In January of this year, President Bush in his State of the Union Address -- true to his oil industry roots -- stood foursquare against oil prices that were beginning to retreat dramatically. They had already touched $49.90/bbl a few days before. He declared that the Strategic Petroleum Reserve would be doubled from 750 million barrels to 1.5 billion barrels.
What was not fully understood at the time by the public and the press, was that the announced increase, coming only weeks after OPEC's declaring that it would cut supply to world markets, would be interpreted by OPEC and oil interests at large, that for this administration the retreat in oil prices had gone far enough. Practically nothing, especially given its timing, other than war and destruction, could have been more supportive of OPEC's objective to ratchet up the price of crude. In consequence, and in large measure because of the forcefully supportive implications inherent in the doubling of the SPR, the unprecedented and exceptionally steep march reaching $99/bbl in November, was underway. This with all the potentially grave implications for the economy as a whole. But for the oil patch rarely has national policy been fine tuned so stealthily, bringing joy in this instance, to even the most hardened wildcatter's wildest dreams.
Then come November with the price of oil skyrocketing to within spitting distance of $100/bbl, winter ahead, and OPEC heads of state scheduled to meet in Riyadh our Secretary of Energy, Sam Bodman, boldly pronounced on November 8 that no oil would be released from the Strategic Petroleum Reserve to curb prices (now remember that's our oil, not his, not the President's and certainly not the oil companies' nor OPEC's). This bold Prince would go one step further and announce that 12 million barrels of crude oil, which would inevitably include the most desirable grade, light sweet crude, would be added to the Reserve in January! (Well, it is summertime in Argentina after all!).
Then Mr. Bodman, a jobholder in the tradition of the "best and brightest" appointees of the Bush administration ("good job Brownie") made a further declaration. This 12 million barrel addition would not have a "material affect" on oil prices . This from an Energy Secretary who before his anointment as the administrations straw man at the DOE, had virtually no direct energy experience and whose nomination was widely greeted by a befuddled "Sam who?". So much for bringing in experienced and constructive talent to head a $23 billion agency with 100,000 employees and contractors. Once again dashing the nation's hopes of coming to grips with an issue of core importance to its future. The Bush administration appointments to this key agency (not to belittle the personal commitment and competence of a number of DOE technocrats, who worked hard but have little to show for their efforts) will have let altogether another eight years slip by without effective leadership, direction or meaningful programs to deal with energy's looming dangers to our economy, national security and climate change.
What kind of signal did Mr. Bodman's illuminations send to the then gathering OPEC heads of state in Riyadh? Simply, that the American government, the world's largest consumer of oil, is not concerned about the current price of oil then ranging $90/bbl. That by deed and utterance ("we will add 12 million barrels to the SPR in January") the administration is not prepared, even symbolically to contest current oil price levels and possibly higher levels to come. The administration's actions, taken together, could even be construed as being supportive to current prices. Therefore there would be no perceived reason for OPEC or others in the oil industry to change direction in policies, policies that have flooded their coffers to overflowing. And all the while our president remaining stubbornly adherent to his free market fantasy and oil patch roots, while the good people of Maine are maxing out their credit cards on heating oil bills and woolen nighties and sweaters.
That the government would not use the SPR as a symbolic gesture to counter OPEC's and the oil industry's rapaciousness borders on the incredulous or perhaps more accurately the malign. Releasing barrels would at the very least send a signal to OPEC, "Gentlemen, you are overstepping yourselves". Adding to the SPR under current circumstances is close to madness. It gives comfort to OPEC and endangers our ecomomy by validating current oil prices, prices that are risking accelerated inflation and a massive economic slowdown. This far beyond any measure of safety those 12 million additional barrels in January could bring.
While households and truckers in Maine are near freezing or going broke one can presume the issue of turning down the thermostat because of heating oil costs at the Bush Kennebunkport family spread in Maine, is not even an item of discussion. This might well be attributed to the millions having been rained upon Bush pere through his service to investment entities with deep ties to Middle East funding, funds generated in large measure through sky high oil prices. But then again not everyone in Maine has access to such beneficent connections in sunny climes. Ice fishing is more the order of the day.
While millions of American households are turning down their thermostats our Government, Republican and Democrat alike is about to pass, or by this writing have passed, an Energy Bill that will be signed into law with alacrity by the President, extending further billions in tax breaks to the oil industry, today perhaps the most profitable sector of our economy. This under the bizarre argumentation that it, the oil industry, "needs all the resources it has to find and develop new energy sources" ("Industry Flexes Muscle...", NY Times 12.14.07). As though with oil prices in the $90/bbl range further incentive were necessary. And of course no mention of the salaries riding the tidal wave of oil company profits such as Oxy's CEO Ray Irani's $500 million payday nor Exxon Mobil's $400 million plus golden parachute for Lee Raymond, among others.
With priorities such as these one begins to wonder whether we have a government and governance that is completely broken, where only moneyed access through well connected lobbyists prevails, and that the workings of what our government was meant to be has been dismantled by special interests.
Raymond J. Learsy is the author of the updated version "Over a Barrel: Breaking Oil's Grip On Our Future"
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