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 â€œBaker 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 Clintonâ€™s use of his â€œdiscretionary authority to lease oil to the market on a time-swap or exchange basisâ€ as an example of a no-no. First, according to the Baker experts, Clintonâ€™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 â€œfar less in interestâ€ than he could have, by using better methods. Perhaps Clintonâ€™s biggest faux pas according to the Baker experts is that he used the drain-down of the reserves â€œto address winter heating-oil inventory concerns,â€ 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 â€œa market buffer stock to damp prices and price volatility.â€ (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 â€œthe marketâ€™s forward price structureâ€¦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.â€
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 nationâ€™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.