Surviving the New Oil Crunch

Here we go again. For those old enough to remember the 1970s, the developing mini-panic over gasoline and heating-oil prices carries with it a distinct sensation of deja vu; we've definitely been here before. Americans may have learned the lessons of Vietnam, although that's debatable. What we haven't learned as a nation are the lessons of the great oil shortage of a generation ago.

Everyone is looking for a scapegoat, somebody culpable for the sudden demise of cheap fuel. Sorry folks, there is no one villain; there is plenty of blame to go around, however. We could point to our Arab friends in the Middle East; they've certainly played a role. Years of American aid, military and otherwise, have not prevented Kuwait, Saudi Arabia, and the rest of OPEC from holding the West hostage to high-priced crude. Nice guys wouldn't treat us that way. On the other hand, it's their oil, not ours, and no one forced the Bush administration to save them from Saddam.

We could nominate the Clinton White House for criticism. The president does seem to have been asleep at the switch and not acutely aware of changes in the petroleum market. Still, this is the same chief executive Americans lionized as he adopted a hands-off posture on the economy, deregulating sector after sector, setting aside antitrust laws, and letting the markets rule. This is what we said we wanted to keep the business boom on track and the stock market rolling. By allowing the oil industry full rein to follow its bliss, so to speak, Bill Clinton has only been observing dominant public opinion.

We could point the fickle finger at the major oil companies, those eternal enemies of the American consumer. Most of us have a love-hate relationship with the denizens of Big Oil; we love them when they keep cheap energy supplies flowing into our gasoline and fuel-oil tanks, but we hate them when they use their oligopolistic market control to enrich their bottom lines at our expense. We've had many chances over the years to curtail the abuses of these cowboys of capitalism through tighter regulatory controls, but in the end we always support our elected officials when they exhibit a reluctance to crack down and impose ìbig governmentî solutions.

This leaves us, the American people. We aren't the innocents we like to think we are. How many citizens would be willing to drive less, buy a smaller, more fuel-efficient car, or turn down the heat? Not many, it seems. This is a nation hooked on cheap oil and intent upon instant energy gratification. It's hard to feel sorry for a population that makes the wasting of fuel supplies an integral part of its way of life.

To a large extent, of course, the nascent oil crisis really amounts to a crisis of capitalism. The oil companies, which don't operate on the basis of national needs but according to the dictates of the marketplace, have lately declined to maximize fuel production because (until very recently) low pump prices haven't met their profit expectations. There is no worldwide shortage of crude oil, simply a reluctance to recover and process it at what the industry deems to be an insufficient profit.

Big Oil's attitude toward return on investment is no different from that of the rest of corporate America. A new commercial ethic has taken hold in recent times that says making a decent profit and staying in business is no longer enough; it's now imperative to make huge, unheard of, unprecedented profits, profits that will satisfy the greediest stockholders and preserve the tenuous (if well compensated) jobs of CEOs. This is one of the unexpected results of the widespread movement away from privately held companies (those owned by a tightly-knit cadre of shareholders and not listed on stock exchanges) and toward publicly held companies (those whose stock is traded openly on Wall Street and available to any and all investors).

Publicly held enterprises have access to infinitely more capital -- thus their rationale -- but they invariably become the captives of legions of demanding investors, many of them institutional in nature. America's publicly held oil companies are, like most of big business, subject to the whims of a dispersed and largely irresponsible ownership that wants ever higher returns and pressures management to find ways to get them. If oil stocks are down due to lagging profits, as they have been in recent years, one way to boost them is to reduce price competition and increase market control by means of mergers, such as last year's multi-billion-dollar marriage between Exxon and Mobil. Another is to force prices higher by contriving an artificial shortage or (as appears to be the current situation) by taking advantage of higher wholesale costs imposed by overseas suppliers to raise retail markups far beyond what conditions warrant.

Means exist to counteract such behavior. Serious application of existing federal antitrust laws would slow or reverse the oligopolistic trend represented by the 1999 Exxon-Mobil merger and the BP-Amoco merger of the previous year. Vigorous Justice Department prosecutions of illegal price-fixing and supply manipulation represent another option. There is also the trump card of establishing a national oil company analogous to Ottawa's Petro-Canada, which allows the Canadian government to play a direct role in monitoring that country's oil industry.

The creation of such a public enterprise, an initiative suggested by the late Senator Henry M. ("Scoop") Jackson during the energy crisis of the 1970s, would provide Washington officials with a yardstick for domestic oil-industry pricing in much the same way that the Tennessee Valley Authority (TVA) serves as a benchmark for national utility rates. If the oil giants were colluding to overcharge, for example, that fact would be revealed by a price comparison with their federal competitor, providing the basis for legal action. In the meantime, a ready alternative for consumers would be available.

There is one immediate and relatively easy way to lower energy prices and improve supplies, however; it requires no government action and no new legislation, but it does entail a change of attitude on the part of millions of Americans. Simply trade in those SUVs and watch the oil market react. A return to the environmental consciousness of a generation ago would work wonders, and who knows, it might even feel good as well.

Wayne O'Leary is a writer in Orono, Maine.

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