Letter 2 America for May 28, 2013

Dear America,

I am always both amazed and frustrated by the things said by representatives of the American Petroleum Institute, and I am daunted by the fact that any one asks them about policy in light of their naked self-interest.  Last Saturday I saw one of them taking public phone calls asking about the XL Pipeline as if she would have anything negative to say about it.  I watched for only a minute or so, but I felt no need to continue as the predictability of her position obviated doing so.  I am confounded by the fact that anyone still sees a need for it when its purpose is to bring Canadian oil to our Gulf Coast--you remember the Gulf Coast where BP spilled millions of barrels of oil polluting the Gulf of Mexico--where we refine petroleum into gasoline that we then export to other countries.  It seems to me that any argument about petroleum that is based on the notion that we are pursuing energy independence is demonstrably tainted by the dubious interests it serves, but amazingly, we continue to have the debate on the subject.  Our congressmen seem to have little to do in that they have time to investigate everything that could be a black eye for the other guy, but they never get around to considering our national interests with regard to petroleum, and there is a good reason: that's where the money is.

Campaign contributions, post-politics jobs, profits to bolster the unearned income of our political oligarchs and the capacity to generate artificial wealth for our affluent class are all ancillary benefits of an unrestrained petroleum industry.  The solutions to the problems caused by the rapacity of those with interest in oil production and refinement all have consequences for those who benefit from an unconstrained petroleum industry, so, discussing those solutions being the first step toward gaining public acceptance for them, none of them get discussed, but there are  ways in which the industry's rapacity could be reigned in...the ultimate being nationalization.  But even short of that remedy, there are ways in which real competitive pressure could be infused into the market for oil.  For example, most people don't realize that the federal government is the single largest consumer of petroleum products.  Ten percent of what we consume as a nation is consumed by the federal government, and ninety percent of that is consumed by the military.  If there were a ten percent drop in the demand on the open market for petroleum, think how much downward pressure there would be on prices.  And with that diminished demand and the cognate lower prices, there would come a commensurate increase in disposable income for the population and an attendant expansion of our economy, including the creation of jobs...a thing we are all concerned about these days...and accomplishing all that wouldn't be as hard as one might think.  We have a branch of the military that monitors and maintains our national waterways' levees and dikes--the Corps of Engineers--and the military also builds its own infrastructure...or it used to before the obsession with contracting such things out to companies like Dick Cheney's alma mater, Halliburton, became de rigeur...so why not create a federal petroleum production division of the military.  Our government could keep some of the oil leases it now sells and develop those federal reserves by doing its own exploring, drilling and production.  Then, that same organization could acquire some of the refining capacity that refiners claim is no longer profitable, modify it as necessary, and begin producing the petroleum products that the federal government...the military in particular...needs or wants to add to our national strategic reserves and now has to buy at inflated prices on the open market.  Production could rise and fall based on the price in the open market, thus giving private producers an incentive to keep prices low, but more importantly preventing them from allowing them to get unreasonably high given the constant threat that as much as ten percent of the market for their products could dry up, so to speak, at any moment with the federal government having its own source of supply at its disposal.  But there are still more solutions to the problem of untrammeled price rises.

Much of what we experience in that regard is a function of speculation.  Oil is bought and sold--even the oil produced in this country by our major oil companies--on an open market, and in that market, there are people who buy and sell not to refine, but to capitalize in the arbitraging of the oil market...that is the buying and selling in response to market fluctuations. But the process of arbitraging creates its own fluctuations in the market, which only increases arbitraging.  The solution that I have been proposing is to require buyers in the markets, and there are several in the world, to have the certified capacity to take delivery of what they buy, and here's another.  We could permit the export of only excess petroleum and refined petroleum products.  It will be a decade or so before we will have an excess, so the export of gasoline, for example, would be prohibited at present and the current exports in excess of a million gallons per day would be proscribed  If we had a million more barrels of gasoline per day the price at the pump would drop substantially.  And we export a total of about 500,000 barrels of oil per day, which we then import along with more.  That swapping of our oil for someone else's would also be prohibited, and the profit made from those transactions would be cut out of the cost of petroleum products in this country.  And here's another suggestion: sell new oil leases, especially in off-shore waters, on the strict condition that their production be used only in this country without reduction of the domestic usage of current production.  And then there's tax policy.  If our oil industry is going to export resources we need here to other, more profitable markets, we can impose export tariffs on those products so that at least the tax burden on the rest of us could be reduced...theoretically if nothing else.

There must be many remedies to the problems posed by the operation of the petroleum markets today, but our congress isn't discussing them...and what's more, we aren't asking them why they aren't.  We have elections so that we can express our will as a governed populace, but we never seem to take a concerted action in that regard.  I think that the next election should be about a few salient issues.  We should consider this abuse of our capitalist system by the petroleum industry among them.  Then we should consider gun control and the phantasmagoric obstacles to it that those with related special interests are foisting on a gullible gun owning minority.  We should consider the filibuster and the unwillingness of our senators to eliminate it so that our interests will have primacy among those that they consider.  Then there's universal health care.  Then money in politics, which is largely a problem because the Supreme Court insists that corporations are people requiring either a constitutional amendment or a change in the way in which we legislate so as to specify in our laws that such is not the case.  But since the catalogue of our political woes is profound and the list of the detrimental principles to which our politicians have shackled us seems without end, we are left only the option to vote for the right people to represent us and hope that they see most issues our way.  Unfortunately, those whom our political problems serve also have the power of the oligarchy that they constitute, and with that power, they can control the ideas proliferated by all of our media.  Thus, they can depict their favorite politicians as they see fit, thereby controlling the choices of tens of millions of voters who believe without question anyone who wraps his wishes in the flag, religion, traditional virtue or deceit masquerading as patriotism.  So much for reform of the petroleum industry.  So much for capitalist democracy in America.

Your friend,

Mike