Is Big Oil Influencing Our Elections?

Chinese demand drives U.S. gasoline prices - that, and profits for American oil companies, banks, and hedge funds. It's really that simple, it's not Obama's energy policy.

And when the big oil companies got wind of Obama's proposal through the grapevine (lobbyists) several weeks ago to end tax subsidies for oil and gas companies, gas prices suddenly started going up; but rather than tying this to higher taxes (and less profits), Iranian threats are now being used as their leading excuse. Is big oil in cahoots with the Republicans, and attempting to influence the 2012 elections? They have before.

The U.S. also has an abundance of natural gas, so keep your eyes on these prices too. If China starts making cars powered with natural gas, we could end up paying triple to heat our homes.

The History of the Standard Oil Company (written in 1904) was an exposé of the Standard Oil Company, run at that time by oil tycoon John D. Rockefeller. The book was about trusts, large businesses that, in the absence of strong antitrust laws in the 19th century, attempted to gain monopolies in various industries.

By 1911, with public outcry at a climax (almost like today), the Supreme Court of the United States ruled that Standard Oil must be dissolved and split into 34 companies. Two of these companies were Jersey Standard (Standard Oil Company of New Jersey), which eventually became Exxon, and Socony (Standard Oil Company of New York), which eventually became Mobil. On November 30, 1999 they both merged to become ExxonMobil.

Today ExxonMobil is the largest refiner in the world and is the largest of the six oil super-majors. The nation's six largest oil companies reported over $78.3 billion in profits in just the first six months of 2011 (the highest ever in human history from any business). So why are taxpayers still subsidizing the oil industry? That is exactly what the Taxpayers for Common Sense would like to know.

It's always been a ménage à trois between the bankers, the oil companies, and the Republicans. And like water, oil will always find the path of least resistance. And these days, oil is on the high road to China.

With 1.3 billion people, the People's Republic of China is the world's most populous country and the second largest oil consumer, behind the U.S.

Just like America once experienced during the Fabulous Fifties, in recent years China has been undergoing an historical process of industrialization and is one of the fastest growing middle-class economies in the world. With real gross domestic product growing at a rate of 8-10% a year, China's need for energy is projected to increase by 150 percent by 2020. To sustain its growth, China requires increasing amounts of oil. Its oil consumption grows by 7.5% per year, seven times faster than the U.S.

Growth in Chinese oil consumption has accelerated mainly because of a large-scale transition away from bicycles and mass transit toward private automobiles, more affordable since China's admission to the World Trade Organization. With automobile numbers growing at 19% a year, projections show that China could surpass the total number of cars in the U.S. by 2030.

China is now expected to produce 20 million vehicles in 2012 with double-digit growth rates to stabilize somewhere around 35 million units annually by 2020 or 2025.

Four years ago under George W. Bush, when we had over $4-a-gallon gasoline, Forbes reported: "China has been the primary contributor to the increasing oil demand over the last decade." Back then China sold gasoline for 2.49 a gallon (when oil was over $130 a barrel) and all of the Chinese companies were still making profits.

The Chinese government has been competing with international oil companies like ExxonMobil, partially because it wants to secure a fuel source for its huge and growing country.

China's oil companies are nationalized, and as a result, the Chinese government subsidies the price of gasoline so that the average Chinese consumer only pays $1.50 to $2.50 per gallon. This would be the same as if the U.S. government nationalized Exxon, Chevron, Texaco, etc. and took the billions of dollars in profits that these companies earn and passed these savings on to the American people and domestic businesses.

But in America it's just the opposite. Domestic oil companies don't subsidize our gasoline, taxpayers subsidize the oil company's profits - "multi-national" corporations that dodges U.S. taxes.

Like Oliver Stone suggests, isn't it time that America nationalized its own oil industry, especially if we wanted to see fair prices for our energy costs - - and also to be TRULY "energy independent" by NOT exporting gas and oil?

It's Chinese consumption and market manipulation (for profits), not domestic demand, that drives domestic gasoline prices.

Domestic demand has had very little (if any) bearing on domestic gasoline prices. Gasoline prices are surging, spurred in part by recent refinery closings (market manipulation?), but mostly because of foreign demand and speculation by the banks and hedge funds. Read: Profits Drive Gasoline Prices, not Obama's Energy Policy

With rising demand from countries like China, gas prices are already at record highs for the winter months — averaging $3.73 a gallon nationally, according to AAA’s Daily Fuel Gauge Report. On July 3, 2008 the average cost for a gallon of gasoline was at it highest level ever in U.S. history at $4.11 a gallon when the record peak for a barrel of oil was at $145.

While although gasoline prices are higher elsewhere, that's mostly because of their government's taxes. Fuel taxes in the United States vary by state. Federal taxes currently make up just 11% of the pump price in the U.S., according to the Energy Information Administration; but in France and the U.K., taxes account for an average of around 70%.

But even despite a fall in gasoline demand in the United States and Europe, global oil markets are tightening because of the demand for energy from Asian countries, particularly China and India.

If there is conflict in the Middle East, and our military gets involved, demand for oil goes higher to supply our ships and aircraft...and there could be a 50-cent increase for a gallon of gas, or $30 a month for an average American consumer.

Iran's saber-rattling encourages investors to buy oil futures contracts at higher and higher prices. The bankers are speculating, protecting their profit margins from higher prices by committing obligations to buy now, and that starts the ball rolling toward higher prices. There are many ways that huge money funds and banks can influence the market. Koch Industries Lackeys Admit To Manipulating Oil Prices…And Gloat About It, Too

In testimony to Congress on May 11, 2011 the chairman of Exxon-Mobil, Rex Tillerson, said the price of oil was inflated by about 30% due to speculators. But when the CEOs of oil companies buy back their own stock, you know they're making money.

Why doesn't the government force futures traders to physically take possession of the commodities they're buying and we'll see pricing based on true supply and demand. There's no practical real world justification for $100 a barrel oil. Gas prices do not reflect actual supply. Prices are now determined by China's demand, speculators, huge hedge funds and the value of the dollar against other currencies.

The United States Commodity Futures Trading Commission (CFTC) should move ahead with their attempts to add restrictions designed to remove some of the speculative element from commodity futures trading. Their proposals would restrict the number of open positions held by a single individual or organization. The objective is to reduce speculative trading. This will affect large commodity trading funds and also on governments that have been actively intervening in commodity trading.

The five commissioners at the CFTC must do its job and obey the law in the Dodd-Frank bill that requires the agency to enforce position limits in the oil futures market. Read: How Wall Street Is Raising the Price of Gas

One should also expect the transportation industry to pass on its higher fuel costs to consumers. We will see rising prices for basics like food and household goods, increasing inflation and further limiting consumers' purchasing power in a fragile economic climate. Thus, dependence on oil affects everyone, regardless of their driving behavior, public transit use, or location. But until there is a paradigm shift that favors conservation, alternative energy, and a "think globally, act locally" mentality, nothing will change.

Oil prices are going up and yet we are still exporting it. New shale oil finds in North Dakota might increase global supplies a bit, but probably not enough to make up for increasing demand from China and other emerging economies. Basically, prices are going to stay high for the foreseeable future; even small supply disruptions are likely to cause big price gyrations; and big supply disruptions are likely to cause full-blown recessions. Like it or not, this is our future.

If American cars got 100 miles-per-gallon and we turned off all our heaters and air conditioners, China's growing middle-class is expected to buy 30 million more new cars within the next 6 years...so demand for oil elsewhere will still keep prices high domestically. And despite what the Republicans claim, any oil from a Canadian pipeline will go to China to fuel those cars.

Of course alternative energy is light years away, because we have been cutting the budget for it for decades. Why? Because the true cost of alternative energy cannot compete with the subsidized cost of fossil-fuel energy, and it's very difficult to justify pouring research money into energy sources that look like they cost more than present sources. Read: The Republican's Selective Outrage (re: Solyndra)

Funding for fusion research in the U.S. is also being cut (again) next year. Why? Big oil. It's a good thing that this research is not classified and other countries are still working on it; hopefully the Chinese will be willing to build fusion plants for us within the next 30 years.

Coal and Oil Problems: - costs going up - finite resources - environmentally hazardous to obtain - extremely dangerous occupations. - constant pollution - cause of global warming - decreasing number of coal and oil jobs - foreign energy dependence - 19th Century and older technology

Solar and Wind Solutions: - costs going down - infinite resources - silicon and other materials are dramatically less hazardous - relatively safe occupations - no air pollution - solution for global warming - increasing jobs - energy independence - 21st century and beyond technology

The real price of gas can be as high as $10 a gallon when we factor in the hidden costs for oil spill cleanups, reduced crop yields, health care bills and lost productivity associated with pollution-related illnesses, global warming, wars for oil and security in the Middle East and around the world (the cost of using our military to protect not just oil and gas imports for our "national defense" and domestic consumption, but also for oil and gas exports for corporate profits).

Europe and China are outspending the U.S. on solar, wind and other technology. They are cleaning our clock. Congress must stop giving subsidies to profitable oil, gas and coal companies. With much more research and development, we could eventually create hundreds of thousands of jobs by investing in energy efficiency and sustainable energy.

But in the meantime, oil sands and shale oil would go a long way towards "energy independence" if we didn't export domestic and Canadian oil; we need to exclude this oil from the "global market".

I have always suspected that since the 1973 oil embargo, the big oil companies and the U.S. and British governments are already aware of vast quantities of yet untapped domestic oil, and only imports to consume the global supply first, before having a monopoly on all the world's only known supply of oil - - and they only allow for the current high price of oil because the market can still bear the cost without totally crippling our economies.

And for all the general public knows, there may already be hydrogen and fusion technologies at hand, but because they are less profitable, they won't be used while there is still available oil, thanks to our politicians and the oil lobbyists. (Lobbyists on K Street paid like CEOs on Wall Street)

But either way, if the energy crisis is ever over, the next "global crisis" will be about water, and who owns and controls it. I can already imagine $10 for a gallon of tap water.

My Other Related Posts

• Keystone Pipeline: Who Owns the Oil, and Why?
• Keystone Pipeline: It's WE who should get into the oil business!
• GOP's Energy and Jobs Bill is Transparent
• End Entitlements for Big Oil
• GOP Won't Reform Banks or Cut Oil Subsidies