Turns out I didn’t clutch at my chest in pain and collapse on the floor with a super-sized myocardial infarction when I heard the news that Senate Republicans had blocked the Obama administration’s and Senate Democrats’ proposal to end exorbitant incentives and subsidies to oil mammoths from as much as making it to the Senate floor for debate. Budget times are hard, Republicans repeatedly tell us, funds are in short supply. Tough austerity measures, these brave men and women insist, must be implemented now, and unsentimentally, everyone needing to grit his teeth and take the pain. Well, except for the oil companies and the extremely wealthy. Delicate flowers that the oil giants certainly are, fragile enterprises and hothouse flowers in more than one sense, we must protect them, and protect their resources, say Republicans, from the beastly forces that would require them to yield to the federal government and the deficit gap much needed, and by them barely missed revenue.
Another of Republicans’ highly prized protected classes is the speculators currently driving the price of oil skyward in the commodities markets. If all other advantages oil companies enjoy in sustaining their giddy profits are insufficient, Republican due diligence protecting the speculators from regulatory interference is another method of obeisance to every little profit wish of the petroleum business. For some time of course the price of oil has all but been decoupled from ordinary supply and demand, prices determined by fluctuations in the commodities market, which can be affected by everything from changes in wind direction in Bora Bora, to the raw desire of speculators to drive prices up or to bail from the market altogether. According to the Commodities Futures Trading Commission speculation now accounts for 81% of investment in the market…meaning only 19% derives from businesses which actually use the oil.
Last year the Obama administration with the help of congressional Democrats passed financial reform legislation in response to the economic meltdown that occurred in significant part due to weakened regulation, methodically diluted by Republicans over the last decade. Included in this reform are mechanisms designed to check the effect speculators can have on commodity prices, therefore, on the prices American consumers pay at the gas pump. Enter Eric Cantor, Republican House Majority Leader. Speaking Tuesday to a group at CME, major operator of derivatives and futures exchanges, he assured speculators that Republicans would be vigilant in fighting all reform designed to make them behave responsibly. He told them:
“It’s very troubling. But we’ve got similar instances in much of, a lot of other areas. It’s not just financial services where federal bureaucracy has rum amok. So the Republicans and our growth agenda are very focused on stopping regulations that negatively impact people who want to create growth and value. We want to help you continue to lead for America, that means we gotta do our part when you see the implementation of Dodd-Frank coming at you like a barreling train. We want to help control that so that we can get some sensible, sensible follow up to that legislation. […] Whether it’s the EPA, the FDA, the FCC, the SEC, the CFTC, you name it, there is an acronym for a federal agency causing harm right now. We’re trying to pull that in.”
If when you read this paean to “creating value” you understood that translated from horseshit into English it means, “doing everything we can to keep you unaccountable, damn the consequences to the American consumer,” then you have understood it properly.
Singling out those who are beneficiaries of Republicans’ paternal and protective instincts, does put Republican priorities, and of course values into rather stark perspective. During a time when many Americans are facing economic hardships, (unfortunately, the rest of the time as well) when it comes to protecting those Americans, Republicans’ protective instincts do not extend to them. Americans perhaps reliant temporarily on food stamps or Medicaid, on assistance to the disabled; or the nation’s elderly, some of whom are hanging on for dear life to the Medicare that literally keeps them alive, Republican solicitude is all but absent. Unless it is the interests of the wealthiest Americans, or perks to the financial sector or to the oil business, or its speculators that is being discussed, according to Republicans it is harsh reality time.
And if the cost of buying gasoline is gutting your quality of life or costing you your business, for Republicans, your concerns are secondary to those of the financial and energy sectors whose interests always come first.
One might say the sole purpose of modern American conservatism, at least from an economic standpoint is the preservation of as much of the national treasure in the hands of those already holding it as is humanly possible. So they are reflecting only the values they purport to hold, and display of any others should never be expected. Coddling and defending a single class is the Republican Party’s raison d’etre, and it behaves accordingly in this view. For these conservatives, the wealthy are the Darwinian winners to whom the rest must retain their deference, and offer their gratitude for the bounty that flows forth (or downward) due to the top dogs’ economic wisdom and judiciousness…at least when this elite doesn’t fritter it all away in bogus hedge funds, or in the derivatives market trying to make the ever faster, easier buck, demolishing our economy in the process.
Yet when it comes to the budgetary “crisis” Republicans recently discovered, and customarily do discover when and only when they are out of power (therefore when not increasing the debt as the last three Republican presidents in succession have done) then these great sums of revenue kept out of reach by them on behalf of their powerful cronies are of huge concern to American taxpayers and American citizens. Republicans certainly have incentive to treat the oil barons like a protected class: three-fourths of oil’s political contributions go to Republican candidates, and the rest to oil state-producing Democrats voting with them (or perhaps that’s entirely coincidental).
As an example of the political kryptonite oil money has been in the political process, many of these incentives still in effect date to the dawn of the automobile, when assisting oil exploration was a national and governmental priority. And much of the special pleading on behalf of the petroleum business harkens to dark days of lower oil prices, when companies declared hardship to their bottom line when it came to exploration. So before Republicans sacrifice the safety net and middle class programs they historically have detested on the altar of budgetary “crisis”; and as they continue to protect incentives and subsidies and speculation, it is useful to examine how the oil business has manipulated and continues to manipulate the American system, in order to make out like highly successful bandits at taxpayer and consumer expense, thanks to their GOP enablers.
As a pretty reasonable metric of the health of oil companies in the present time, profits for the five major ones ranged in the previous quarter from increases of 43% to 69%. Exxon Mobile took in 10.7 billion dollars in the first quarter. Over the last decade, the five major international oil companies have amassed one trillion dollars in profit. That’s pure profit. So any hardship argument on their behalf should be taken with a grain of salt the size of a bowling ball.
One successful method through which the oil companies have manipulated demand is by reducing their number of oil refineries. There were more than 300 refineries in the United States as of 1980. By 2003 they had been reduced to 149, and it wasn’t accidental or unintended. Currently there are 148, 137 of which are actually in operation. Since 1981, the refining capacity actually in use each year has never reached as high as 90%, and has settled for many years in the mid-eighties range, and recently was cited as 81%. You don’t have to be T. Boone Pickens to understand that keeping supplies in check keeps the prices higher.
We are often reminded by oil company representatives and their Republican surrogates of the need for new petroleum sources, and the costs of exploration, justifying, supposedly, continuing expensive subsidies, multiple breaks and incentives. The truth is, oil companies now hold leases to millions of acres from which not a drop of oil is being produced. According to the Interior Department oil companies are producing from less than 20 percent of the 34 million acres they currently have leased in the Gulf of Mexico. Presently there is a total of 68 million unused acres leased by the American government to the oil producers.
Another bountiful waterfall of gravy oil companies enjoy at the expense of the American taxpayer is something known as royalty waivers, meaning substantial reductions in the amount of royalties owed the American government from the enormous profit they make producing oil on territory owned by the American taxpayer.This isn’t chump change. The Government Accountability Office has estimated that these waivers can cost the Treasury 55 billion dollars or more over the life of the leases. The GAO found that out of 104 jurisdictions around the world, only 11 received a smaller portion of oil revenues for oil produced on their property than the United States. In Norway, for instance, where extracting oil from the ground is as brutal a process as anywhere on Earth, Norwegians manage to get a 75% return for oil extracted. In the U.S.? 18% is as high as at gets, and it’s usually lower.
Oil companies get a break known as a “depletion” allowance, essentially meaning that after they have produced all the oil from a given site that can be produced, and of course benefitted from that production in profits they get another break because the oil is all gone, in other words, they get a benefit because they’ve depleted the source. This is not to be confused with “depreciation” allowances, which of course compensate them for the aging of their equipment and the purchase of replacements, from equipment used in search and exploration all the way to that used when extracting the oil.
Oil companies even get a deduction for “capital costs,” costs incurred in meeting compliance with environmental laws and regulations. How often do you get compensated for complying with the law? In other words, oil companies get a break, subsidy or incentive at virtually every point in the production process, from low interest bonds and loans at the very beginning, to loopholes on the payment of taxes from the profits made.
So, next time you have the misfortune to encounter those eminently arrogant oil company executives or their Republican waterboys threatening the American people with higher gasoline prices unless every last drop of corporate welfare they get is retained in full, tell them to fold their threat six ways and put it where the moon don’t shine. If this sounds like a business that needs coddling, if it sounds like a business so vulnerable to economic peril it cannot forego a fraction of its profits at a time when the budget of the nation is under duress, at a time when American institutions that have provided security to Americans for more than seven decades are put in jeopardy by Republican politicians, and their radical agenda, then surely Republican values have prevailed.