Separation Of Oil And State
TomPaine.com Steve Kretzman October 20, 2006
Steve Kretzmann is Executive Director of Oil Change International. He has worked on environmental and social issues surrounding the oil industry for the last seventeen years.
As gas prices continue to decline, it’s only natural to wonder about the apparent coincidence between this trend and Republican interests in the election. Indeed, a recent poll found that 42 percent of Americans believe that gas prices have been “deliberately manipulated� in advance of the election. Countless articles have been written on blogs and in the mainstream press speculating on the possibility of a gas price conspiracy, either supporting the supposition or shooting it down.
The trouble with conspiracies is that they’re wickedly difficult to prove, particularly without a smoking gun. There may be a conspiracy, or there may not be. However, there doesn’t have to be a specific conspiracy on gas prices in the run-up to the election—there just has to be a collective recognition of self-interest among the Bush administration, oil industry executives, investment fund managers and oil traders.
What we’re seeing in the oil markets right now is a chilling demonstration of the mutual and constantly converging interests of oil and state in the U.S. In other words, it’s not a conspiracy—it’s the gasoline market, which is an oligopoly, recognizing that its collective self-interest lies in more Republican rule. In the current election cycle, the Center for Responsive Politics reports  that donations from the oil industry and its employees are running 83 percent in favor of Republicans, which is the most pronounced slant by the oil industry—and possibly the most pronounced in any industry—ever. Clearly, they know which side their bread is buttered on, and can take actions to protect those interests.
Oil companies have a lot they can do to influence the price of gas at the pump, despite their frequent protestations to the contrary. By raising and lowering its profit margins in the refining business, Big Oil can have a major impact on the price of gas. A recent study by the California-based Foundation for Taxpayer and Consumer Rights found that, over the summer of 2006, the oil majors had been making almost three times as much profit—a 334 percent increase since 2003—off of their refining and marketing operations in the U.S. than they were in Europe. Over the last two months, those margins have dropped sharply, particularly in the Midwest and the Gulf, where the price of gas now approaches $2.
Oil industry analyst Tim Hamilton argues that this difference is due to the fact that these refineries overproduced in the late spring and summer, in anticipation of the heavy hurricane season that never arrived. This led to a glut of gasoline on the market and a corresponding drop in prices this fall. Although Hamilton is skeptical that refiners purposely reduced their profit margins in August, he says that political pressure does impact production decisions. The initial move to crank up production in the spring was “a political decision, based on them not wanting to get their asses handed to them for being unprepared like they were last year after Katrina,� Hamilton says.
What does this imply? Not that a small cabal is trying to rig the elections, but rather that there is an ongoing and systemic confluence of interests between oil and state in this country. The U.S. government needs the oil industry to maintain power, literally [more]