May
12 , 2006
To Pump
or Not to Pump, That Is Not the Question
America is the land of the automobile. It was invented
and nurtured in this land; it throve and flourished
here and became the darling of the entire nation.
The inventive genius of this ‘can do’
society brought it within the reach of even a man
of meager means. Soon it came to be counted among
the necessities of a common man. It is now the consuming
passion of this society. That is the ground reality.
An average American is therefore astonished to be
told that he has become addicted to oil, and he
is therefore himself responsible for the current
high cost of gas.
He does not comprehend clearly the complexities
of the oil industry. The role of the oil-rich Gulf
States, the war in Iraq, the clouds of a conflict
over Iran and the sudden spurt in the thirst of
oil in China and India are too far away from his
mental screen. All he sees there are the Neros of
the oil industry manipulating the market and putting
in their pockets millions in profit squeezed from
the consumers’ wallets.
He wants to hit back and see someone squirming like
himself. He finds confronting the choice between
feeding the family and fueling the car. He can’t
give up either. It is the Hobson’s choice.
To pump or not to pump, that is not the question
for him. He has to.
As it is, his paychecks are already eaten up by
a host of other rising costs, from health care to
education, to housing. He cannot find any justification
for the billions made in profit by oil companies.
He may want to kick the butt of the CEO of an oil
conglomerate who was recently paid $400 million
on retirement. Since that is not feasible, he takes
it out with the cashier by hitting hard on the counter
the wad of dollar bills for the gas. The young cashier,
a college student, appreciates the customer’s
anger and tries to explain the intricacies of the
system, but fumbles and falters as he could make
little sense trying to separate oil from politics.
Responding to the mounting outrage, President Bush
announced on April 25 a series of measures. These
include halting of the purchases for the government
emergency stockpile, suspending environmental rules
governing gasoline refiners, and investigation of
possible price gouging by oil companies. He has
ordered three federal agencies to investigate this,
particularly as several oil companies have reported
record profits. Exxon Mobil reported an enormous
profit of $36.1 billion for 2005 - the biggest ever
by any US company.
In the Congress, public representatives have come
out with scathing denunciation of oil companies.
Senator Ron Wyden (D) advocated the withdrawal of
subsidies of $35 billion for oil and gas companies.
GOP Senators have rolled out a package of energy
measures, including a $100 rebate to most taxpayers.
They also proposed permission for drilling in the
Arctic National Wildlife Refuge in Alaska –a
proposal opposed vehemently by Democrats.
Democrats too have unveiled their own ideas, including
windfall-profit tax, a temporary suspension of the
federal gas tax and alternative energy investments.
The windfall-profit tax sounds punitive and thus
holds an emotional appeal for the customer at the
pump. But such a tax does not lower prices; it simply
creates another moneybag for the government. Nor
would it increase oil production by one barrel or
decrease American companies’ dependence on
foreign producing states.
The Democrats have held press conferences at gas
stations to effectively exploit consumers’
pain. Both parties are focused on the mid-term elections
in November. The oil companies too have launched
PR projects but in the opinion of Senator John McCain,
“They have the least PR sensitivity of any
group outside of satanic cults.”
From the viewpoint of an ordinary consumer, the
profit margins of oil companies are outlandish,
and they are kicking consumers when they are down.
He has grown cynical towards both parties. Election
results will reveal the direction of his rage.
The oil industry, it need be pointed out, has been
one of the closest allies of the Bush administration.
And it has financed Democratic candidates too. The
rhetoric in the Congress is thus unlikely to be
matched by concrete proposals bringing immediate
relief to customers at the pump.
Dozens of price-fixing investigations in the past
have come to naught. Big oil’s top executives
have appeared before Congressional committees twice
this summer. The current furor too will die down.
As the Federal Reserve Chairman, Ben Bernanke, has
cautioned, “Unfortunately, after many years
of not really doing as much as we should have on
the energy front, this situation has arisen, And
I don’t see any way to make a marked impact
on it in the very short run…. I would like
to let the market system work as much as possible
to generate new supplies, both of oil and alternatives,
and for the prices, painful as they may be, to help
generate more conservation and alternative uses
of energy on the demand side.”
With polls showing that high gasoline prices are
creating deep anxiety about the election-year economy,
the President wants to project the image of a leader
doing everything he can to provide some relief,
but without alienating corporate allies and economic
conservatives who loathe government intervention
in the market.
Since any fructuous intervention is ruled out, the
consumers will be served with a lot of rhetoric
but no relief. Those barely scraping through may
take the advice painted on the back of a bus: “Gas
isn’t expensive if you don’t buy any”.
But, those doing slightly better may take the advice
in a Chinese adage: “When rape is inevitable,
relax and enjoy it.”
The affluent, blithely indifferent to their gas
bills, may continue playing their fiddles in a state
of insouciance. The middle class - the backbone
of the economy - might shrink under the ripple effect
of the impact. The strong innovative genius of American
society, however, holds out a ray of hope. It may
produce an alternative fuel that is renewable, cleaner
and competitive, if not cheaper. Let us keep our
fingers crossed.
