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Breaking the grip of Big Oil

by Susan Webb/People's Weekly World Saturday, Oct. 15, 2005 at 11:41 AM
pww@pww.org

The day after President Bush advised Americans to deal with skyrocketing gas prices by avoiding unnecessary driving, he flew to New Orleans for a photo-op, burning up about 11,437 gallons of jet fuel, worth over ,000. Apparently, it all depends on what you consider “necessary.”

Singing the same tune, the American Petroleum Institute ran a full-page ad in The New York Times Oct. 4, piously calling on Americans to “work together to use energy wisely and efficiently.” It offered tips like “plan trips carefully” and “use energy wisely at home.” Two days later the industry group ran another ad emoting, “We all can do our part.”

Really?

ExxonMobil CEO Larry Raymond’s total compensation last year was million. Meanwhile, in Chicago, 250 people a week flock to Affordable Power to the People seeking help with heating bills that are “not just bigger than the rent or mortgage, but bigger than their whole income,” said organizer Curly Cohen.

The Petroleum Institute ads offer no suggestions on what to do when the gas company shuts off your service because you’ve fallen behind on payments and you can’t afford the 0 reconnect fee. Cohen said 52,000 households are shut off in Chicago today.

Gasoline is about a gallon higher than a year ago. Home heating oil and gas prices have rocketed to record highs. Americans are facing what the San Francisco Chronicle called “a painfully expensive home heating season,” with utilities across the country “bracing their customers for increases ranging from 55 to 75 percent.”

Ordinary Americans did not need advice from multimillionaire oil execs or their Oval Office crony to know they had to try to save on their fuel bills.

In central North Dakota, just digging out from a blizzard, Dave Kemnitz and his wife turn the thermostat down to 60-64 degrees at night and leave it there if no one is home during the day. But as to avoiding “unnecessary driving,” he said, “it’s virtually impossible to hold a job if you don’t drive.” Like much of the country, there is next to no public transportation. “It doesn’t matter where you live, it’s a commute.” The commute for his son David, a construction worker, is 37 miles each way.

Kemnitz, an electrician, is president of the North Dakota AFL-CIO. “We have people who, because of the ruralness of the manufacturing, drive 50 miles one way” to get to work, he said.

And there is no such thing as a neighborhood grocery store anymore, he added. “It’s all super-centers. You go out of your way to a chain.”

Fuel costs will be a “budget wrecking ball” for working-class families this winter, said Kemnitz. “How do people conserve when what they have now is inadequate? How can this government condone making the already comfortable and wealthy more comfortable and more wealthy when the lowest, low and middle class are sliding into an economic abyss?”

“Everyone’s angered over this,” he said.

That anger spurred Sen. Byron Dorgan (D-N.D.) to introduce a bill to impose a windfall profits tax on major U.S. oil companies and use the revenue to give consumers an energy rebate.

Cash gusher for oil companies

Dorgan’s web site has an electronic counter where numbers flash upward quicker than you can blink. Below it is this message: “Since you have been viewing this page, the big oil companies have collected this much money in windfall profits.”

Fuel prices, and oil company profits, were skyrocketing well before Hurricanes Katrina and Rita hit. The week before Katrina, gasoline prices were up 39 percent from the year before.

For the second quarter of this year, before the hurricanes, ExxonMobil’s profits topped .5 billion, a 32 percent increase and the highest ever for the corporation. ConocoPhillips netted .1 billion, a 51 percent jump.

“By just about any measure, the past three years have produced one of the biggest cash gushers in the oil industry’s history,” MSNBC’s John Schoen wrote in July. He quoted Oppenheimer & Co. oil analyst Fadel Gheit: “This is the mother of all booms. They have so much profit, it’s almost an embarrassment of riches. They don’t know what to do with it.”

Oil price spikes have been a feature of the last five years, Tyson Slocum, research director for Public Citizen’s energy program, said in a pre-Katrina interview. “It has nothing to do with actual events,” domestic or international, he said. “It’s about how much the oil companies want to make.”

Refineries’ big role in oil company profits

The hurricanes knocked a sizeable chunk of the nation’s oil refineries and natural gas facilities out of service, and much attention has been focused on the impact on prices. But Kemnitz was particularly outraged over a report that on Sept. 1, as Katrina was pounding the Gulf Coast, oil refinery profits hit record highs. The Denver Post editorialized, “The increase in refining [profit] margins that day was 434 percent over the same day a year earlier. Those numbers smack of avarice.”

The refineries are the biggest source of price gouging, Slocum said. But the refinery industry is directly owned or indirectly controlled by the same handful of oil corporations who control every phase of the oil and gas industry.

The oil giants like ExxonMobil have their “downstream” sector — refining and distribution, and their “upstream” sector — exploration and production, Steelworkers union spokesperson Lynne Baker explained. “ExxonMobil basically sells oil to itself.” Each sector boosts the price and takes in profits. The sectors have separate executives, “but they both report to the same CEO.” It’s not a conspiracy, she said, it’s just the way the system works. In addition, she noted, Wall Street speculators “trade up” oil prices. “Everybody’s part of the food chain.”

Baker comes out of the former Oil, Chemical and Atomic Workers, which later became PACE. The Steelworkers, following a merger with PACE earlier this year, now represent 30,000 oil workers.

Dave Campbell is a 31-year refinery worker. For the last 10, he has been on leave as secretary-treasurer of USW Local 675. He’s also a vice president of the Los Angeles County Federation of Labor.

“There is no doubt, from internal company documents,” the oil companies’ strategy “starting I would say in the 1980s, has been to decrease refinery capacity,” including closing or forcing out many small refineries, Campbell said. From the workers’ point of view, the companies’ strategy amounts to pushing more productivity out of fewer refineries, and less maintenance, he said.

There’s very little preventive maintenance now – “it’s more ‘operate till something goes wrong,’” Campbell said.

“If you’re a multinational integrated oil company and have more than one refinery, if one goes down it decreases the supply, prices go up, and your other refineries make money.”

“Public policy should be revamped to emphasize things like mass transit and better urban planning,” said Campbell. Workers face the brunt of dirty industries in their communities and on the job, he noted. “We would like to make what we call a just transition, from dirty, polluting industries to clean industries.”

Solutions

A winter heating emergency is looming for many families. Some consumer groups say gas reconnect fees should be waived. Funding for the federal Low-Income Heating and Energy Assistance Program (LIHEAP) has not been increased since it started a decade ago. Increased funding is critical.

But it’s not a solution, said Curly Cohen of Affordable Power to the People. When people get energy aid, “who gets the cash? The gas company. It becomes a taxpayer subsidy to private monopolies.”

“We need a national energy policy,” he said.

The Steelworkers have joined with environmental groups in the Apollo Alliance. It has issued a 10-point program based on the “imperatives” of “staunching the hemorrhaging of manufacturing jobs,” “moving to diverse, sustainable and renewable energy sources” and “reconstructing our communities for the benefit of all.”

A host of environmental, rural, consumer, public transportation and other advocacy groups are saying it’s time to challenge the rule of big oil. Solutions being proposed include:

Windfall profits tax. In addition to Dorgan’s windfall profits bill, Rep. Dennis Kucinich (D-Ohio) has a bill, the Gas Price Spike Act, that would tax windfall profits and promote public mass transit initiatives.

Investigate oil and gas pricing and profits. It has to be an independent investigation and has to go back further than Katrina, Steelworker spokesperson Baker emphasizes. “It’s not just the hurricane.”

Former California public utilities commissioner Carl Wood says the energy corporations deliberately “obfuscate” the actual costs of oil and gas, because they “don’t want people to understand it.” Wadi’h Halabi of the Communist Party USA economics commission says the monopolies’ cost of producing oil is such a small part of their price that revelation of this alone would be “explosive.”

Strong regulation that links prices to the real cost of production and controls the level of profits oil companies can make. California state Sen. Joe Dunn took a step in this direction last month, saying, if the oil industry “can’t fix their market behavior, we’ll fix it for them.” He introduced a constitutional amendment that would allow the state Public Utilities Commission to require mandatory fuel reserves, set profit limits for oil and gas companies, order construction of new pipelines, and forbid agreements between companies that reduce competition. Similar legislation passed in Hawaii in 2002 allowed that state to set price caps on gasoline.

National energy conservation program. “We need a massive WPA-type approach,” said Wood. It should include overhauling the nation’s housing stock to make it more energy efficient. “It’s part of addressing our housing crisis,” said Wood. “Poor people tend to live in old houses that are not energy efficient.”

High quality public mass transit to reduce dependence on oil, cut pollution and promote planned development and green space. Require the auto industry to produce fuel-efficient cars, trucks and buses.

Massive public investment in renewable, nonpolluting, nondestructive energy sources.

Public ownership and control of energy resources, production and distribution. Produce energy to meet people’s needs and protect the environment. Use the revenue to benefit the people, as Venezuela is doing today.

None of this will happen without a mass grassroots movement, of course.

And any such measures will have trouble getting far with the current makeup of Congress. Rep. Sherrod Brown, a progressive Democrat from Ohio, told the Washington Post, “In this Congress, if it’s an issue that the oil companies don’t like, it’s defeated.”

It underscores the importance of the 2006 congressional elections in the battle to put people before oil company profits.

Susan Webb (suewebb@pww.org) is a member of the People’s Weekly World editorial board.

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