Hate the high price of gasoline? Look at the whole picture

By Cindy Schnitzler

October 18, 2007 | As a nation, the United States frequently ignores problems that don't seem to touch us. We also have a nasty habit of perpetuating others' misery for our own financial gain and to keep ourselves comfortable. Most Americans live complacently with the wool pulled over our eyes, perfectly willing to deceive ourselves into thinking that everything in the world is of little consequence, and perfectly able to convince ourselves that if there is something wrong in the world, then eventually someone else will do something about it.

We generally only notice problems that wander into our backyards.

Take the problem with the rising price of gasoline. How many Americans have not been frustrated with the increasing amount of money we have to pump into our cars just to get to work? The problems of supply and demand continue to force the prices of gasoline up, and as long as we are willing to pay what the oil companies demand for their product, they will continue to raise their prices.

The demand for oil has been increasing all over the world, not just in the United States and Europe. Countries like India and China, which are growing fast in many ways, are undoubtedly requiring more oil. Couple this with the fact that many of the world's largest oil producers -- Iraq, Iran, Nigeria -- are increasingly unstable, and of course the gas prices are going to go up.

But the real cost of the gas we are putting in our cars is not what is posted at the pumps. CNNMoney.com states that in 2005, Exxon Mobil set a huge profit record—their net income for that year averaged out to $1,146 a second.

But Exxon is certainly not the only oil company making huge profits. One of the biggest contributing factors to this is government subsidies. According to Earth Track, a Web site specializing in helping the layperson understand government intervention in global energy, subsidies are more than just cash. "Subsidies are government-provided goods or services, including risk-bearing, that would otherwise have to be purchased in the market. Subsidies can also be in the form of special exemptions from the standard required payments ( e.g., tax breaks)."

The government continues to provide such services to the oil companies despite the fact that they can clearly afford them on their own.

Douglas Koplow and Aaron Martin of Industrial Economics, Inc., in their study "Fueling Global Warming: Federal Subsidies to Oil in the United States," broke down the fifteen largest subsidies for oil, and found that the total came to over $34 billion. Their report also states that in the 1980s, "federal subsidies to oil were more than four times higher than those to all renewable energy and energy efficiency sources combined."

According to the New York Times, a study by the Interior Department published last year "estimates that current inducements could allow drilling companies in the Gulf of Mexico to escape tens of billions of dollars in royalties that they would otherwise pay the government for oil and gas produced in areas that belong to American taxpayers." This study was conducted to compare the amount of money the government was pumping into the system to the output it was receiving. The conclusion was rather dismal: Robert A. Speir, an employee of the Energy Department who participated in the study, concluded that, "[The government] is giving up a lot of money and not getting much in return." Congressman Nick J. Rahall states, "Royalty relief is the gift that keeps on giving. It seems painfully obvious that when the government gives tax breaks in the form of royalty relief to Big Oil, the American people are footing the bill."

Despite all of these incentives for oil drilled in the United States, most big oil companies continue to drill in foreign countries, for multiple reasons. Not the least of these is greater supply, but the list also includes foreign governments' lack of laws and regulations protecting the land and the people of the area. It is easier for them to get at the oil when they don't have to worry about what they are doing to the land and the people.

Peter Maass, in an article entitled "The Price of Oil," describes how in 1967 an extraction program for oil was operated by Texaco and a state-owned oil company in Ecuador. Mass writes that 25 years later, this program "had reduced parts of the Amazon to a deforested miasma of pollution and poverty… Ecuador had a negligible foreign debt before oil was found but now owes $16 billion and, the greatest insult of all, more than 70 percent of the population lives in poverty." His article continues to describe how these countries that have foreign oil companies drilling in them are more prone to violence among the people and corruption among officials. "An oil state is, almost by definition, a dysfunctional state."

The bigwigs of Big Oil vehemently defend their foreign operations, however. In a panel discussion on the security of global energy in Calgary held Sept. 7, Exxon Mobil CEO Rex Tillerson stated, ``The nationality of energy is irrelevant… A diversity of sources mitigates the impact on total supply from disruptions in any region or from any one source… History shows [pursuing energy independence] is often counterproductive, leads to inefficiencies, higher prices, supply shortages and at times even trade wars."

He objects to calls for development of domestic energy supplies and complained bitterly about a Congressional proposal made by the Democrats to pull the plug on roughly $15 million in tax breaks that have previously been available to oil companies for the purposes of exploration and expansion for oil production.

Maass also writes that the vast majority of environmental groups in the United States that oppose oil drilling are focused only on the domestic side of things. They combat Big Oil on the home front, but don't seem to be too concerned with what these companies are doing to other countries. He points out that these groups demand that our waters and lands be kept pristine and beautiful, while the American people -- including themselves -- continue to demand oil in quantities that encourage the oil companies to further despoil the lands and waters of other nations. He explains that this disconnect is essentially our selfishness.

"You don't need to alter your lifestyle much to help protect baby seals or punish Kathie Lee for supporting sweatshops, but you might need to suffer inconveniences -- like higher gas prices, energy-conservation efforts and new taxes for alternative-fuels research -- if better energy policies were adopted."

We as Americans have become so enamored with our lives of plenty and ease that we are loathe to inconvenience ourselves with other nations' selfish desires for things like food and clothing. We're perfectly willing to reduce another country to an impoverished war zone so we can continue to live the lifestyle to which we have become accustomed.

But if we could see what Big Oil is doing to other nations, if we would stop and think about what this would look like in our own country, maybe we would think twice before nodding our approval of our government's decision to not only condone it, but to reward it.

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