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Five honchos of Big Oil appeared before Congress last month singing in
perfect harmony their old song that skyrocketing gasoline prices are simply
the product of free market forces. “The fundamental laws of supply and
demand are at work,” crooned the president of Shell Oil.
Bovine excrement! There is no free market in the oil industry. Sure,
global demand for petroleum is up, but under free-market laws, supply is
supposed to rise to meet that demand and hold prices stable. However,
there’s only a handful of global suppliers, and these oligopolists openly
conspire to restrict the flow of crude, thus doubling oil prices in the past
year.
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Who are the oligopolists? The OPEC cartel, for sure, which has flatly
rejected pleas to open up their pipelines. But they’re not the only ones. Yes,
Saudi Arabia and Iran are the two largest producers on the globe, but who is
the third? Exxon Mobil! Exxon, Shell, BP and other brand-name gasoline
giants who so piously invoke supply and demand orthodoxy in congressional
testimony are themselves major producers, and they have a direct interest in
keeping supply short to hold their crude prices high.
Wait, you say, doesn’t that raise their cost of making gasoline? Yes, but
so what? There is no free market at the pump, either. Thanks to the rash of
mergers that Washington has allowed, gasoline refining is oligopolized, too,
and guess what? The big refiners are now slashing their output of gasoline to
keep supply low and prices rising. Also, notice that pump prices are the
same at Exxon, Shell and other major stations. If a free market really
existed, at least one of them would try to attract customers by cutting prices.
By locking up supply, these oil barons are able to rob us – and that’s another reason America must push alternatives to oil.
“Exxon investors veto plans to split power, go greener,” Austin American Statesman, May 28, 2008
“The Sam Old Song on High Gas Prices,” www.nytimes.com, May 23, 2008
“Oil Refiners See Profits Sink as Consumption Falls,” www.nytimes.com, May 14, 2008