FORBES: Oil Executives Should Have Gotten A Pass

Turning Up The Heat On Big Oil

It's a rare industry that gets hauled before Congress twice in just four months. But with high prices at the pump and an election looming, it seems that Big Oil is too tempting a target for lawmakers.

Could it be that the price gouging, outright disregard for fair competition, foreign ownership of all the big companies and record-setting profits in the face of wildly fluctuating prices for gas, home heating fuels, diesel and petroleum products make these companies, the industry and these executives the perfect target?

When they were harangued for their fat profits by the Senate in November, America's big oil executives were at least spared the indignity of being sworn in under oath. But this time, the oil men--looking like a bunch of tobacco executives from the 1990s--raised their right hands before a burst of camera flashes.

If you ask me, anyone testifying before congress should be sworn in so that there is ACCOUNTABILITY for their testimony. Without being sworn in, witnesses before congress can feel free to lie, mislead or excuse their miscomments.

Sen. Arlen Specter, R-Pa., chairman of the Judiciary Committee, hauled the oil executives before his committee to grill them about whether they've been using market power to line their pockets. The senator seems to think they have and has proposed a bill that would make it more difficult for oil and gas companies to merge and make it illegal for them to divert or export petroleum products with the idea of creating a shortage. The bill also revives a rather quixotic plan for suing the OPEC nations over price-fixing.

It's about time that congress called these gougers, price-fixers and corporate shell-game artists (aka con artists) to task for their record of taking every opportunity to line their nests at the expense of every American citizen. However, there is a certain irony in having representation of the two bodies that have ripped off the American people by means of corporate influence discuss ethical conduct toward the average citizen.

Too much industry consolidation is a legitimate concern: There were more than 2,600 energy-industry mergers in the 1990s, and eight more since 2000, according to the Government Accountability Office. And experts say the guidelines used to judge the competitive effects of the mergers don't give enough weight to the elasticity of the demand for gas and other petroleum products, or the shortage of oil.

Think about those numbers. More than 2,600 mergers. We know that corproate bodies do not merge unless there is some sort of advantage in doing so. We know that al most every corproate merger results in job losses, tax incentives and tax advantages... and, or course, huge profits for the Board of Directors, the Executive Management, and some, down-the-line payoffs for the stockholders... consumers and national defense be damned!

But the impact of the concentration in the industry on gas prices is inconclusive. A 2004 GAO report found that mergers in the 1990s drove up wholesale gasoline prices by 7 cents a gallon. Meanwhile, a study by the Federal Trade Commission found no effect at all.

Given that the GAO is run by incompetent accountants that use inappropriate accounting procedures and metrics to judge whether the government is functioning within normal limits and the FTC is an essentially dunsel agency under the direction of ultra-conservative, pro-big business Republican administrations, is it any wonder that the impact would be assesses as "inconclusive"? If we want some real evidence of the issues and problems, just go to the nearest gas station and ask the people paying through the nose to fill up their vehicles to make it to work. Or better yet, ask the folks living on fixed incomes how they manage to pay their heating bills, electric bills or obtain transportation to and from the doctor's office. Or perhaps we could ask the numerous Americans living just above the poverty line or skating near bankruptcy while working two or three jobs.

In fact, while standing in line at a local gas station/convenience store the other day, those of us in line began chit-chatting about work and the cost of gas/energy. Out of nine of us in line, and two workers behind the counter, only one of us was not worker at least two jobs, with spouses working at least one job as well... and each of us was concerned that paying for gas, electric and heating was almost impossible.

On Tuesday, the oil execs vigorously denied that their industry was anything but competitive. Pressed on Exxon Mobil's $36 billion profit in 2005--the highest of any company in U.S. history--Chairman and Chief Executive Rex Tillerson said it reflected the company's global scale. John Hofmeister, president of Shell Oil , insisted that size was a prerequisite in an industry in which projects hinge on billion-dollar capital investments. "Fragmented or financially insecure players cannot afford such risks," he said.

Bovine excrement in extremis! Are these folks actually expecting us to believe the "size matters" argument to explain their profits? In this case oligarchy matters. Our raw petroleum purchasing, crude shipping, petroleum refining and fuel distribution is under the strict control of a handful of oil companies... many of which have ties to the pro-big business Republicans now dominating congress, the White House and the federal benches... including George W. Bush and Dick Cheney. There seems to be a case of conspiring foxes and wolves in charge of the chicken coop.

But whether or not Big Oil is gouging consumers or plowing enough of its profits into investment, it is hard to see how Specter's legislation will help lower gas prices. As any energy expert will tell you, the soaring price of crude is the most important factor in high prices at the pump. And that is being driven by roaring demand from the U.S., India and China. Though they benefit from such high crude prices, the U.S. oil giants have little power to set them.

Sadly, this statement may be an accurate assessment. They only real legislation that will change oil company behavior are acts that call for increased mileage standards for automobiles and trucks, alternative fuel production and usage, alternative energy incentives... and consumer boycotts of those companies with the highest gouging prices... and rotate that boycott until the oil companies get the message that consumers will no longer stand for gouging, excuse-making for raising prices at a whim and what seems like certain price fixing within most sales regions.

"This is one big bathtub of oil, and the U.S. companies are very small players in it," testified Severin Borenstein, a professor at the University of California, Berkeley's Haas School of Business, via a video connection.

All the more reason to fulfill a promise made over 4 decades ago to wean our economy off petroleum based fuels and fund research--with direct benefits to the government, taxpayers and consumers--for alternative energy resources and fules.

Still, the bill is harmless compared with a "windfall profits tax," which would likely increase costs in the long run by decreasing the oil majors' incentives to invest. On the other hand, opening up more lands for production at home is not the panacea the oil industry claims it is. Supply is likely to be tight for some time to come, argued Borenstein.

In other words, it is a useless piece of legislation that allows useless platforms and ideologues to continue to appear useful.

"Frankly, drilling in the United States is not going to change that more than a minute amount," he said.

Great! So we do not have to allow the risk of oil drilling and exploration in wild life preserves, along Florida's pristine shores and wildlife refuges, in the Alaskan wilderness and in places where enforcing rules and regulations about pollution are almost unenforceable. Instead, why don't we invest our time, energy, finances and future in finding an alternative to our dependency on these oil companies.

And let us be honest about something. We are not dependent upon the OPEC nations for our oil... we are dependent upon the car manufacturers that still do not produce vehicles that get reasonable gas mileage, on petroleum companies that have a stranglehold on our economy, and a government that refuses to wake up to the realities of transportation, energy and domination of our economy by a handful of industries.