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The Price of Gasoline and the Patently Absurd Application of Our Sovereign Immunity Law

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The title of the article in Friday's Wall Street Journal -- "Drivers Feel Pinch of Climbing Gas Prices" -- says it all. Yet we have an anomaly in our courts, irresponsibly supported by the executive and legislative branches of our government, in the manner that our courts interpret Sovereign Immunity and, in turn, its impact on our day to day lives. Technically speaking, Sovereign Immunity is a legal doctrine by which the sovereign state cannot commit a legal wrong and is therefore immune from civil suit or legal prosecution. Yet here it has been extended by our courts, with the backing of our executive branch and the acquiescence of our legislative branch, to giving certain national commercial entities a free pass overriding our laws such as those relating to anti-trust and commercial collusion.

Quite incredibly sovereign immunity has for years been extended to the machinations of OPEC cartel members and their very significant business interests in the United States. Just last May a turning valve ceremony took place at Port Arthur, Texas, bringing on stream the expansion of the Motiva Refinery, now the largest refinery in the United States owned and operated jointly by Saudi Aramco (Saudi Arabia's national oil company) and Shell (much in the manner of the Aramco-Shell "SASREF" refinery operating at the very heart of Saudi Arabia's petrochemical industry, Jubail Industrial City).

But OPEC's tentacles extend further into U.S. gasoline and petroleum product production and their markets. Here we have happily gouging American consumers through the OPEC-manipulated price of oil, the vast presence of Petroleos de Venezuela's (PDVSA, Venezuela's nationally owned oil company) with refineries and facilities in Houston and Corpus Christie Texas; Lamont, Ill.; Paulsboro, N.J.; Lake Charles and Chalmette in Louisiana; Savannah, Ga., and St. Croix in the Virgin Islands refining and marketing gasoline, jet fuel, diesel, petrochemicals, lubricants, asphalt. All together with a capacity of more than a million barrels per day -- this while owning and running more than 13,000 gas stations throughout the U.S. and Puerto Rico.

Here we have two major players in the U.S. gasoline market whose parent company's objective is not to produce competitively priced gasoline and petroleum products to service the U.S. market and its pinched consumers, but rather to keep the price of oil high and have the quoted price of WTI (West Texas Intermediate -- the U.S. benchmark on the commodity exchanges) quoted at levels approaching those of Brent Crude (the more international and significantly higher benchmark price quoted on the London Exchange).

Being tied to the OPEC Cartel, their objectives can readily be alleged to be at clear variance with those of a stand alone refinery needing to source its crude oil in the marketplace. The stand alone refinery would do its utmost to procure the least expensive source of crude and do all it could to reduce the price of oil in its procurement policies thereby servicing the gasoline market at the most competitive price possible. Not so with the OPEC Frankensteins given their cozy and open access to our markets whose objectives could be reasonably construed to push up the price of the core input of the refining industry, crude oil.

Would the integrated U.S.-based producers of crude oil and refined petroleum products such as ExxonMobil, Chevron, etc., collude as to the output and pricing of their crude oil production they would be behind bars long since. A close Justice Department look at the machinations of crude oil procurement of Motiva and Citgo could yield some significant and oil market moving/gasoline pricing results.

Astonishingly, our government, most especially the executive branch, has been a staunch defender of the court's interpretation of sovereign immunity as it applies to the distortions vested on the American consumer by OPEC national oil companies. In the case of Spectrum Stores Inc. v Citgo Petroleum Corporation (case no. 09-20084 -C.A. 5. Feb. 8, 2011), alleging that Citgo, as an oil production company in its affiliation with the OPEC member PDVSA, was in violation of the Sherman Act and Clayton antitrust act, the court ruled for Citgo citing the following rationale:

"Because the political question doctrine is jurisdictional, we address it first. When we do so, we discern that the complaints before us effectively challenge the structure of OPEC and its relation to the worldwide production of petroleum. Convinced that these matters deeply implicate concerns of foreign and defense policy, concerns that constitutionally belong in the executive and legislative departments, we conclude that we lack jurisdiction to adjudicate the claims. We hold alternatively that the complaints seek a remedy that is barred by the act of state doctrine, that is, an order and judgment that would interfere with sovereign nations' control over their own natural resources. Accordingly, we affirm the judgment dismissing the complaints."

Astoundingly, in total disregard of the financial and economic damage that the OPEC-related oil companies are inflicting on both national and international economies our executive branch had gone full bore in siding with the courts decision by having the Justice Department, the Commerce Department, the Department of Energy, State Department submit amicus briefs in support of the Appellees (Citgo et. al.) and in affirmation of the judgment.

The legislative branch of our government has been more proactive on this issue (please see ("NOPEC 'No Oil Producing and Exporting Cartels Act': A Presidential Issue and Test of Political Integrity" 09.10.12) from which the following is taken:

"Yet some years ago, in 2007, there was a genuine effort to change the equation in a fundamental way when Congress voted overwhelmingly, in defiance of the oil lobby and their allied interests for the NOPEC bill, so named because it would allow the international oil cartel, OPEC, and its national oil companies operating outside the law, hiding behind our sovereign immunity shield, to be sued and held accountable for what are clearly anti-competitive attempts to limit the world's supply of petroleum and the consequent impact on oil prices.

In defiance of oil interests Congress voted overwhelmingly for the Bill (70 votes to 23 in the Senate and 345 to 72 in the House). This was an act of refreshing and courageous leadership by our Congress only to be abandoned after President George W. Bush, that great stalwart of oil interests and friend of Saudi Arabia, made it clear that he would veto the bill should it land on his desk."

Regretfully the Obama administration has done little on this issue as pointed out in the blog post above, other than have its agencies file amicus briefs in support of our courts current interpretation of Sovereign Immunity while American consumers struggle with gas prices that have risen by 50 cents in the past month alone.

It is incredible that at this time and under these circumstances we are giving a free pass to members of the OPEC coven, something we denied to John D. Rockefeller and his Standard Oil. At that time the reining in of the Standard Oil monopoly was an act of national policy that was key to creating a freely competitive marketplace that was essential to America's emerging industrial ascendancy.