Opinion » Viewpoint

Hurricane Hucksters

Post-Katrina, the oil companies are gouging us at the pump.



Gas prices used to be fairly stable. It took nine years following the 1970s oil embargo for gas to reach the $1 mark and 25 more years for it to hit $2. But it only took 12 months for the price to top $3.

We've had two unprecedented spikes just in the last several weeks, one (not surprisingly) immediately following the passage of the president's conservation-lite energy bill, when prices spiked by about 40 cents (half of it overnight), and then the whopper, two days after Katrina hit, when the price went up 60 cents, again overnight.

We watched in amazement while gas stations changed the price numbers on their pumps, sometimes twice a day, and wondered how they could change prices on gasoline they had already purchased in anticipation of future price increases.

Big oil, hand in glove with the government and the mainstream media, has spun the propaganda for these spikes to soothe an incensed public and to pacify it into accepting its victimization. We've gotten the oil industry's usual reason for the spikes (supply and demand), coupled with some less usual ones (in deflated dollars, gas is cheaper now than it was 30 years ago). By their credulous acceptance of the oil companies' propaganda, the mainstream media are reprising their shameful performance during the run-up to the Iraq war.

Here are some things the oil companies (and their media shills) are soft-pedaling that help explain price spikes:

The oil companies have made $250 billion since 2001, enough to rebuild New Orleans (or Iraq, for that matter) and certainly enough to last them for a while without holding us up at the pumps. Katrina's going to do even better by them. Exxon Mobil, for example, is on the verge of reporting a $10 billion profit just for the current quarter, the largest quarterly profit for any company in history, raising the question whether profiting at the expense of human misery isn't more like looting than gouging.

With crude oil price increases, how have the oil companies managed to defy the conventional principle that when the cost of manufactured goods increases, profits decline? Why, by manipulating the market, of course. Hey, Enron did it.

The oil companies have been squeezing the supply of gasoline for years. For example, there hasn't been a refinery built in this country since 1978, and scores of them have been shut down during that same period. An investigation by the Federal Trade Commission in 2001 found that oil companies intentionally withheld gasoline from the market in order to drive prices up, a practice they are continuing today. One oil company executive was quoted by the FTC as saying he "would rather sell less gasoline and earn a higher margin on each gallon sold than sell more gasoline and earn a lower margin." And, of course, that's exactly what's happened, with the margin on the cost of a gallon of gas having increased by nearly 50 percent in recent years.

Add to this avarice the complete lack of competition in the oil industry, thanks to permissive government policies that have allowed giant oil company mergers (i.e., Exxon and Mobil, Chevron and Texaco). As a result, eight companies control 80 percent or more of the production, refining, and domestic retail market. And guess what? Monopolies aren't friendly to consumers. So why hasn't the government done anything about this? Do the words "Cheney's secret energy task force" mean anything to you?

Could $80 million in political contributions since the 2000 election cycle -- 80 percent of it to Republicans -- and $50 million spent on lobbying have something to do with it? Government regulators have been all but emasculated; fewer investigations and enforcement actions are being pursued. Enron taught the government that energy markets can be manipulated, but cash has a strange way of steepening the government's learning curve.

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