Obama – Big Oil Truths and Elisions

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CoalSlurryEscapes.jpgBy Rowan Wolf

“Clean coal” hits the river. Image from Keep WV Wild. Please click on picture for larger image.

On March 29th, President Obama engaged in some of the most honest discussion of the realities of oil and oil corporations I have heard from a politician. He also engaged in some big lies of omission (elisions). So let’s start with the “truths.”

(I have included the video of President Obama’s speech on 3/29/2012, and my transcript of same, at the end of this article so that readers can get the the points in context.)

The purpose of the speech was to encourage the Congress to stop the subsidies for big oil. This was a lost cause as the Democratic measure was blocked by Republican Senators (CNN, 3/29/12). This is not surprising given that “Individuals and political action committees affiliated with oil and gas companies have donated $238.7 million to candidates and parties since the 1990 election cycle, 75 percent of which has gone to Republicans“  – though Obama received $884,000 in 2008 (OpenSecrets.org).

In the course of the speech, Obama tells some truths that I don’t believe any other President has told.

The “truths” that were in this speech

Point: The big oil companies get billions of dollars a year in subsidies, and they have gotten these subsidies for almost a century.

This conveniently leaves out the almost free “leases” of our commons to the corporations ($1.50 to $10 per acre Who Owns the West? Oil and Gas Leases) and the amazingly low “royalties” (roughly 8% after all associated “production” costs American Petroleum Institute). In fact according to API, in 2007 MMS collected about $9.4 billion in oil and gas royalties, $815 million in bonus bids, and $10.2 billion in leases. This comes to a total of $20.42 billion. To put this in context, it is generally estimated that oil and gas companies receive about $24 billion in subsidies a year with  high estimate of $37 billion a year (Common Peoples Source for News). So Big Oil gets somewhere between $3.6 billion to $16 billion more per year than they pay in leases and royalties.

Point: Obama detailed the record profits being made by the oil companies – particularly the top three. He even points out that every one cent increase in the cost of gasoline adds about 200 million in quarterly profits; last year the 3 largest US oil companies had more than $80 billion in profits; and that Exxon earned about $4.7 million an hour last year. However, in spite of all of that, Obama has opened up massive amounts of public land (and coast line) to these rapacious corporations – something he takes credit for.

Despite the significance of the truths above, perhaps the most significant was the following (emphases are mine):

Point(s): “And keep in mind we can’t just drill our way out of this problem. As I said, oil production here in the United States is doing very well. And it’s been doing well even as gas prices are going up. Well the reason is because we use more than 20% of the world’s oil, but we only have 2% of the world’s known oil reserves. That means we could drill every drop of American oil tomorrow, but we’d still have to buy oil from other countries to make up the difference. We’d still have to depend on other countries to meet our energy needs. And because it’s a world market, the fact that we’re doing more here in the United States, doesn’t necessarily help us because even US oil companies are selling that oil on a world-wide market. They’re not keeping it just for us. And that means if there is rising demand from around the world then the prices are going to go up.”

One of those issues tied into the cost of gasoline is an area of dead silence most of the time. Namely, the issue of refineries. This from FactCheck.org:

Though oil refinery productivity in the United States has been improving, the number of operating refineries has been dropping steadily. In 1982, the earliest year for which the Energy Information Administration has data, there were 301 operable refineries in the U.S., and they produced about 17.9 million barrels of oil per day. Today there are only 149 refineries, but they’re producing 17.4 million barrels – less than in 1982, but more than any year since then. The increase in efficiency is impressive, but it’s not enough to meet demand: U.S. oil consumption is 20.7 million barrels per day. Refinery capacity isn’t the only factor in the price of gasoline, and according to the EIA it’s not the most important one either (that would be the cost of crude oil), but it’s certainly a contributor.

Regardless of why refining capacity is not keeping up with demand, the current situation guarantees that prices are going to stay high -and profits for refiners (such as the Koch brothers) remain high as well. A related issue that should breed concern is the aging of those refineries, and the growing risk they pose to the communities in which they reside. Their failure would also dramatic economic and structural impacts on the nation.

Point: Obama was also at least semi-honest about his energy strategy. He stated that his strategy is “all of the above” – meaning everything is on the table.

However, his delineation of that strategy left a number of questionable (and contentious) energy sources out. Namely, he did not mention fracking (and the problems it is causing), nor coal (and his duplicitous “clean coal” which also overlooks the massive destruction coal entails); nor tar sands (and the massive environmental and public health problems attached); nor nuclear power (and the significant issues entailed particularly post Fukushima).

He also conveniently avoids the entire issue of peak oil (Post Carbon Institute), and while encouraging fracking across the country, overlooks the issue of global warming. After all, methane is a more potent green house gas than CO2 – 21 times (EarthSave) to 25 times (Wikipedia) worse in fact. Not to mention the issue of water supplies lost and contaminated (Goodell, 3/15/2012, page 3), or the increasing earthquakes in regions being fracked (Texas – State Impact, 3/30/2012; Ohio – Chesapeake Bay Journal). But then there is  the even bigger issue that it appears that the wonders of the “massive” amounts of natural gas to be fracked may be more hype than reality. As stated by Jeff Goodell in his investigation of fracking The Big Fracking Bubble: The Scam Behind the Gas Boom, “It’s not only toxic – it’s driven by a right wing billionaire who profits more from flipping the land than drilling for gas.” That billionaire, and the focus of the article, is Aubrey McClendon. McClendon’s Chesapeake Energy is very big in natural gas. The Koch brothers (underwriters of the Tea Party and owners of several governors including Scott Walker of Wisconsin) control the nation’s pipelines and refineries. Isn’t it a bit troubling that these folks have a strangle hold on much of the nation’s energy supply, and that they are getting both richer and subsidized by us? Well it troubles me!

Sometimes what is not said is more significant than what is said. As I listened to Obama I was struck that he was saying things that few other politicians are saying. I was also struck by the elisions that were so apparent you could drive an oil tanker through them.

 


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Personal Transcript of President Obama’s speech of 3/29/2012

Today the members of Congress have a simple choice to make. They can stand with the big oil companies, or they can stand with the American people. Right now the biggest oil companies are raking in record profits. Profits that go up every time folks pull up into a gas station. But on top of these record profits, oil companies are getting billions a year, billions a year,  in tax payer subsidies – a subsidy they have enjoyed year after year for the last century. Think about that. It’s like hitting the American people twice. You are already paying a premium at the pump right now. And on top of that Congress (up until this point) thought that it was a good idea to send billions of dollars more in tax dollars more to the oil industry.

It’s not as if these companies can’t stand on their own. Last year the three biggest U.S. oil companies took home more than $80 billion dollars in profits. Exxon pocketed nearly 4.7 million dollars every hour. And when the price of oil goes up, prices at the pump go up, and so do these companies profits. In fact one analysis shows that every time gas goes up by a penny, these companies pocket another 200 million dollars in quarterly profits. Meanwhile, these companies pay a lower tax rate than most other companies on their investments – partly because we are giving them billions in tax giveaways every year.

Now I want to make clear that we all know that drilling has to be a key part of our overall energy strategy. We want US oil companies to be doing well. We want them to succeed. That’s why under my administration we’ve opened up millions of acres of federal lands and waters to oil and gas production. We’ve quadrupled the number of operating oil rigs to a record high. We’ve added enough oil and gas pipeline to circle the earth and then some. And just yesterday we announced the next step for potential new oil and gas exploration in the Atlantic. But the fact is we’re producing more oil right now than we have in eight years and we’re importing less of it as well. For two years in a row Americans bought less oil from other countries than we produce here at home – for the first time in over a decade. So American oil is booming. The oil industry is doing just fine. With record profits and rising production, I’m not worried about the big oil companies. With high oil prices around the world, they’ve got more than enough incentive to produce even more oil. That’s why I think it’s time they got by without more help from tax payers who are already having a tough enough time paying the bills and filling up their gas tanks. I think it’s curious that some folks in Congress – who  are the first to belittle investments in new sources of energy – are the ones who are fighting the hardest to maintain these giveaways for the oil companies.

Instead of tax payer giveaways to an industry that has never been more profitable we should be using that money to double down on investments in clean energy technologies that have never been more promising. Investments in wind power, solar power, and bio-fuels. Investments in fuel efficient cars and trucks, and energy efficient homes and buildings. That’s the future. That’s the only way we are going to break this cycle of high gas prices that happen year after year after year as the economy is growing. The only time you start seeing lower gas prices is when the economy is doing badly. That’s not the kind of pattern we want to be in. We want the economy to be doing well, and people be able to afford their energy costs.

And keep in mind we can’t just drill our way out of this problem. As I said, oil production here in the United States is doing very well. And it’s been doing well even as gas prices are going up. Well the reason is because we use more than 20% of the world’s oil, but we only have 2% of the world’s known oil reserves. That means we could drill every drop of American oil tomorrow, but we’d still have to buy oil from other countries to make up the difference. We’d still have to depend on other countries to meet our energy needs. And because it’s a world market, the fact that we’re doing more here in the United States, doesn’t necessarily help us because even US oil companies are selling that oil on a world-wide market. They’re not keeping it just for us. And that means if there is rising demand from around the world then the prices are going to go up.

That’s not the future I want for America. I want folks like these back here and the folks in front to me, to have to pay more at the pump every time there’s some unrest in the Middle East, and oil speculators get nervous about whether there’s going to be enough supply. I don’t want our kids to be held hostage to events on the other side of the world. I want us to control our own destiny. I want us to forge our own future. That’s why as long as I’m President, America is going to pursue an "all of the above" energy strategy. Which means we will continue developing our oil and gas resources in a robust and responsible way. But it also means we are going to Keep developing a more advanced home-grown bio-fuels. The kinds that are already powering truck fleets.

We’re going to keep investing in clean energy – like the wind power and solar power that’s already lighting thousands of homes and creating thousands of jobs. We’re going to keep manufacturing cars and trucks to get more miles to the gallon – so you can fill up every two weeks instead of every week. We’re going to keep building more homes and businesses that waste less energy so that you are in charge of your own energy bills. We’re going to do all of this by harnessing our most inexhaustible resource – American ingenuity, American imagination. That’s what we need to keep going. That’s what’s at stake right now. That’s the choice that we face. And that’s the choice that’s facing Congress today.

They can either vote to spend billions of dollars more in oil subsidies that keep us trapped in the past, or they can vote to end these tax payer subsidies that aren’t needed to boost oil production, so that we can invest in the future.  It’s that simple. As long as I’m President I’m betting on the future. And the people I’ve talked to around the country – including the people who are behind me here today, they put their faith in the future as well. That’s what we do as Americans. That’s who we are. We innovate. We discover. We seek new solutions to some of our biggest challenges. And ultimately, because we stick with it, we succeed. And I believe we are going to do that again.

Today, the American people are going to be watching Congress to see if they have that same faith

Thank you very much everybody.

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