the problem?
"Here in Florida, there has been a bipartisan and historical agreement that oil drilling off our coasts is a very bad idea."
So how do you feel about China drilling 50 miles off the coast of Florida?
Might upset someone if it were TRUE.
Quit spreading rumors and propaganda. It is a bad habit to get in to.
Cellulotic Ethanol
Cellulotic Ethanol has its root in Democracy. The average person could get subsidized to grow gasoline and add 2 trillion year in our econoy.
Cellulotic stops terror and stops Exxon what else do you need to know.
help a child in South Carolina School
www.cdemocrats.com
Corridor of shame help someone today.
Sounds like the same thing we heard from Democrats on corn ethanol . . . how is that working out?
I'd be willing to talk about more drilling if the oil companies would start drilling on the 70 million acres of the 90 million acres of oil leases they already hold in the Gulf of Mexico that they aren't doing anything with.
Until then, not so much.
If they're not drilling there, it's because they haven't yet found oil/gas in producible amounts there.
I'm amazed at how the Dems are counting on the ignorance of public in floating this argument.
Energy companies lease land NOT because they know oil is there. The lease gives them the right to find out if oil is there, and the right to produce it if it's there. It doesn't mean that oil is there.
This is how it works on private land, too. The companies will lease up all the land in area they suspect might have oil just so they can retain the rights to exploring that property. It does not mean that there actually is oil there. Meanwhile, the the mineral rights owner gets some nice lease money.
Uh, no. That is not exactly how it works.
But they don't waste money on land that doesn't have potential. And the Feds don't put up worthless land for leasing.
There might be some wildcatting still going on.
But not on these lands.
The biggest increase in the price of oil is inflation. Every shortfall in Government revenues (called overspending) is covered by just printing more money. There was a reason throughout history why paper currencies were pegged to a weight of gold. Today, an ounce of gold will still buy the same amount of oil as it did 50 and 100 years ago. The same is true for bread, milk, diamonds, and every other commodity (and if they aren't there yet, then they will eventually be there). Since the dollar is pegged to nothing, the Gov can print it at will and destroy the value of every other dollar in circulation. The problem isn't really the greed of capitalists, although I know there is a certain amount of greed, the problem is the worth of our currency, which will soon equal the value of the peso. 8 years ago, if you can remember, the Euro traded at 88 cents. Today, it is trading at $1.60, and the dollar is still losing value. The Euro didn't get twice as strong, the dollar got twice as weak! Put the blame where it belongs, on CONGRESS, who controls the purse strings of the nation. Gee, the Euro costs twice as much to buy and so does bread in the market and gas at the pump. Do we see a connection now?
Canaris- Here ae the facts- the GOM consists of slightly less thatn 160 MM acres, approx. 40MM acres are leased, there are 29,096 blocks, 7368 of them are leased as of today. Your guesstimate missed the mark by 50,000,000 acres. Would you like to retract that or are you happy with that level of inaccuracy?
You might go to www.gomr.mme.gov and study up on the topic just a tad.
i guess you are ready to start talking about expanding the OCS now, correct?
Double speak and confusing rhetoric is the stock and trade of the oil industry. Make sure you throw in a hand full of marbles with every statement...no wonder we are close to melt down time.
"Congestion, is the indispensable prelude to getting your hand in the other guy's pocket"
Marshall McLuhan
Oil companies spend huge amounts of money and apply tremendous expertise to find the oil that we need. Why punish them for doing their job?
If you want lower oil prices, increase the supply.
Using the example of Tunisia that lets companies recover all costs before applying royalties and taxes (Candax, an offshore producer that pulls it out for $10/barrel in exchange for giving its natural gas by product to Tunisia for near nothing, is an example) and in return Tunisia gets jobs, future taxes and royalties, and nat gas by products that fuel their electrical generating stations.
Why does the US not let companies drill offshore in exchange for half of the first 500,000 barrels be sent to the US strategic oil reserve (or an equivalent cash amount)? More supply, lower prices, and more US jobs.
While I acknowledge your well thought out argument, there are several factors that you fail to note. First the oil companies have stacked the political deck in their favor. The US energy policy was written by the oil industry. No room for alternative sources. They have America by the short curlys’ and are gleefully displaying their odious attribute of being very nasty bullies. This is a classic case of greed vs. altruism.
Why subsidize the biggest profit making companies in history?
If they are working in a "Free Market" and they aren't, they would do all they could to increase the product anyhow. So why subsidize what they are already going to do?
If anything we need to increase the taxes and royalties on oil they find under public lands. It is OUR oil after all. You know, us? American citizens and taxpayers?
P.S They are paying none of those fabulous profits to "discover" oil in Saudi Arabia, Venezuela, Mexico etc etc.
Those reserves are well established. They are just raking off the profits as middlemen.
Your argument can easily be applied to the overwhelming state and federal TAXES applied to every gallon of gas. The REAL "windfall" is being collected by the government. As gas has doubled in price, tax receipts have quite nearly doubled as well. Why aren't you up in arms about THAT?
Your math is seriously flawed. State and federal taxes on gas are applied on a per gallon basis. They do not increase as the selling price of gas goes up. The taxes on four dollar gas are the same as those on two dollar gas.
Exactly right.
Oh, how horrible, taxes you say?
Hmm, what do those taxes go to? Oh yeah, every cent goes to maintaining the national highway system, roads and bridges. But as an anti-tax republican, you hate the national highway system, right? HOrrible waste of our taxpayer dollars, the whole thing should be abolished and folks can either pay for thier own roads or walk, right?
You are flat wrong.
Gasoline is taxed at a fixed rate per GALLON, not a percentage.
As the price rises tax revenue does not. In fact revenues are down because of decreased consumption.
And the taxes are far from "Overwhelming."
In addition to Gov. Crist's blind support of McCain in drilling off the coast of Fl. and whatever else he thinks is going to get him the VP spot, Gov. Christ has been busy forgetting about the best interest of the people who live in Fl.
He offered a bill to increase Fl.'s homestead exemption therefore reducing property taxes. Sounds good except for the fact it cuts money for our teacher's, education system along with cutting funds for the police and firefighters in our state.
While Gov. Christ is busy taking credit for and being honored for the Fl. buying precious Everglades land from US Sugar Corp he is also allowing Florida Power and Light build a FOSSIL FUEL POWER PLANT just 1000 ft away from the very Everglades he is claiming to protect. Infact this is very close to the land that Fl. state has just purchased from US Sugar Corp.
http://riverofgas.evergladesearthfirst.org/powerplant.htm
Thanks Charlie.
Why don't we reclaim the 3 trillion a year in subsidies the oil industry had the good fortune to obtain? 3 trillion would go a long way towards design/implementation of solar and wind power. Take back what the coal industry gets also, I'm sick of their smarmy "we're green" commercials.
Well this is what Barack Obama is wanting to do with the windfall profits tax.
You believe you me, if there is an escalating form of taxation put on the Oil companies the price of gas will drop like a stone. If they (the Oil companies) have a taxation system that is let's just say for giggles 20% on an annual profit margin of let's say 10%, that increases to 25% for a profit margin of 12%, 30% for 15% profit margin etc., etc....the price of oil will come down. and it should be based on Quarterly Earning.
Now what I'm saying is if Exxon's profit margin for the the first qtr of 08 is (what did they report? $1.61 Billion PROFIT increase from Qtr 4/07) a 17% increase well they should be taxed apprx 33%of that profit or roughly $500 Million. Now if Exxon were to reduce that profit margin say down to 10% in Qtr 2/08 or an increase of $161 Million for a total of $1.72 Billion their taxes would roll back to 25% or $430 Million. If their Profit continues at a 17% rate or climbs so would their taxation rates go.
We would without a doubt see prices drop.
A major factor factor in the price and profits of oil is the weak dollar - that fact falls clearly on the Bush/Cheney Administration. Iran is threatening to sell oil in Euros which is the main reason Cheney is pushing hard to bomb, bomb, bomb, bomb, bomb Iran, not some smoke and mirrors job about nuclear weapons which was debunked by a recent National Intelligence Estimate.
Borrowing money from China to occupy Iraq is further weakening the dollar.
Another factor is the Enron loophole which allows for unregulated oil speculation.
too simpleBilly:
1) Consolidation
2) Control of US leases not explored
3) Lobbying to prevent hybrids, higher CAFE, electric cars, alternate energy, public transportation
Didn't he get married to defuse that idea?
IT IS THE HEDGE FUNDS THEY ARE ALL INVESTED IN!!!!!!!!!!
THAT IS WHAT THEY WANT TO HIDE FROM THE PUBLIC!!!!!!!!!!
BUSH STRIPPED THE SEC OF 25% OF IT'S BUDGET SO IT CAN'T REGULATE ANYTHING!!!!!!!!
OFFSHORE HEDGE FUNDS ESPICALLY!!!!!!!!!!!!!
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