The Bush – er, Cheney – Policy – high energy prices for everyone!

In most areas of the country, gasoline prices have “surged” (to use an administration buzzword) past $3.oo per gallon. While all of us understand that our consumer culture is part of the problem (too many SUV’s still being used to go to the grocery store, yadda, yadda), it may surprise some readers to discover that a major reason for these high prices is directly related to Bush administration “Cheney’s pals” energy policy.

Or it may not.

While Denny Wilkins’ thoughtful analysis of Gulf Oil’s Joe Petrowski’s “it’s the oil refineries” explanation hints at other underlying causes for our energy cost woes, perhaps it’s time to be more explicit about at least one important reason for the spiking of gasoline prices…

In 2002, the Bush administration began buying crude oil to fill up the SPR (Strategic Petroleum Reserve. This in an of itself is not a bad thing, and it is certainly important that we work at keeping our SPR in good shape in case oil supplies are disrupted for some period. There’s no argument that having such a reserve is both good energy and security policy – if handled thoughtfully and used to do those silly things the Constitution Preamble calls for – you know, “provide for the common defense” and “promote the general welfare.”

But as usual, Bush didn’t do any thinking – he let his Dick (Cheney) do his thinking for him. Katherine Yurica explains:

Why did Bush do it? For one thing, he was advised to do it. It has to do with the secret National Energy Policy advisory group headed by Vice President Dick Cheney. Cheney has steadfastly refused to release the names of those who advised the administration on energy matters. However, according to an article published in the Sunday Herald in Scotland (October 6, 2002), by Neil Mackay, it was former Secretary of State, James Baker who personally carried an advisory report to Cheney in April of 2001. Assembled at the James A. Baker Institute for Public Policy of Rice University, the task force consisted of oil and energy executives. The report, Strategic Energy Policy Challenges for the 21st Century is referred to simply as the “Baker Report“…The Baker report was not irresponsible, it also warned the president, ‘One problem with trying to refill the reserve at this time when markets are strong is that any purchases made by the U.S. government would add to the current tight supply.’ In other words, prices would go up!

Importantly, the “Baker Report,” as it’s generally known, also points out that the President has an obligation to do (what else in a corporate presidency?) Make a profit:

There were many object lessons in which to point. The Baker report singled President Bill Clinton’s use of his “discretionary authority to lease oil to the market on a time-swap or exchange basis” as an example of a no-no. First, according to the Baker experts, Clinton’s exchanges reduced the size of the SPR at a time when more oil might have been needed. Next, the report chided, a president must not earn “far less in interest” than he could have, by using better methods. Perhaps Clinton’s biggest faux pas according to the Baker experts is that he used the drain-down of the reserves “to address winter heating-oil inventory concerns,” which indeed reduced heating oil from $37 to $31 per barrel. That was a big no-no. The Baker report advises a president must not use the SPR as “a market buffer stock to damp prices and price volatility.” (Translation: A president must not help the poor to heat their homes at a reasonable price at the expense of oil company profit taking.)

That Bill Clinton – doing things to help the American people when he could have been helping the oil companies steal more taxpayer money – increase profits….

The Baker Report advises that President Bush reaffirm that the SPR can only be used in times of national exigency – not to “manage oil prices.” (Translation #2: Don’t use the SPR to help poor people afford heat in terrible winter situations – that’s not profitable.)

Of course, Bush had choices about how to fill the SPR. The Baker Report offers one solution that actually takes the needs of the country – and the budgets of citizens – at least partly into account:

The report advises taking advantage of “the market’s forward price structure…if the market structure were backwardated, with future prices lower than current prices, the government would be able to replenish the reserve with more oil than it had leased on an auction basis. If the market structure were in contango, with future prices higher than prompt prices, the government could lease its cheaper spare storage capacity to industry, thereby also providing revenue to build government-owned reserves at a later time.”

But that didn’t suit Dick Cheney and his advisors of the “super secret advisory group” – you know, guys like the late, unlamented “Kenny Boy” Lay. They pushed Dubya to follow another method for filling the SPR – one that provided maximum profits to oil companies:

But the method the Bush administration chose was to fill the SPR without regard to crude oil prices at all but simply at a constant rate of speed. The result was extremely high prices for gasoline and increased charges to be born by the taxpayers. The Bush administration denies this. But the method they chose did not add any additional reserve oil to the nation’s strategic supply. So why do it? Oil companies were happy….

The Bush administration has deflected criticism of this behavior by hinting that the only way to get oil companies to support programs like alternative fuels and developing shale oil resources is to keep prices high. They’ve also used the “national security” mantra repeatedly (I know, I know – what else is new?).

But the likely real reason?

In the end, regardless of the lip service Mr. Bush may offer to the American people on how he is benefiting all citizens, the facts show he benefits those corporations who made large contributions to his campaigns.

To quote one of our favorite rogues, “So it goes….”

See Yurica’s useful list of sources (bottom of article) here.


13 replies »

  1. Every time I turn around the list gets longer. I find myself wondering if a TEAM of presidents led by the guys on Rushmore would be able, in only four years, to unravel and correct all the shenanigans perpetrated by this administration.

    Honestly, you just about have to be nuts to WANT the job at this point, don’t you?

  2. “While all of us understand that our consumer culture is part of the problem (too many SUV

  3. keen said: “but what we really need to discourage are the a-holes who buy these vehicles knowing they are going to be making daily 100 mile commutes in them. as a society we must address demand, anything else is blowing smoke.”

    The only counter-argument I can offer is that while SUV’s get lousy mileage on the highway (commuting, let’s say), they get even worse mileage for errand running, taking kids to soccer practice, etc.

    And I’m not even making this counter willingly – it’s just that I see way too many SUV’s at the supermarket and mall – often left running while their owners go in “for just a few items.”

    I agree with your main point wholeheartedly – we’ve got to find a better way – even if it means we all drive hybrids…. As long as we want these big toys, we’re at the mercy of guys who’ll do anything to take our money – including start wars….

  4. My head hurts too. Not because this is hard to follow, but it seems your analysis is incomplete and you come to some incorrect conclusions about the intent of the Baker plan.

    Of course, MonkeyBoy did what he wanted to do to line the pockets of his friends. With that I agree. But the cost of oil and gasoline is dictated by market traders.

    This is why these periodic Congressional investigations don’t lead to any satisfactory conclusions. The solution is to use less oil, and it starts with you and me, not Bush and Cheney.

  5. No argument there – I’m all for revamping our energy use policies. And if we as a nation can make the sacrifices and commitments we need to, maybe we can work our way out of this energy nightmare.

    But the analysis isn’t incomplete – Bush, or rather Cheney, saw a way to further enrich cronies and did so. That’s really all this is about. I think maybe you’re moving beyond the scope of what I wanted to cover. Which is fine – I’ll try to address those other issues (trader influence, etc.) in another post. I just meant this to be a piece of the puzzle.

    It’s a big old puzzle, but if we can put the pieces together maybe we can get to energy policies that benefit the environment and us.

  6. If congress can pass a $100,00 tax credit for buying a Hummer why can’t they pass a $20,000 tax credit for anyone who buys a car that gets 40 or more MPG. I can assure you that if this were to happen 3 things would happen:

    1. The American car companies would get off their asses & build fuel efficient cars.
    2. Most Americans would get into fuel efficient cars.
    3. We could tell the Saudis to piss off.

    Write your congressman now & demand it.

  7. But the cost of oil and gasoline is dictated by market traders.

    Wrong! It is set by buyers and sellers in the market. If the gov is buying oil in significant quantities, the price of oil will go up since there is finite production and refining capacity. This is called competition. Many people competing for the same thing tends to raise the price of a comodity.

    With the rise in price and profits, refiners will expand their facilities to make more product. This is one way to drive the price down, make more than the demand.

    The other way is to decrease demand by driving less or driving more efficiently. For example, I have been taking my wifes Miata to work (26 mile each way) and she takes my Wrangler to work (1.5 miles each way). We also save up shopping trips and roll them into one big, efficient shopping outing.

  8. I must disagree with Chris. It is wishful thinking to believe that the markets are not rigged. Sure, it’s not at the trading floor level, however if supply can be “reduced” then you will have what we have today. It is so much like the California energy crisis in 2001.

  9. With the tricksters Bush/Cheney, it’s ALWAYS ABOUT the bottom line, stupid! $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$…

    Their job is to shovel USTaxpayer dollars as fas as possible to their
    pals: the war profiteer corporate welfare queens, pharmaceutical industry CEOs, and hand over Middle East oil fields to Big Oil

    It’s always been the BOTTOM LINE, and USTroops have been dying for it. The war profits are too huge to stop the war now. Bush/Cheney are thrilled with the results as are their rich corporate pals.

  10. chris young – May 16, 2007
    But the cost of oil and gasoline is dictated by market traders.

    Wrong! It is set by buyers and sellers in the market. If the gov is buying oil in significant quantities, the price of oil will go up since there is finite production and refining capacity. This is called competition. Many people competing for the same thing tends to raise the price of a comodity.

    Market traders(the boys in the pits) are the buyers and sellers in the market. I spent 10 years trading in the wheat pit and learned that while you might be able to move a market a few cents for a few minutes, you can’t move THE market. The oil market is too big and transparent to be rigged. It’s also a highly fungible commodity, just like the grains.