10 Truths About Big Oil

Bill Georgevich



The fossil fuel economy is literally a dinosaur that should have ended soon after World War II. For decades, Big Oil and Gas have enjoyed a massively successful global hegemony over this planet's energy. More than world domination in the marketplace, the Oil and Gas industry has succeeded in convincing mankind that fossil fuel is still the cheapest, most viable source of energy. This has simply not been true since the mid 1970's.

Here are some astonishing facts:

• The first hydrogen powered fuel cell battery was invented before the Civil War.
  
  
• Electric cars were the preferred method of transportation for the very rich in the U.S. until 1925.
  
  
• After making 1200 all-electric cars to comply with a California zero-emissions mandate, General Motors repossessed those cars from their owners and crushed them, even though movie stars offered the car maker millions of dollars not to.
  
  
• There can be no 'energy crisis' in a universe where the most plentiful element is hydrogen, the preferred fuel for NASA spacecraft.
  
  
• There is a enough sunlight in the U.S .Southwest to provide electricity for one half of the country.
  
  
• Gov. Arnold Schwarzenegger's hydrogen car initiative includes hydrogen fueling stations, whose hydrogen is made and provided by Shell Oil -- despite the fact that hydrogen can be made at home with ordinary tap water.
  
  
• The first hydrogen fuel cell passenger car is not the (unavailable) 2008 Chevy Equinox, but was a 1966 van that GM secretly and successfully tested.
  
  
• The Oil and Gas industry spends hundreds of millions of dollars a year in public relations efforts to convince the public and law makers they should remain unregulated, while at the same time encouraging consumer conservation so that less and less gasoline can be sold for more and more money.
  
  
• Major car makers the world over don't want you to own an electric or hydrogen fuel cell car as there is virtually no mechanical maintenance compared to an internal combustion engine, eliminating tremendous profits from the sale of parts and services.
  
  
• Every U.S. president for the last 100 years has been an "Oil President" as there has been no major government initiative to remove us from the fossil fuel economy -- unlike France, which has been 85% fossil fuel independent since 1985.
  
  

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Exxon Stops Drilling

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Bill Georgevich reporting

After posting the largest corporate profit in the recorded history of mankind, Exxon has decided to halt drilling and development of existing oil leases - despite Sarah Palin's campaign to the contrary. In a move to make the perfect storm for another oil crisis, this decision to use profits to buy back Exxon stock, rather than "Drill Baby Drill", proves that the world’s largest corporation is continuing to control the world’s economy to suit themselves.

Some folks may think that high oil and gas prices will hasten the renewable green economy. And to some extent that is true. But why not have both during this time of world recession?

Lower gas prices translate into a savings of about $200/month for the average American family of 4. That's essentially a $2400/year cash injection stimulus check!

Why not embrace the Obama and Gore green initiatives and require the oil companies to keep prices down by keeping supply up? The oil lobby begged Bush for more areas to drill in 2008 during the oil crisis they completely made up, and now they aren't drilling on the leases they already have?

This ranks along with AIG as one of the greatest scandals of the 21st century. We need low fuel prices to sustain a recovery and buy us the time to convert our energy economy to a renewable world.

Oil Prices Down, Gas Prices Up

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Last year on The Renewable Minute we asked, How can oil prices plummet after being so high? The answer: SPECULATION, and the speculators were fleeing the market. Now gas prices are creeping up, even as oil prices continue to fall. How? Oil refineries are reducing the supply to increase demand and pump up the price. Guess Exxon-Mobile doesn’t want a world recession to interfere with windfall profits for 2009.

And speaking of deja vu from late 2008: Have you noticed those Exxon ads are starting to show up everywhere as they did when gas was $4 a gallon? About 2 weeks before gas prices started creeping up again, Exxon was back in my Yahoo inbox, this time with a kinder, gentler message about renewable energy research, a politically more correct position in line with the Obama-Chu-Al Gore cultural creatives who currently rule the roost.

Our next program will be dedicated to the unveiling of the renewable energy provisions Obama's Stimulus Package. We’ll be visiting the new government website Recovery.gov, which promises total transparency, to look into a curious 3+ billion dollar line item for "fossil fuel renewable energy research." Join us next time to find out what that means.

What's Really Behind That Changing Price of Gasoline?

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In October of 08 we reported that the Saudi’s believed the wild fluctuation in oil prices was based on commodity market speculators. This week, “60 Minutes” reports that the same investment bank that got billions in bailout money also used commodity trader techniques from Enron to hyper-inflate the price of oil last summer when supply was high and demand was actually diminishing.

And it gets worse. 60 Minutes’ Steve Kroft points the finger at Morgan Stanley, claiming that the same company that needed billions in US government bail-out funds also took advantage of deregulation pushed through the Bush Administration’s first term by lobbyists from Enron. Remember Enron, the largest contributor to the Bush 2000 campaign, the oil and gas company that created artificial rolling blackouts in California to successfully raise electricity rates? It’s the same corporation that created fake companies to boost its stock price. Well, according to the CBS news story, those loopholes for oil commodities trades still exist and those techniques used by Enron in California were used to buy and sell oil contracts for a company, Morgan Stanley, that is not in the oil business.

Connect the dots and you have a scenario in which one of the greatest contributors to the global financial meltdown also made the strongest contribution to the world recession by artificially boosting oil prices during a time of increased oil supply and lagging demand.

And what does the Bush administration do? Send them to jail like Ken Lay? No, they receive a $20 billion bailout from the US government.

Petrol Cheaper Than Ethanol?

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Yes, it’s true. The corn-sourced distilled ethanol that is mixed with gasoline is now more expensive than plain old gasoline. Gasoline blenders have always used more ethanol than required because it was cheaper than gasoline. Not any more. With today’s lower oil prices, ethanol will be blended with gasoline by decree from Congress for cleaner air, another finger pointed at a misguided national strategy for alternative fuel.

On a purely voluntary basis, gasoline blenders have always used more ethanol than the required minimum because increasingly high oil prices made ethanol an attractive fuel in its own right. This month with oil under $50/bbl and wholesale gasoline under $1/gal and ethanol at $1.60/gal it makes no economic sense to blend ethanol with gasoline. The national blending requirement will become binding for the first time in 2009. Gasoline blenders will have to use 11.1 billion gallons of ethanol because that is what the law tells them, not because it makes economic sense.

In our last program I shared what it cost the Saudis to extract 1 barrel of oil - $2/barrel or less 4 cents/gallon. Well, I stand corrected. The oil minister of Saudi Arabia was just interviewed by 60 Minutes' Leslie Stahl ,and he told her on Dec. 7 of 2008 that it cost LESS than $2/ gallon.

This means that with US current laws, gasoline will be more expensive because of the mandatory blending with ethanol than by itself! This would be inconceivable in the summer of 08 and I don't think Americans have really taken it all in yet. As we talked about on several programs, oil commodity speculators poured billions into futures contracts that artificially raised the price of oil for years finally resulting in the $4+/gallon fiasco of the summer of 2008. When money left the stock market it fled the commodity markets as well forcing oil and gas prices to get closer to their actual Fair Market Value.

The other fear that drove prices up artificially was the notion that the Saudis had somehow reached peak oil production. They have consistently heartily denied this and demonstrated to 60 minutes in Dec. 08 how they intend to actually double their output at least for the next decade.

Today drivers are relieved to get was is essentially a $200/month economic stimulus package but they're also outraged that the stories about India, China, and the rest of the "increased demand" for oil really was only increased demand by speculators!

We also promised on our last program some insight as to what this means for renewables. The magic number for renewables to be competitive is for oil to sell at $35/barrel. It hasn't got there yet so the question we will explore next time is what happens now that gasoline is cheaper and how best to take advantage of it for clean energy. In the meantime, all those who told us that the era of cheap oil is over will have to eat those words at least for now.

Are you driving 75% less? If not, then why is gasoline so cheap?

Bill Georgevich reporting

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We want to know why no one is investigating the relationship between oil prices and oil demand. Unless the world is using 75% less petroleum, it appears that the sky rocket in prices this summer was driven purely by speculation in the energy stock markets. If that’s so, what is the real cost of oil?

We know that it costs about $2/barrel or 4 cents a gallon to pump pure crude oil out of an existing oil well. There also are relatively small transportation and refining costs involved in turning that oil into consumer gasoline.

We know that in America a new oil refinery has not been built in 30 years. And we know that 30 years ago those refineries were producing gasoline that sold for less than 75 cents/gallon. Add to that the fact that in some countries like Iraq, Iran, and Venezuela, gasoline sells for less than 40 cents a gallon right now.

What does it all mean? Certainly this points to the fact that there is no relationship between “demand” and the market price of oil anymore than the value of a company is represented by it’s stock value. Companies can be over- or under-valued in the stock market….So too in commodity markets.

Without speculation inflation, oil would sell these days for between $10 and $20 per barrel with the retail cost of gasoline under a dollar per gallon. Keep in mind that oil sold for $45/barrel in early December 2008, even though OPEC had lowered production by 60 million barrels/month in a vain attempt to create a $50/barrel floor through which prices would not drop. Short term predictions point to even lower oil prices. What does this mean for the consumer and for renewable energy? Stay tuned, we’ll talk about low fossil fuel prices and its effect on renewables in our next program…

Should US Tax Payers Bailout the Electric Car Killer?

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While the US Treasury and Congress debate whether to save the Big 3 carmakers, environmentalists and renewable energy activists ponder whether General Motors, the Detroit auto manufacturing giant that killed their electric car 10 years ago, should be given a second chance. Some say that the 100 mile-per-gallon Chevy Volt promised in 2010 is too little, too late.

Tax payers are faced with a real dilemma. Should we support bailing out the Big 3 in Detroit? After all, investment banks got federal money to cover credit default swaps, which are unsecured side-bets on imaginary financial instruments. GM, Ford, and Chrysler are real brick-and-mortar companies that build real goods and employ millions of Americans. The news pundits warn that the challenged economy can't tolerate a shut down this large in the Midwest. Imagine hundreds of thousands of auto workers marching on Washington, with the fierceness and fury of Martin Luther King, demanding that Uncle Sam save the most powerful symbol of American manufacturing from extinction and mass layoff of over a million people.

Patriotism aside, how did GM and the rest get themselves in this mess? We may be quick to assume that like the Dow, Detroit is going down with the sinking ship the banking and mortgage crisis. The timing of the sudden run on government bailouts may suggest that the Big 3 are just another victim of the financial fiasco of Oct 08. No, it's just odd timing. Detroit's demise, if it comes to that, is by it's own doing – decades of poor decisions, culminating in it's most recent choice to continue making low mpg cars and trucks, even as gas prices hit $4+. Folks couldn't unload their SUV's and find enough high mpg cars to replace their daily driver. When they did, most of them were made in Asia.

GM made big cars because their ad consultants told them that big cars made drivers feel powerful. When city folks I know, who only drive in the city, purchased SUV's, their excuse to me was always that in a crash, big cars are safer. Physics would support that until every American seemed to be driving bigger and bigger cars.

Instead of making advances in hybrids and eletric vehicles, GM not only discontinued their only electric car after making only 1100, they decided that even less than a thousand on the road offered too much of a challenge to their gas-guzzing hegemony and actually had them towed away from their clinging lessees -- who offered GM millions just to keep the cars -- and crushed them!

Should we really have sympathy for car company that decided it was better to sue the State of California and overturn it's 10% zero-emission law rather manufacture a constantly improving electric car?

And what about this Volt? This hybrid sounds promising: You plug it in to power the first 40 miles, after which a gasoline powered generator makes just enough electricity to keep you going. 100 mpg or more is predicted for the car. Though GM would have you think it's breakthrough technology, it isn't, really. Every diesel locomotive ever made operates on the same principle: generate electricity to power the electric motors pulling the train. They are the most fuel efficient system in the world. When were they invented? 1920. So the Volt, we discover, is an old technology that GM finally decided the American driver was ready for.

The conclusion we come away with is that there is some kind of collusion between oil companies and domestic Detroit Iron. And somehow the wild and wacky speculation in oil futures (which was solely responsible for the dramatic gasoline price hike earlier this year), threw things out of control and drivers got spooked.

The car companies have known about the threat of high gas prices and shortages since the mid 1970's, but to hear the CEO's of these companies talk today, you would think that this problem suddenly occurred in the last few weeks. In a separate story we will talk about the real purpose of GM's introduction of the Chevy Volt - and it's not about getting good gas mileage or lowering our carbon footprint. Stay tuned.

Energy Legislation at Last?

Bill Georgevich reporting

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Despite many efforts to pass an energy package, Congress adjourned for summer recess gridlocked and empty-handed. Partisan compromise is essential if we will ever see any real energy legislation. Republicans must give up oil industry tax breaks and Democrats need to budge on the offshore drilling ban. A bi-partisan group of 10 Senators, days before adjourning last month for summer recess, wrote a compromise bill that does just that.

The New Energy Reform Act of 2008 was written in response to the months-long Senate deadlock on energy legislation. The legislation, which could be considered when Congress returns in September, includes limited offshore drilling with increased investment in new energy technologies. A portion of the finding for renewables would come from taking back tax breaks from the oil industry. The bill also sets a goal of fueling 85 percent of the country's automobiles with alternatives to oil within 20 years.

The upside:

• co-sponsored by a bi-partisan group committed to breaking the energy legislation gridlock in Congress
• closes tax loopholes for the oil industry
• maintains the ban on offshore drilling in California
• extends renewable energy tax incentives that will expire in December
• invests $20 billion for the conversion of cars and trucks to non-oil fuel sources
• garnering wide support from liberal democrats, moderates, and Republicans

The downside:

• permits offshore drilling in parts of the Gulf of Mexico and the east coast (by states' consent)
• recycling of spent nuclear fuel

Given the many bones of contention between the two parties, it is imperative to accept that a compromise coming from both sides of the aisle is the only solution to the impasse. Republicans need to give in on oil industry tax loopholes so that the renewable energy tax credits can be paid for. Democrats need to budge on their intractable stance on offshore drilling.

This bill was written just before Congress adjourned in early August. We hope that our Senators give serious attention to this bill when they return on September 4.

Countdown to Energy Reform

Bill Georgevich reporting

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This week we begin our Countdown to Energy Reform. While Congress enjoys their August recess, many Americans are wondering, where are the solutions to our energy issues? Despite multiple efforts to pass energy legislation, the Senate has been intractably gridlocked. Time is running out. Essential renewable energy tax credits will expire in December. Join us in our weekly call to action as we contact our vacationing Senators every week until they reconvene in September. This week: send a letter to Senators Obama and McCain.

Congress went on recess in early August without passing any energy legislation. Despite multiple efforts, both the House and Senate danced around the crucial issues of gas prices, offshore drilling, oil-market speculation, and the clean energy tax credits that are expiring in December.

The clean energy tax credits are especially important, because as December draws nearer, more and more investors in various renewable energy projects are getting cold feet. Many have pulled out entirely or are threatening to do so if the extension doesn't happen. Failure to renew these tax credits will be disastrous for our country and the steady momentum towards clean energy that has been taking hold.

Obama and McCain have remained rather detached in Senate activities related to renewable energy legislation. Both were among only a few to abstain on a vote to get a bill that would renew clean energy tax credits on the floor for debate. And both have shown some allegiance to the big oil industry that so handsomely finances their presidential campaigns. In 2005, Obama voted for an energy bill backed by Bush that included billions in subsidies for oil and natural gas production. In June of this year, in the weeks following McCain's embrace of offshore oil drilling, contributions from the oil and gas industry poured in ($1 million, in fact, compared to $116 K in March, $283 K in April and $208 K in May).

When the Senate reconvenes on September 4, they will be greeted with a new, bi-partisan energy bill, the first to offer a compromise to the wide philosophical and political schism that has prevented any passage of renewable energy tax credits. The New Energy Reform Act of 2008 is very promising, and couldn't come a moment too soon.

Obama has shown support of the bill, in recognition of the hope that it will end "partisan gridlock and special interest influence" and bring to the Senate "a good faith effort at a new bipartisan beginning."

McCain has remained very quiet about the bill, but most likely will not support it, for at least 2 reasons: one, the bill will take away subsidies for the oil and gas industry, which McCain adamantly wants to keep in place; and two, the bill allows for very limited offshore oil drilling (none at all off the California coast). Learn more about the bill here.

And if you haven't already, we invite you again to send a letter to Senators Obama and McCain on the very important and timely matter of energy policy.

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Do You Own an Oil Company?

Bill Georgevich

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"Do You Own an Oil Company?' -- that's what the American Petroleum institute's full page ads in Time Magazine are asking. The ad reminds us that it's millions of Americans owning a piece of the Oil and Gas industry who get hurt when government attempts to tax or regulate Big Oil. This warning is from the same industry who so recently denied the reality of global warming.

Yes, it is true that "tens of millions of Americans own a piece of the US Oil and Gas Industry", but it does not mean that "when the political rhetoric gets hot about increasing energy taxes or taking 'excess profits' from U.S. oil companies, it is important to step back, look at the facts, and ask yourself, 'who does that really hurt?'"

This the latest spin from the Petroleum Institute, the same folks that brought you the "myth" of Global Warming. If you are indeed a stock holder in the Oil and Gas business then you have a vote, a vote to influence these mega-corporations at stock holder meetings that oil as a fuel should be voluntarily phased out and used exclusively for durable goods like plastics. You, as a part owner of this business, have the right to demand that these companies take their billions and billions (127 billion in 2007 alone, according to Congress) in profits and invest that in renewable energy.

You can be sure that like all monolithic industries (remember Enron?), the Oil and Gas Corporations are hiding as much of their rising profits as possible. According to their own pie chart above just 1.5% of the oil business is owned by executives, yet the outgoing president of ExxonMobil got a 400 million dollar retirement check. That's nearly 20% of the 2.4 billion the Bush Administration has totally allotted for government spending on research into Wind, Solar, Hydrogen, Coal, and Nuclear combined!

The man who received the 1/2 billion dollar golden parachute was Chief Executive Officer and Chairman of ExxonMobil Lee R. Raymond. Hey Lee, how about sharing the wealth? Your buddy George Bush could use some help with the whole renewable energy, global warming thing. Your president is spending 2.4 billion dollars in Iraq every 40 hours and, since you, Lee, are earning $6,000/hr while in retirement, do you have any spare change for our War President?


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