Wednesday, February 22, 2006
Politics and Oil
President Bush had this to say about those subsidies: "I will tell you with $55 oil we don't need incentives to oil and gas companies to explore. There are plenty of incentives." quoted in the Washington Post, 4/19/2005
Regardless the Energy Bill was passed with the massive oil and gas subsidies. Good olde oil industry lobbyists had it their way. It seems they have more power than even George W!
Then with Rita, oil and gas prices shot up. Oil is a global commodity. Every nation that purchases crude oil on the global market pays the same price (in US dollars). Oils its price shot up not only in the US but also in India, Japan, Germany, Mexico, Iceland, etc.
Funny, Wisconsin's Governor Doyle had subpoenas issued to executives from the world’s five largest oil companies to come to "Milwaukee to testify under oath about how, following one of the largest natural disasters to hit America, they could justify reaping billions of dollars in profits from the pockets of Wisconsin’s working class families." (Quote from Governor Doyle's webpage)
Hello Mr. Governor, the oil industry big five does not set the price of oil. The world market place does. (And as we import more and more natural gas - the world market will soon determine its price for us too.) The oil production of the big five is tiny when compared to the oil production from OPEC.
If any oil producer controls the price of oil it is OPEC. But these days I believe that the primary price driver is simple supply and demand. With supply and demand delicately balanced any natural disasters or political tensions that effects real or perceived supply or demand, effects price.
In the months before those subpoenas the WI governor cut the funding to the State's energy efficiency and renewable energy program by half, put pro-utility regulators at the utility commission, and hired someone to head the State's division of energy that knows close to nothing about energy. Politics as usual - to find a scape goat in big oil.
Then in January 2006, the oil and gas industry had their highest profits ever in the history of oil and gas. While we the consumers paid high prices. That had many of the same representatives that had put those subsidies in the energy bill in a huff. Many called to enact a windfall profits tax.
(I like high energy prices - nothing else gets us to make the changes this country so desparetly needs. Changes like improving energy efficiency and increasing the use of renewable energy.)
In response, the oil and gas industry came out with full-page ads showing that their profits as a share of sales were actually low (mostly when compared to the pharmaceutical industry).
Oil and gas prices are back down. So the brush fire is out... for now. But what about next week?