The price of gasoline topped $3.50 per gallon last week in many big cities, with experts saying that it would likely climb over $4 later in the summer. Prices, which have been creeping up all year, shot up in advance of the Memorial Day weekend. Suddenly, filling up your car could easily cost more than $50.
Oil companies say prices are simply obeying the dictates of the "free market"--low supply coupled with the beginning of high summer demand.
Don't believe it. We've heard this before. When electricity prices began skyrocketing in California during the summer of 2000, energy companies pleaded innocence. But after the collapse of the energy giant Enron a couple years later, it was revealed that companies were artificially restricting supply in order to inflate prices. It's likely that something similar is happening today.
The oil company Conoco even asks consumers to take pity on them, claiming on their Web site that their profits are being squeezed by rising oil prices--so much so that they are only making 10 cents a gallon in profit.
But claims about rising oil prices are simply untrue. In the summer of 2006, a similar surge in gas prices was accompanied by an increase in the price of crude oil, which reached a peak of $75 a barrel. When oil prices dropped later that year, so did the price of gas. This year, however, the price of oil has remained virtually constant at $65 a barrel.
So where is all the extra money going? The answer: Straight into the pockets of the oil companies.
Oil companies across the board have posted record profits this year. ExxonMobil's stock jumped 35 percent in the last year. The oil giant made $39.5 billion in profits in 2006, topping the Fortune 500.
A spokesperson for ExxonMobil blamed low output from refineries as the cause of the jump in gas prices. But a report on refinery output released last week was almost double what was expected.
What's more, refinery output is routinely manipulated by oil companies to push up prices. All the major companies pool their oil in the same storage facilities. They have instant access to information on not only their own holdings, but on those of their competitors. They can use that information to regulate refinery output and keep prices artificially high--without actually sitting down and colluding to fix prices, which would be illegal under anti-trust laws.
As Tim Hamilton, a researcher with the Foundation for Taxpayer and Consumer Rights, noted: "Years ago, you had companies that would try to guess when the other companies were going to have supply shortfalls of gasoline in the summer. They'd ramp up their own gasoline refining, and then supply the market at a lower price and eat their competitors' lunches.
"But today, no oil company would do that. They all benefit by keeping the supplies tight."
As Dave Lindorff wrote recently: "The oil industry has in practice conspired to limit refining capacity, so that companies can keep pushing up the price of gas artificially--only they've done this without ever having to meet in secret and cut a deal, because they all have complete competitive information on each other's inventories, internal pricing and refinery capacity."
The Bush administration has expressed "concern" for rising prices, but has said it won't intervene to help lower them, either by capping prices or opening up the federal government's fuel reserves. Instead, it's using the current situation to try to revive efforts to expand oil drilling in the Alaskas wilderness.
Are the Democrats doing anything to help? After all, In the spring of 2006, when gas prices were approaching $3 per gallon, Democrats seeking to win back Congress blamed the Republicans in charge. "The American people can no longer afford the Republican rubber-stamp Congress and its failure to stand up to Republican big oil and gas company cronies," Nancy Pelosi, the top House Democrat, said at the time.
A year later, the Democrats control both houses of Congress, and Pelosi is Speaker of the House. The House voted this year to roll back $14 billion in subsidies to oil companies, but couldn't agree with the Senate on a version that might get past George Bush's threatened veto.
The Senate passed a bill that would raise minimum gas mileage in new cars from 25 miles per gallon to 35 miles per gallon by 2020--but it includes a clause that allows automakers to ignore the standards if they find that meeting them isn't "cost-effective."
* * *
IT HAS become a commonly accepted argument that the war in Iraq was fought for oil. But many on the left think the war is about supplying energy-hungry Americans with gas and oil at cheap prices.
The current surge in gas prices shows that the corporations who hoped to benefit the most in Iraq have little interest in anything except lining their own pockets. The companies that are bleeding Iraq dry are the same companies that are robbing people in this country.
Meanwhile, workers--especially the working poor--are bearing the brunt of soaring gas prices. As a Couleecap report, "Affordable Wheels: The High Cost of Transportation," points out, "Most American families spend more on driving than on health care, education or food. The poorest families spend proportionately the most."
Melissa Bakken is a 25-year-old single mother making $7.50 an hour at her job. "When I started driving, it was 98 cents a gallon," Bakken said. "That was only nine years ago. And yet, my wage hasn't gone up, but gas has gone up $2. It doesn't seem fair."
"I don't like how high gas prices are, but what am I going to do about it?" she added. "What I'm finding out more and more every day is that nobody listens to people like me."
Some people concerned about the environment have suggested that there's a silver lining to the high gas prices: that consumption might be driven down.
But this misses the point. For most people, driving isn't a luxury that they can choose to do without. The lack of decent and affordable public transportation in U.S. cities and the sprawl of suburban development make long commutes a necessity for most workers.
Targeting consumers and asking them to tighten their belts further blames workers for a situation that they have little control over, while letting the real culprits--the politicians and the corporations--off the hook.
Geoff Bailey writes for the Socialist Worker.
Profiteering at the Pump
The Great Oil Robbery
By DAVE LINDORFF
In case you're wondering why crude oil prices are down from last year, hanging around at about $60 a barrel, while gasoline prices have soared past $3.10/gallon nationwide, just check out the latest profit reports from the oil companies. They are at record levels.
The answer for this seeming contradiction is simple: Americans are being robbed blind by the oil industry.
Sure, the oil companies, and their PR and lobbying agency, the American Petroleum Institute, will give you all kinds of reasons for higher gasoline prices at a time of falling crude prices: problems at two refineries in Texas and Oklahoma, rising demand or whatever. But the real answer is that there is simply no competitive market in this industry.
As Tim Hamilton, a researcher and petroleum industry consultant with the Foundation for Taxpayer and Consumer Rights, observes, the oil companies all store their crude oil and refined gasoline in the same tanks, and all know exactly how much inventory each other company has, so they don't have to meet and collude on pricing in order to reap the huge rewards of deliberate supply constraints.
Says Hamilton, "Years ago, you had companies that would try to guess when the other companies were going to have supply shortfalls of gasoline in the summer. They'd ramp up their own gasoline refining and then supply the market at a lower price and eat their competitors' lunches, the same way General Motors would do if Ford had a problem on its assembly line. But today, no oil company would do that. They all benefit by keeping the supplies tight."
Hamilton says that the oil industry has in practice conspired to limit refining capacity, so that companies can keep pushing up the price of gas artificially-only they've done this without ever having to meet in secret and cut a deal, because they all have complete competitive information on each others' inventories, internal pricing, and refinery capacity.
"There's no correlation any longer between crude oil prices and gasoline prices," he insists. "Crude could drop to $10/barrel, and you could still have gasoline go to $4/gallon. All the crude oil price does is set a floor on gasoline prices."
As an indication of how much control the oil industry has over retail gasoline prices, Hamilton points to a study he did, looking at the price of gas approaching Election Day. His results are truly disturbing.
The oil industry has been a solid backer of Republicans for many years, giving 80-90 percent of its campaign contributions to GOP candidates-particularly during the two Bush terms. What Hamilton discovered is that this support hasn't just been limited to campaign contributions. In fact, the oil industry appears to have clearly tried to minimize voter anger at Republicans late during the election cycle by pushing prices at the pump down just ahead of the voting. In the period 2000-2006, Hamilton found that each non-federal election year-2001, 2003 and 2005, gasoline prices didn't decline during the month of October, but each of the election years-2000, 2002, 2004 and 2006-they fell, with the most dramatic drop coming in October 2006-a period when crude oil prices were rising sharply. Each time, gasoline prices rose again quickly right after the election was over.
"This is a set of coincidences you'd be hard-pressed to explain by anything but planning," says Hamilton. (And incidentally, it would be interesting, when Congress gets those Karl Rove emails from the Republican Party and the White House mainframe computer, to see if there are any to the American Petroleum Institute.)
The whole situation makes a joke of Bush proposals for opening up the Alaskan North Slope to more oil exploration, or for Republican calls for an easing up on environmental regulations for new refinery construction. Says Hamilton, "The price of oil produced in Alaska will be set in Saudi Arabia, and any new supply of crude from Alaska won't affect American gasoline prices in the slightest. And as for new refineries, why would any oil company want to spent $1 billon or more to add refinery capacity so they could get less money for the gasoline they're selling? There isn't enough money in the federal treasury to subsidize the building of new refinery capacity in America."
The irony here is that it is higher prices for gasoline that might eventually convince Americans to use less gasoline, and to reduce the production of greenhouse gasses. But where those higher prices in Europe come in the form of taxes, which can then be used to subsidize public transportation or retirement and healthcare programs, in the U.S. the higher prices simply go to the bottom line of the oil companies, and into the pockets of oil company shareholders, leaving public transit, retirement and healthcare programs under funded, and leaving lower-income workers stuck with higher bills to get themselves to and from work in their cars.
Until the public recognizes that the illusion of competition carefully maintained by the oil industry and its backers in the government is just that-an illusion-this astounding rip-off will continue.
Dave Lindorff is the author of Killing Time: an Investigation into the Death Row Case of Mumia Abu-Jamal. His n book of CounterPunch columns titled "This Can't be Happening!" is published by Common Courage Press. Lindorff's newest book is "The Case for Impeachment",
co-authored by Barbara Olshansky.
He can be reached at: firstname.lastname@example.org
Predicting that Iran will obtain a nuclear weapon within three years and claiming to have a strike plan in place, senior American military officers have told The Jerusalem Post they support President George W. Bush's stance to do everything necessary to stop the Islamic Republic's race for nuclear power.
Bush has repeatedly said the United States would not allow Iran to "go nuclear."
Israel successfully launches Ofek 7 spy satellite
JPost special: US candidates talk tough on Iran
A high-ranking American military officer told the Post that senior officers in the US armed forces had thrown their support behind Bush and believed that additional steps needed to be taken to stop Iran.
Predictions within the US military are that Bush will do what is needed to stop Teheran before he leaves office in 2009, including possibly launching a military strike against its nuclear facilities.
On Sunday, Sen. Joseph Lieberman of Connecticut said the US should consider a military strike against Iran over its support of Iraqi insurgents.
"I think we've got to be prepared to take aggressive military action against the Iranians to stop them from killing Americans in Iraq," he said. "And to me, that would include a strike over the border into Iran, where we have good evidence that they have a base at which they are training these people coming back into Iraq to kill our soldiers."
According to a high-ranking American military officer, the US Navy and Air Force would play the primary roles in any military action taken against Iran. One idea under consideration is a naval blockade designed to cut off Iran's oil exports.
The officer said that if the US government or the UN Security Council decided on this course of action, the US Navy would most probably not block the Strait of Hormuz - a step that would definitely draw an Iranian military response - but would patrol farther out and turn away tankers on their way to load oil.
On Sunday, the Israel Air Force held joint exercises with visiting US pilots, but IDF sources dismissed speculation that the drills were connected to an attack on Iran.
The US officer said that perhaps even more dangerous to Israel and the Western world than Iranian nukes was the possibility that a terrorists cell associated with al-Qaida or global jihad would acquire a highly radioactive "dirty bomb" or a vial of deadly chemical or biological agents. The officer said al-Qaida was gaining a strong foothold in the Middle East and that Israel was being surrounded by global jihad elements in Lebanon, Jordan and Sinai.
"Iran is a state-sponsored type of terrorism that can be dealt with," he said, adding that it was far more difficult to strike at the source of an isolated terrorist cell.
To combat this threat, the US Navy has come up with a plan for a "1,000-ship navy" - a transnational network composed of navies from around the world that would raise awareness of maritime threats and more effectively thwart sea-based terrorism and the illicit transfer of arms by sea.
"The idea is to allow free trade and to prevent criminal and terror activity at sea," the officer said.
A smaller-scale example of the US Navy's vision is NATO's Active Endeavor antiterrorism operation based in Naples. Israel plans to send an officer to be stationed there in the coming months. NATO launched Operation Active Endeavor in wake of 9/11 and has succeeded in bringing together a number of Mediterranean countries to work together in Naples to share information on naval terrorism and suspicious vessels in the region.