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Matt Stoller

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The Federal Reserve of Oil

Posted: 10/25/11 12:54 PM ET

Spending a lot of time in DC can make you a cynic, but the thing about power is that you can never really keep up with just how cynical power brokers actually are. I think my favorite example of cynicism comes from a man intertwined with the politics of oil, a liberal Democratic power broker named Fred Dutton who came up with the idea of Earth Day when in the administration of John F. Kennedy. Dutton later helped manage Bobby Kennedy's 1968 Presidential campaign (and was heavily involved in McGovern's in 1972), but on the day Bobby Kennedy was shot, he said "the lights went out" for him.

In the 1970s, Dutton opened a lobbying firm, with primary clients Mobil Oil and the Kingdom of Saudi Arabia. He helped invent the "advertorial" for Mobil, so those paid editorials you see in newspapers preaching the benefits of oil. Yeah, that was Dutton. Just think about what this means - the originator of Earth Day, the primordial symbol of the environmental movement, went on to be the ultimate protector oil's place in the American order. Now that's true cynicism, how the pros do it. I bet in China, you'd find power brokers as savvy and cynical as Dutton, only they are building their power and influence around solar panels and wind farms, and access to minerals like zinc.

Oil and the petro-politics are pervasive in our politics, and not just in the ways that you would expect. In the summer of 2009, I went to Saudi Arabia as part of a Congressional delegation exploring weaknesses in the financial system as they related to oil (here's the WikiLeak cable of one of the meetings I was in). One embassy official told me that the nickname people use for the country is the "Federal Reserve of Oil". This is because, like the Fed which controls the marginal supply of the critical resource known as dollars, the Saudis control the marginal supply of that critical resource known as oil. As such, many people come to Saudis asking for them to fund their projects, off-book. Think Charlie Wilson's War, when the Saudis bought weapons for the Taliban to fight the Soviets more than 25 years ago, at the behest of an American Congressman.

"You'd be surprised", this American official stationed in Saudi Arabia concluded, "that a theocratic kingdom and a democracy would have so much in common." The idea that the largest global buyer of oil and the largest global seller of oil would have a well-defined mutually advantageous relationship isn't surprising in the least. Political differences in the form of democracy, theocracy, whatever, aren't necessarily as important as access to resources and power.

When you fast forward a few decades, it seems like our foreign policy is made without regard for democratic debate. And this is truly how oil corrupts our politics, by subverting democracy, by subverting our control over our government. It isn't just the lobbyists and the money, though that is the shield they use. It is the very dysfunction of the system that helps oil grab and retain control. Just who benefits from Congressional dysfunction that we rail about? And the answer is, anyone who funds government operations off the books. That is to say, anyone who gets their money not from Congress, but from the Federal Reserve, from the hidden national security state, or from Saudi Arabia.

We saw this during the financial crisis, when the Federal Reserve essentially financed trillions of dollars of bailouts in collaboration with the executive branch. The Fed took a quasi-fiscal role, leading former central bankers like Willem Buiter to basically say, paraphrased, that these actions were flat-out unconstitutional. It is Congress that appropriates money, not the executive branch. But there are many routes to funding off-books operations. The CIA and the national security state are largely shielded from Congressional overview. And much government contracting is done to avoid Congressional review - if the government doesn't know, then Congress can't intervene. But it is also through the Federal Reserve of Oil, Saudi Arabia, that control and power flows.

This is the system we are trying to fight. It is a system guarded by PR, by rivers of political money, and by profound policy biases in favor of our reliance on oil. In China, they are building their politics around a post-oil energy system, because their leaders understand that this globe is going to run out of oil. But in addition, they don't have a massive oil infrastructure to defend, so their status quo interests are in some ways easier to overcome.

Fred Dutton was not just a lawyer, and a lobbyist, and political operative. He was an architect of a system. And it's a system we better understand, not in the tired language of partisan wrestling, but in real terms. Because that's how we can make the world he was imaging when he penned that memo to the President on Earth Day, and not the world he brought forth when on the payroll of the Saudis.

Matt Stoller is a former financial services staffer for Rep. Alan Grayson. He is currently a fellow at the Roosevelt Institute. You can follow him on twitter at @matthewstoller

 

Follow Matt Stoller on Twitter: www.twitter.com/matthewstoller

 
 
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FreeHat
Really?
09:42 AM on 10/26/2011
Eh...'China's oil demand increase 'astonishing', says IEA'.
From http://news.bbc.co.uk/2/hi/business/8563985.stm
Genders
Love, Tolerance, Enlightenment
10:33 PM on 10/25/2011
Rooftop pv is the low hanging fruit. It's already the cheapest electricity for million of Americans. Let's install it on those roofs, NOW.

The USA also dumps billions of tons of organic wastes, using up land, generating methane, leaching pollution to the ground water. We should immediately begin waste bio char and bio fuels and mine our ewastes for the precious metals. Close the loop.

Finally, the big coastal cities are a perfect place for offshore wind.

Vote for the Kucinich, Grayson CPC progressives in the primaries and the dems in the general. It's our best chance, the GOP/Tea are anti republic Tories.
D-Driller
my micro-bio is empty
05:39 AM on 10/26/2011
Any cost estimates for installing rooftop solar on every roof in America, right now? Remember, this is the same country that has millions out of work and millions more under/at the poverty line. How about companies? Spend money on rooftop solar, or maybe hire someone? Let's talk about waste biological charcoal and biofuels for a moment - any cost or even, at that rate, time estimates for this switch over? Will subsidies be necessary? In addition, what type of waste do these "waste fuels" generate themselves? CO2 from burning them, mayhaps? As for offshore wind - any cost estimates to put in the platforms for the wind turbines? How many platforms? Can we open new pit mines for the additional iron ore needed to produce the steel for these platforms, or is that a non-starter from an environmental perspective? If not, do we import the steel platforms, further outsourcing American jobs? How about just import the iron and smelt it here, further increasing our trade deficit. Better yet, how about we let the foreigners do it all for us, using Chinese money, because, hey, letting a brutal communist nation control our power grid is really a great idea...
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HUFFPOST SUPER USER
Stoopid American
Trooth, justice, and the American way ...
08:21 PM on 10/25/2011
Great article, thanks.
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HUFFPOST SUPER USER
Nighthawlk
07:21 PM on 10/25/2011
WOW! Just figured that out did we?
HUFFPOST SUPER USER
lambdin1
What's this?
05:24 PM on 10/25/2011
Agreed! Agreed! Agreed! This is so true of government today. I did not know of Duton's work and was happy to learn of it. If only a small fraction of people would learn of this through OCCUPY I think that it would garner much more attention. It is certain that the news media will not bite the hand that feeds it. It is as corrupt and cynical as a lot of government. Our big problem started with big oil's greed and went from there. Thanks.
03:38 PM on 10/25/2011
We have massive untapped deposits of oil, coal, and natural gas here at home. We no longer have to rely on foreign oil supplies, which end up funding Middle Eastern monarchies and terrorists. Green technologies are too expensive and inefficient at the moment, but one day they could be sources of clean energy. When efficient, inexpensive green technologies are developed, we also have massive amounts gold, silver, zinc, copper and rare earth metals waiting to be extracted. So we are in a very good position to utilize our own fossil fuel resources while developing for our post-oil future, which is a long way down the road.
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LiamMc
03:18 PM on 10/25/2011
Recomended reading: "The Oil Kings: How the US, Iran and Saudi Arabia Changed the Balance of Power in the Middle East," (Andrew Scott Cooper).
HUFFPOST PUNDIT
ThatsTheTheWayItIs
religion, ideology, partisanship are delusional
02:53 PM on 10/25/2011
Oil is a drug, we are addicts. The war on drugs proved you can't fight supply, only demand. US cocaine users create narco-terrorism, gas-guzzlers create Saudi power. Drive an efficient car, dethrone the Saudis.
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01:17 PM on 10/25/2011
For our own modern-day Dutton, check out John Bryson, who co-founded NRDC then immediately turned around and became a Big Energy guy (Edison, etc.) whicn now means a Big Solar guy (Bright Source), who completely dominates the Big Enviro position on Big Solar, which kills thousands and thousands of acres of healthy wilderness per project, wastes billions of gallons of water, kills thousands of threatened desert tortoises, burns gas and emits a huge amount of GHGs, plus costs more than twice as much as rooftop solar on a per-kWh basis in the ratepayer area it will force the power onto. Big Enviros are meanwhile doing NOTHING to support the much cleaner, faster, cheaper and reliable option of local solar owned by US and supported by a German style feed in tariff - a simple, proven, shovel ready policy solution.

Oh, and taxpayers are handing over $2 billion ($600 million as a GIFT) of the $2.3 billion price tag, and the land for the ISEGS boondoggle, but taking only a debt position (no equity), so Chevron, BP, Morgan Stanley, StatOil (tar sands), Bryson and friends can get all the money with no risk, and ratepayers are not allowed to know what the power is costing us.

The "Renewables Revolution" is being entirely co-opted by Big Energy and Big Banks as the next scam, which will kill OUR chance to decentralize and democratize our energy systems. We need to fight back.
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HUFFPOST COMMUNITY MODERATOR
HLL
Women, their rights & nothing less ~ SusanBAnthony
01:02 PM on 10/25/2011
Fascinating article, thank you, Mr. Stoller. Did not know the originator of "Earth Day" was Big Oil's #1 lobbyist. That is cynicism at its worst.

All I know for sure is that if the USA had been energy independent, if the USA has listened to Jimmy Carter in 1977 and launched initiatives for clean green energy back then, we would not be embroiled in 10-years-wars still in the Middle East.

The USA needs clean green energy, as does the rest of the world, but we'll only have it if we can defeat Big Oil, coal and nuclear power. That is the task ahead and we must be up to it ☮

From Afghanistan to Iraq: Connecting the Dots with Oil
http://www.alternet.org/world/47489/

Libya. Oil. War. Is it that simple?
http://www.salon.com/2011/03/21/the_libyan_oil_war_connection/
03:44 PM on 10/25/2011
Jimmy Carter put solar panels on the roof of the White House, to make a statement.

Ronnie Reagan took them down... for the same reason.
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ILoveFiction
That's unbelievable!
03:50 PM on 10/25/2011
Barack Obama promised to put them back up to make a statement.

"oh do I really HAVE to do this"
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HUFFPOST COMMUNITY MODERATOR
HLL
Women, their rights & nothing less ~ SusanBAnthony
04:29 PM on 10/25/2011
President Carter did more than just install solar panels on the White House to make a statement, which was wonderful of him to do. He made an impassioned speech to we the people and then to congress about clean green energy.

However, everyone ignored (and ridiculed) him because who knew in 1977 that oil, coal, nuclear power corporations and their powerful lobbies owned Washington D.C.? We know it now and that is the battle—we the people must demand clean green energy for the sake of all life or continue to be at the mercy of corporations who are destr0ying the Earth, air, waters and all life ☮

Jimmy Carter - Proposed Energy Policy speech, April 18, 1977
http://www.pbs.org/wgbh/americanexperience/features/primary-resources/carter-energy/
D-Driller
my micro-bio is empty
05:49 AM on 10/26/2011
What about the three energy sources and the companies involved must we "defeat"? If you want a solar panel, put up a solar panel - your local gas station is not stopping you. You want an electric car - go buy an electric car, the local nuke plant would love it. What is there to defeat? The majority of people have no problem flipping on a light, or their furnace, or their car today and using one of the three sources you mentioned. It is not a conspiracy - people just don't care. Don't blame the companies - blame your neighbors. The companies are just giving the consumer what they want. If tmw every American stood up and demanded only solar energy and were willing to pay for it out of their own pockets, then they could have it. You said it for yourself in your post - "if the USA had listened to Jimmy Carter in 1977...". All the time, hot air and money spent on fighting something that is not the cause. Our enemy is us, not some company, which is just an extension of us, run by us, owned by us, selling products to us.