News and Features
The old politics of oil has resurfaced to add a nervous flutter to Election 2000 and also to revive an enduring question of modern industrial life--what is the right price for oil? The media's New Economy cheerleaders scolded Clinton/Gore for tampering with the answer, but those pundits are under an illusion that the market, not governments and international politics, determines the price of crude oil. Their rage at Clinton for unleashing a little extra crude from the government's strategic reserve is an amusing non sequitur. For the past thirty years, the world price of oil has been "managed" by governments, albeit with haphazard results. The price was maintained by the OPEC cartel of oil-producing nations, with discreet consultations from the United States and other industrial powers. Before OPEC, the world price of oil had been managed since the thirties by the fabled Seven Sisters, global oil corporations that still have an influential voice in the conversations. Oil-price diplomacy, for obvious reasons, is mostly done in deep privacy.
Indeed, Riyadh and Washington are at this moment attempting once again to get the price right, that is, to steer crude oil back down to a mutually acceptable zone, centered on $25 a barrel. That's what Saudi Arabia, the largest producer, says it wants--a target range between $22 and $28 a barrel--and what Bill Clinton has called "a reasonable range" acceptable to Washington. Oil at $25 a barrel would be a lot cheaper than the recent peak of $38, but also a lot higher than the $10 bottom that oil hit in 1998, when prices were severely depressed by collapsing demand triggered by the Asian financial crisis the year before. Splitting the difference is a better solution than continued crisis, especially for Europe, because stability helps sustain everyone's economic growth.
So is $25 the right price? Maybe not. Because $25 is still cheap oil--too cheap to allow the producer nations to recapture their massive revenue losses and possibly too cheap to force US consumers and companies to undertake serious, self-interested industrial conversions away from petroleum. Since oil is traded worldwide in dollars, its real price declines automatically from US inflation. Thus, measured in constant dollars, $25 oil is really only about $13 in historical terms--right where it was in the mid-seventies. This level would be modestly above the average real price of the past fifteen years but still far below what OPEC initially gained after its two dramatic spikes in the seventies. Because of the interaction of currency values, Europe is taking a much more severe hit this time. The euro is down and the dollar is strong, so the real price of imported oil is much higher for European economies.
Texas oil guy George W. Bush is making the same retrograde noises Republicans always make--Drill for more oil! Open up the Alaskan wilderness! Drill offshore! Whatever! Bush's nostalgic notion that the United States can drill its way out of its petroleum problem is out of touch by about twenty-five years. The world isn't running out of oil--the undiscovered reserves are probably good for another century--but the United States is running out of its own oil. The proposition that we should pump and burn our remaining reserves first is completely backward, both as energy policy and for long-term national security. Al Gore, in his best moments, understands all this and has long championed a fundamental shift to alternative fuels, but he has lacked the courage to force the issue. The Clinton Administration provided gorgeous subsidies to the Big Three auto companies to develop electric cars and then allowed the industry to backslide by not increasing the government's fuel-efficiency requirements. Maybe the price crisis will prompt Gore to reread Earth in the Balance.
Oil politics is many-layered and so paradoxical that public opinion is not only confused but frequently led in the wrong direction. "Bad news" may actually be good news; the "villains" are sometimes actually victims. In real terms, OPEC's oil revenues peaked two decades ago--$493 billion in 1980 (in 1990 dollars)--and have declined unevenly since then. OPEC's oil income hit bottom in 1998, at $80 billion in real terms. So they regard the recent price run-up as a justifiable attempt to get well, to recover some of their losses. It's hard to muster much sympathy for oil potentates, but their national budgets have been severely squeezed--especially Saudi Arabia's, which absorbs more than its share of the production cutbacks because that country is the biggest and least aggressive player.
OPEC, on the other hand, has been a clumsy, hapless manager of world oil prices. Twice, it wrong-footed emerging economic conditions by increasing production just as global demand was about to swoon--inadvertently feeding the severe price collapses in 1986 and 1997. This time, they overshot again but on the upside --cutting oil supply just as the world's economies were gaining momentum. With the rising demand, prices were driven higher than the Saudis, at least, intended. Among the present dangers, the tight supply still threatens to stall out economic growth, especially for Europe, and it also gives temporary leverage to Iraq. If Iraq were to halt its exports, prices might soar again, just as Saudi Arabia and the United States are pulling in the opposite direction.
But here's some good news. Extreme price gyrations in oil promote fundamental change in US industrial structure. The seventies stimulated major shifts toward energy conservation and persuaded some sectors, like electrical generation, to decouple entirely from the vulnerability of unpredictable price shocks. Electric companies converted to natural gas and other fuels so that a major US user of petroleum was permanently lost as a market for OPEC exporters. Some authorities think this new mini-crisis is likely to encourage similar movements, especially in transportation. The auto industry, for instance, has toyed for years with available technologies like fuel cells, which liberate cars from oil, but they never moved seriously. Now Japanese manufacturers are making electric hybrids with far greater fuel efficiency. In other words, if high oil prices linger awhile, the permanent market for oil might shrink. Detroit could once again lose market share to Japan, but Americans and the environment would benefit enormously.
Sheik Ahmed Zaki Yamani, Saudi Arabia's former oil minister and a founding architect of OPEC, already fears this--another round of innovations that drastically reduce gasoline and oil consumption. "Technology is a real enemy for OPEC," Yamani warned in a Reuters interview. "Technology will reduce consumption and increase production from areas outside OPEC. The real victims will be countries like Saudi Arabia with huge reserves which they can do nothing with--the oil will stay in the ground forever."
OPEC, the sheik predicted, "will pay a very heavy price for not acting in 1999 to control oil prices. Now it is too late. The Stone Age came to an end not for a lack of stones, and the oil age will end, but not for a lack of oil." His forecast may be a bit premature, but it's a lot more cheerful than the oil chatter in American politics.
What an odd presidential race! So long as George W. Bush keeps his mouth shut and remains in seclusion he floats up in the polls. His best strategy would be to bag the debates, take Laura on an extended vacation and come back a couple of days before the election. Meanwhile, Gore reinvents himself on an almost daily basis. Nothing has been more comical than his "populist" posturings about the Republicans being the ticket of Big Oil and himself and Lieberman being the champions of the little people.
This is the man whose education and Tennessee homestead came to him in part via the patronage of Armand Hammer, one of the great oil bandits of the twentieth century, in whose Occidental oil company the Gore family still has investments valued between $500,000 and $1 million.
At the LA convention the headquarters of the Democratic National Committee was on the 42nd floor of the Arco building, and the symbolism was apt. In 1992 Arco (recently merged with BP Amoco) loaned the Clinton/Gore inaugural committee $100,000. In that same year it gave the DNC $268,000. In the 1993-94 election cycle it gave the DNC $274,000. In the 1995-96 cycle it ponied up $496,000 and has kept up the same tempo ever since.
Was there a quid for the quo? You bet there was. Early in Clinton-time, the President overturned the longstanding ban on the export of Alaskan crude oil. Why that ban? When Congress OK'd the building of the Trans-Alaska Pipeline in the seventies, the legislation triumphed by a single vote only after solemn pledges were made that the North Slope oil would always be reserved for domestic markets, available to hold prices down. Congress had on its mind precisely such emergencies as this year's hike in prices and consequent suffering of poor people, soon to be trembling with cold for lack of cheap home-heating oil.
With the help of Commerce Secretary Ron Brown and Energy Secretary Hazel O'Leary, Arco was also, at the start of the Clinton era, in the process of building refineries in China. Hence Clinton's overturn of the export ban was an immense boon to the company, whose CEO at the time, Lodwrick Cook, was given a White House birthday party in 1994. The birthday presents to the favorite oil company of the Clinton/Gore era have continued ever since.
While the Democrats and mainstream Greens fulminate about Bush and Cheney's threat to open up the Arctic National Wildlife Refuge, nary a word has been mentioned about one of the biggest giveaways in the nation's history, the opening of the 23-million-acre National Petroleum Reserve-Alaska. Back at the start of the nineties Arco's Prudhoe Bay reserves on Alaska's North Slope were dwindling. Now Arco will be foremost among the oil companies exploiting a potential $36 billion worth of crude oil.
Gore's "populism" is comical, yet one more facet of a larger mendacity. What suppressed psychic tumult drives him to those stretchers that litter his career, the lies large and small about his life and achievements? You'd think that a man exposed to as much public derision as was Gore after claiming he and Tipper were the model for the couple in Love Story, or after saying he'd invented the Internet, would by now be more prudent in his vauntings. But no. Just as a klepto's fingers inevitably stray toward the cash register, so too does Gore persist in his fabrications.
Recently he's claimed to have been at the center of the action when the strategic oil reserve, in Texas and Louisiana, was established. In fact, the reserve's tanks were filling in 1977, when Gore was barely in Congress, a very junior member of the relevant energy committee. The legislation creating the reserve had been passed in 1975. At around the same time as this pretense, the VP claimed to have heard his mother crooning "Look for the union label" over his cradle. It rapidly emerged that this jingle was made up by an ad man in the seventies, when Al was in his late 20s.
As a clue to why Al misremembers and exaggerates, the lullaby story has its relevance as a sad little essay in wish fulfillment. Gore's mother, Pauline, was a tough character, far more interested in advancing Albert Sr.'s career than in warbling over Gore's cot. Both parents were demanding. Gore is brittle, often the mark of the overly well-behaved, perfect child. Who can forget the panicked performance when his image of moral rectitude shattered at the impact of the fundraising scandals associated with the Buddhist temple in Los Angeles?
"He was an easy child; he always wanted to please us," Pauline once said of him. The child's desire to please, to get the attention of often-absent parents, is probably what sparked Gore's penchant for tall tales about himself.
Gore's official CV is sprinkled with "epiphanies" and claims to having achieved a higher level of moral awareness. In interviews, in his book Earth in the Balance and, famously, in his acceptance speech at the 1992 Democratic convention, Gore has shamelessly milked the accident in which his 6-year-old son was badly hurt after being struck by a car. Gore described how, amid his anguish beside the boy's hospital bed, he peered into his own soul and reproached himself for being an absentee dad. He narrated his entry into family therapy. But Tipper and the children didn't see more of him as a consequence. Despite that dark night of the soul beside Al III's bed, Gore plunged even deeper into Senate business and spent his hours of leisure away from the family, writing Earth in the Balance while holed up in his parents' old penthouse in the Fairfax Hotel. Soon after, he accepted Clinton's invitation to run for Vice President.
Gore's a fibber through and through, just like Bill. A sad experience in the closing weeks of the campaign is to encounter liberals desperately trying delude themselves that there is some political decency or promise in the Democratic ticket. There isn't. Why talk about the lesser of two evils, when Gore is easily as bad as Bush and in many ways worse? The "lesser of two evils" is by definition a matter of restricted choice, like a man on a raft facing the decision of whether to drink seawater or his own urine. But in this election there are other choices, starting with Nader and the Greens. It isn't just a matter of facing seawater or piss.
Contrary to the impression fostered by the government's supporters, not all the fuel protesters are selfish, gas-guzzling throwbacks greedy for a bigger TV.
To date, the Rehnquist Court's environmental record has been mixed. While no darling of the greens, neither has it been consistently "brown."
NPR's Living On Earth program broadcast a radio version of this story over the weekend of
September 1-3, 2000. Research support provided by the Investigative Fund of
the Nation Institute.
The Bush Administration is pulling a fast one on energy, and we
will all pay dearly for decades to come. By panicking the public with oil
industry propaganda of an energy shortage, the Bushies are building
support for the most reckless energy policy since the days before the
environmentalist movement, when blackened skies and lungs represented the
vision of progress.
To make things worse, to head off objections to their plans to plunder
virgin lands and obliterate conservation measures, they have thrown in as
a palliative the old oxymoron of "clean" nuclear power.
Of course there is nothing clean about nuclear waste, which can never
be rendered safe.
The public may temporarily accept new nuclear power plants, as long as
one is not built anywhere near their neighborhood and the radioactive
byproduct is shipped to another part of the country.
But trust me, while these things may be better designed today, the
insurance companies are no dummies for still refusing to insure nuclear
power plants. It is wildly irresponsible for the Bush Administration to
now insist that US taxpayers underwrite these inherently dangerous
Does anyone even remember Three Mile Island? Or, more disastrously,
Chernobyl? I was the first foreign print journalist admitted to the
Chernobyl plant after the explosion. Even a year after the fact, and with
the benefit of the best of Western scientific advice, it was still a
scene of chaos. Nuclear power is like that--unpredictable, unstable and
ultimately as dangerous as it gets.
The entire Chernobyl operation is now buried in a concrete-covered
grave, but the huge area under the radioactive plume emitted from the
plant is a permanent cancer breeding ground, as is the sediment in the
area's main rivers and throughout much of its farm land. I traveled from
Moscow to Chernobyl by train in the company of top US and Soviet
experts, but even they seemed to feel lost and frightened as they donned
white coats and Geiger counters to tour Chernobyl. Nuclear power is just
too risky a gamble to push because of a phony energy crisis.
The desperation in the White House is palpable, but it is not over an
"energy crisis," which Bush's buddies and campaign contributors
manipulated in the Western electricity market.
No, the fear of the Bush people, even before Jim Jeffords's defection,
was that their political power would be short-lived and that they had
best move as fast as possible on their pet projects, beginning with
increasing the profits of GOP energy company contributors.
Why else the panic? There is no sudden energy crisis. Known
world reserves of fossil fuel are greater than ever, alternative energy
sources are booming, and conservation measures work. If the Federal
Energy Regulatory Commission would do its legally required duty of
capping wholesale prices to prevent gouging, there would not be an
electricity crisis in California or elsewhere.
The FERC has not done its job. Clearly, as the New York Times reported
last week, energy wholesalers are in cahoots with the Bush administration
to use the FERC as their personal marketing tool to drive up their
already obscene profits.
Finally, there is simply no reason to rape America in pursuit of
something called "energy self-sufficiency." If the vast reservoirs of
natural energy resources--resources that are sitting under land
controlled by regimes around the world that we've propped up at enormous
military cost for half a century--are not available to be sold to us at a
fair price, why continue to prop up these regimes? What did President
Bush's Dad, with his buddies Dick Cheney and Colin Powell, achieve in
preserving Saudi Arabia and Kuwait if those degenerate monarchs they
saved in the Gulf War will not now trade fairly in the one commodity of
value that they hold?
We must make our quid pro quo clear: We will pay for a huge military
to keep these sheikdoms and other energy-rich regimes in power only if
they guarantee fair oil and natural gas prices for our retail consumers.
Make that deal and the energy "crisis" is history.
Fernando Contreras points to the area behind a green mesh fence where his family home used to be. He is about to be a grandfather for the first time.
In a small brick house strung year-round with Christmas lights, behind curtains made of flowered sheets, Jeremiah Smith is listening to his favorite preacher on the radio.
Why beat around the Bush? Surrogate President Dick Cheney is
behaving like an oil-guzzling, intellectually irresponsible,
How else to define one who summarily dismisses the promising advances
made in energy conservation while urging the more rapid depletion of
fossil fuel resources and construction of nuclear power plants?
Cheney is a mouthpiece for energy companies like Halliburton, his
former employer, which paid him $36 million in his last year of brief
service as its CEO in a field he previously knew nothing about. But the
company, which prospers when new power plants are built, got its money's
worth when President Bush added "energy policy czar" to Cheney's
extensive White House portfolio, leaving the president ample time to
greet Little League teams.
Ever grateful to the oil bigwigs who made him financially whole while
lavishly supporting the GOP ticket, Cheney barely took up his new civic
responsibility before launching a war on energy conservation. In his
words, the commitment to conservation, endorsed by a long line of
presidents of both parties, was valuable primarily as therapy for
tree-huggers: "Conservation may be a sign of personal virtue, but it is
not a sufficient basis for a sound, comprehensive energy policy."
Nonsense. Conservation works, and according to the latest government
studies--pointedly ignored by Cheney--it could be a major factor in
staving off any future energy crisis.
As the New York Times reported in its lead story Sunday, "Scientists
at the country's national laboratories have projected enormous energy
savings if the government takes aggressive steps to encourage energy
conservation in homes, factories, offices, appliances, cars and power
The three-year studies by the five national science laboratories
undermine Cheney's shrill insistence that the country must pop for a huge
new polluting power plant every week for the next two decades, lest our
homes and factories go dark. The studies concluded that a government-led
conservation program could cut growth in energy consumption almost in
half, using proven technology already tested and in place.
Such technology is already saving energy and money at Cheney's
official residence at the Naval Observatory and at President Bush's new
ranch in Crawford, Texas. Inexplicably, what's good for them isn't good
enough for the rest of the country.
To ignore scientific breakthroughs on energy conservation is to lie to
the American people about the dimensions of the problem. This is not
leadership; this is fear-mongering that withholds from the American
public sound scientific information in order to justify eviscerating
Indeed, the administration's 2002 budget kills much of President
Clinton's program to improve energy efficiency in building construction,
heating and appliances, savings that would have obviated the need for an
estimated 170 new power plants.
Cheney chose to attack conservation at the very time when California
embarked on a major plan to end its electricity shortage through lowering
consumer demand--a shortage that Cheney irresponsibly blames on
environmentalists who were insisting on pollution controls.
California's crisis is being created by the price-gouging of mostly
out-of-state energy suppliers that are taking advantage of a deregulation
plan hatched by former Republican Gov. Pete Wilson in cahoots with the
privately owned utilities. The utilities wanted to sell off what they
incorrectly figured to be the less-profitable energy production business,
including ever-troubled nuclear plants of the sort Cheney now embraces.
In return, they agreed to temporary caps on consumer prices.
The problem is that the feds control wholesale prices, which they
didn't cap. Last week, when the Federal Energy Regulatory Commission
finally recognized that it needed to exercise its legal authority to cap
wholesale prices, Cheney blasted it: "If I had been at FERC, I never
would have voted for short-term price caps."
California consumers should remember Cheney's refusal to rein in the
price-gougers come the next election.
Finally, whatever happened to the monarchs of Saudi Arabia and Kuwait
saved by former President Bush and then-Defense Secretary Cheney during
the Gulf War?
The monarchs sit atop the world's largest oil reserve. Wouldn't you
think that since they owe their continued existence to the Bush clan,
they might return the favor with lower oil prices? Instead, US
consumers are being punished at the gas pumps with some of the highest
prices in recent memory.
The dirty secret is that the Texas oilmen in the White House like the
price of foreign crude to be very high. That justifies increased US
production, even in pristine lands, and boosts energy profits, which
doubtless will fatten the coffers of Republican candidates in the next
You can't say we weren't warned. Put two Texas oil guys in the White
House, and they are going to seize any opportunity to grease the palms of
their big oil backers while raping the environment.
Still, it is surprising that they are being so obscenely blatant about
The power of the market, and of the giant corporations that dominate it, is the overriding political fact of our time.