Tuesday, May 27, 2008

Right-wing Myopia on Oil

A dear friend sent me an email over the Memorial Day Weekend linking to radical right website WorldTribune.com. I know it's radical right wing because on its home page is a link called "What Rush Said." I don't think they are referring to the Canadian rock band.

This link pointed me to a story entitled "The Oil Price Crisis: Not So Difficult to Understand." No by-line, just a subheading about being excerpted from the "PowerLine" blog. Guess some on the right wing don't want to be identified by name? Whatev. So, the piece covered recent congressional testimony given by some oil industry heavyweights, but the slant is obvious from the first few sentences:

Not surprisingly, the petroleum executives stole the show, as they were far smarter, infinitely better informed, and much more public-spirited than the Senate Democrats.

It lays blame for high gas prices squarely at the foot of Democrats in Congress who have created multiple roadblocks for American oil companies to increase domestic exploration and extraction of supposed oil reserves off our coastlines, in the Rockies, and in Alaska (the famous Arctic National Wildlife Refuge). On top of that, the piece says that 15% of the price of gas goes to taxes, and that's the fault of the Democrats too.

On top of that, it outlines the infinitessimally small role US oil companies actually play on the world stage. According to the sworn testimony of ExxonMobil's Stephen Simon, CEO of the largest US oil company, accounts for "only two percent of global energy production, only three percent of global oil production, only six percent of global refining capacity, and only one percent of global petroleum reserves." They have to spend a billion dollars a day just to maintain current operations and make needed capital improvements.

Well, let's see about that: according to their last annual statement, ExxonMobil has gross revenues of $404.5 billion. Yes, that's right -- more than 77% of the cost of the war in Iraq over the last five years, in just one year. The cost of generating that revenue and running the company totalled $334.1 billion. Sixty percent of that is solely the cost of acquiring crude oil from all its various sources, and another 10 percent was for refining and other production. Further the company reports that in the last 12 months, absolutely nothing was spent on Research and Development, and there were no non-recurring or extraordinary expenses. Their net profit for the fiscal year was $40.6 billion after taxes.

(To give you a comparison and to show how staggering a number this truly is, the largest tech company in the world, Microsoft, has only one-eighth the revenues and a little more than one-third the net income of ExxonMobil.)

Nowhere on Exxon's financials do they show expenditures of $1 billion a day on maintenance and capital improvements. So essentially Simon lied to Congress. This discovery, to me, makes all the statements made by all the industry execs suspicious, and probably false.

In fact the only statement I could see that seemed accurate enough -- although I can't prove it -- is the statement that the Democratically-controlled congress wants oil and gas prices to rise. Well, maybe, if they're smart (which is debatable), they'll continue to do things that inhibit domestic oil production. The problem isn't high gas prices, it's our dependence on oil in the first place. The late 19th century ushered in the greatest period of industrialization the world has ever known, largely on the back of petroleum, which greased the gears of machinery and lined the pockets of oil barons, who peddled their influence in Washington without regulation for decades. Now, the oil industry, this dinosaur literally created from dinosaurs, is faced with its seriously reduced presence as an engine for change. We will no doubt continue to need petroleum for decades. But real innovation, real progress, real improvement for the quality of life for Americans, then the world, rests on alternative energy and efforts to reduce our global carbon footprint. The Republican Party, by far the greater recipient of campaign contributions from the oil lobby, fails to see this because they just want the gravy train to keep rolling (on $5.50 per gallon diesel fuel!). They don't want the price of gas to come down either, because so long as oil companies rake in these huge profits, the special interest money will keep flowing too. They just obfuscate by saying that global warming is a myth or is largely out of our hands, and blame high taxes levied by Democrats and too much government regulation of oil exploration within our borders, again controlled by Democrats.

How convenient. And how wrong.

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