It used to be I was like everyone else and blamed the big oil companies for the spike in oil prices that have been occurring. But, after thinking about it some more, I am now convinced that blaming the oil companies for the spike in oil prices is like blaming the National Weather Service for hurricanes. The cause and effect are not what one might first think.
That’s not to say I don’t think the oil companies don’t have some culpability for what is happening. But the real blame lies with the Congress and especially with this President. Though every President before George W who didn’t take action to deal with this problem holds some culpability, our current President holds an order of magnitude above them in culpability, though not in accountability.
Oil prices are not set at the oil companies but at our marketplaces, i.e., the stock exchanges specifically. Analysts set prices based on projections of both supply and demand and on their perceptions of how world events may impact either quantity. We’ve all heard that part of the problem is that there is not enough refinery capability in this country, and I take that as a truism. This is where the oil companies have some culpability since they are the ones who make the decisions about whether to sink current and future profits back into expansions of their own capabilities. This is, too, probably the one place where any kind of government investigations into price fixing or a conspiracy thereto may show anything. Have the oil companies not invested in expanding refinery development because they wanted to force an artificial increase in prices?
But beyond the fact that we need more refinery capability is the fact that one of the major things influencing prices is the stability of the world in the areas where oil is found. To that end, President Bush’s policies have, so far, inflamed the Middle East. While the Middle East has been burning quite well on its own for some time, the invasion of Iraq has, so far, only turned up the fire. It’s still questionable whether US involvement in Iraq will lead to any kind of democratic government and more questionable whether such a government can survive in that part of the world, whether supported by the US or not. It is also no coincidence that Iran has now elected a hard-line Islamic government in place of a more moderate one and that Hamas has become the Palestinian representative, events that have come to pass since the U.S. invasion. The current spike in oil prices is a direct result of the market’s concerns that oil supplies will be interrupted either by refineries in Iraq and Saudi Arabia that are damaged or by war with Iran. It’s sad the U.S. was not sophisticated enough to predict that the imposition of hard line governments could be a reaction to US presence. It’s a basic tenant of human psychology that if one tries to control a person or a people; then, sooner or later, you’re going to get just the opposite of what you intended.
The second major factor in the rise of oil prices also lands in the lap of our government, and that is this country’s denial about or dependence on oil and our refusal to do anything about it. We’ve had 22 years since the last Arab oil crisis; and, in that time, we have done little to move us to alternate energy sources. There is little or nothing being mentioned today (hydrogen, nuclear, etc) that was not talked about then. But because the move would be painful and expensive and oil was cheap we did nothing. The President is right when he says we are addicted to oil. I wrote an article saying the same thing rejected by a magazine over a decade ago, and all because the editor seemed to be inflamed by my premise. Our reactions as a country have been modeled on those of an addict, i.e., we went into our denial as soon as the problem appeared to go away so it could grow worse. Now, here it is, again, bigger this time, and gas prices higher than they’ve ever been. The best thing that could happen for the long term national outlook is that gas prices stay high enough to inflict just enough pain to keep our attention. That way, the technological solutions that need to be found will be; and I have every confidence they do exist.
Yes, the Congress and the President are going to investigate Big Oil, but who’s going to investigate them?
We need to recognize these investigations for what they are.
(As an aside, I think it’s extremely ironic that George W is talking to us about addiction. Those of us who deal with that subject know that a behavior that speaks of addiction is that of trying to “force a solution”, the exact thing we are doing in Iraq and seem to insist on doing with those countries in the rest of the world who don’t agree with us. Seems to me that the old passage about removing the log from one’s eye first is appropriate here.)