Governor Perry of Texas has loudly proclaimed that his ten-gallon hat is in the ring, running for president of the United States. What does that entail and -- should he succeed -- what can we expect? Certainly, a high degree of restraint to government spending in spite of the current economic downturn and a significant modification in myriad government programs. But most worrisome for those of us who don't live in Texas and are not engaged in the oil business is the prospect of staggeringly higher gasoline prices. By what right do I make this prediction? Let me review the extraordinary impact other highly elected officials from Texas have had on the escalation, public perception, and formation of oil prices to the massive detriment of the nation's economy, its national security, and its environmental well-being.
The players are manifold, but let me cite among the most egregious the likes of Texas Representative Joe L. Barton, who in 2006, as Chairman of the powerful Committee on Energy and Commerce, with the price of oil already at over $65/bbl, some $40 bbl higher than at the beginning of the George W. Bush presidency in 2001 (at U.S. consumption of some 20 million barrels a day that is a transfer of $800 million, day after day, out of the pockets of American consumers into the pockets of oil interests here and abroad) would instruct us that "America runs on energy that is abundant and is affordable at prices we can pay." He thereby became a Texas Oil Price Cheerleader, tossing up verbal pom-poms as his team wended its way to all time high oil prices reaching $147/bbl barely two years down the road.
You can bet while the price of oil was escalating by leaps and bounds to levels which helped precipitate the financial crisis of 2008, his Committee was asleep at the switch, or worse. The reaction to his comments did not abate in the slightest way his enthusiasm for glossing over the industry's most egregious behavior. Texas Congressman Barton outdid even himself in 2010 by calling for a public apology to BP, categorizing BP's payout of damages for having caused the massive Gulf Coast oil disaster in the following terms: "I think it is a tragedy of the first proportion that a private corporation can be subjected to what I would characterize as a shakedown -- in this case a $20 billion shakedown."
But then again Barton had powerful Texas forbears who left deep boot prints in the prairie for him to follow. There was one George H.W. Bush, erstwhile Representative of Texas' 7th Congressional District, who would make his mark in higher positions of government. As a professional oil man who had founded his own oil company Bush ('41') never left his ties to the oil industry and those with kindred interests -- like his friends the Saudis -- far behind.
Speaking of the Saudis, there was this Texas oil moment back in 1986 which has literally cost us, the nation and its well-being, trillions of dollars, and we are still paying the price. In April 1986 with the price of oil at $9.75/bbl providing inexpensive gasoline and a boost to the economy one George H. W. Bush, then Vice President and beneficiary of significant support from the oil industry, was able almost single-handedly to reverse the Reagan administration's steadfast commitment to unfettered market forces of supply and demand, without government interference, as the determinant of the price of goods and services. He accomplished this by arranging a visit to Saudi Arabia to meet with King Fahd in order to discuss first and foremost the manipulation of the price of oil. George H.W. Bush, using his title and position as Vice President of the United States, responded to the pleas of the oil patch to get Saudi Arabia to hold back production in order to bring about a significant increase in the price of oil. It was an opportunistic payback to his political base and oil industry cohorts, at enormous cost to the rest of the nation.
"My plea will be for stability in the marketplace" were his parting words.
Bush met with King Fahd and convinced him that it would be in Saudi Arabia's interest to bring discipline to the then production policies of the Organization of Exporting Countries (OPEC), to restrict production of oil in order to achieve meaningful increases in its price. Saudi Arabia, having by far the largest production capability of any of the OPEC countries, and the largest margin of spare capacity, was in a position to virtually impose this new policy on their fellow OPEC members. And so they did. In less than a year the price of crude shot up from just under $10 a barrel to over $17/bbl. In Texas and the oil patch, George W. Bush was a hero. And we continue to pay the price to this day.
What transpired was to become the authorized exploitation of the American and world consumers of oil for decades to come, reaching its apogee in June 2008 when oil ascended to $147/bbl under President George W. Bush ('43') who together with his anointed Vice President Dick Cheney, oilman, former Chairman and CEO of Halliburton, the giant oil services company and government contractor as well as former Congressman from that other energy rich state, Wyoming, oversaw the march on high of gas prices flirting with $5.00 a gallon; thereby, among a multitude of other drawbacks, helping to crash the U.S. housing market and bring about the financial implosion of 2008 (those many spec and leveraged homes in the suburbs reachable only by automobile without access to public transportation, along with the prospect of over $5/gallon gasoline, suddenly and grievously lost their appeal and dangerously, their value).
For Saudi Arabia something far more significant took place far beyond the additional billions they would be cashing in momentarily from higher oil prices. Through George W. Bush's intercession as the sitting American Vice President they received the implicit approval of restraining production to increase prices. Whatever hesitancy the Saudis or OPEC had in pushing the price of oil too hard by withholding output was no longer on the table. With America's blessing the sky became the limit.
And so Texas prospered while woolen pajamas became all the rage in Maine, if people could still afford them after paying their heating bills and their gas bills to get to work. Family budgets across America were devastated as the heavy air of economic despondency descended over the land.