(The) C0MM0N PE0PLES S0URCE for News

July 1, 2008

The Facts

Crude oil prices have more than doubled in the past 15 months. As consumers, we are given any number of reasons for this, depending on who we are listening to. The most quoted reason is supply & demand. However, many of us can not accept that “supply” can decrease so rapidly relative to “demand”, or “demand” can increase so rapidly relative to “supply”, during a one-year period of time that it justifies a 100 plus percent increase in price. Ironically, most who say oil prices are justified or unjustified seem to be divided along political party lines. Those who say price increases are justified seem to be of the Republican persuasion while those who say they are unjustified seem to be of the Democratic persuasion, with very rare exceptions on both sides.

My View

In 1870 John D. Rockefeller started Standard Oil Company of Ohio with three other partners, but later bought them out. Then he became a monopoly through shear ruthlessness. By 1890 his monopoly could fix its own prices and terms of business because it had no competitors (quoted). By 1896 Rockefeller was worth $200 million ($5 billion indexed to 2007). But being a country of laws, one which forbids monopolies, the Supreme Court broke up Standard Oil in 1911. But that didn’t stop Rockerfellow and future business men in our country from aggressively pursuing ways to monopolize their product. About the only thing the action against Rockefeller did was tell these thieves they needed to find “legal” means of monopolizing, and if there were no legal means, bribe the countries lawmakers to pass laws that would circumvent the monopoly laws. And that has been done very successfully.

Not one single person today could make a viable argument that oil companies are competitive. There just simply isn’t any competition between them other than negotiating for sites where they want to drill for oil. Even at the retail market of gasoline, there is no real competition. And where there is no competition, prices are controlled; hence, a monopoly. (Occasionally, the retail owner will vary the price of gasoline a penny or two out of his own profits as a competitive edge, but the price to the retailer is set daily to include all of them.)

Take a look at all the places in the US where oil is produced; Alaska, Gulf of Mexico, the mountain ranges, west coast, etc.; even from abroad. Once the oil comes out of the ground and volumes recorded, it all goes into the same “barrel”. (“Barrel” is described as pipeline, tanker trucks, tanker ships, storage tanks, etc.) One market pays the same for all crude oil produced (by grade), no matter where it comes from. It doesn’t matter what oil company you are talking about, they all get the same price for their oil at any given time. Hence, a monopoly. No incentive to produce oil more economically for the purposes of competition. Now compare that to, say, the auto makers. For every compact car that rolls off any assembly line let’s charge the same sale price; for every full size car that rolls off any assembly line lets charge the same sale price; etc. etc. etc. You get the point. The results? No competition; charge any price you want or what the market will pay. How about appliance manufactures? Refrigerators, for example. All 19 foot refrigerators, same price; all 21 foot refrigerators, same price. How about all 4 ounce chocolate candy bars; lets charge the same price regardless of the manufacturer. (There’s a name for this kind of market, but we Americans don’t use it because it doesn’t coincide with a Democracy or a Republic.)

We must remember one thing; when our constitution and laws were set up, there were a lot of arguments about who should run (control) the country. Was it to be made up from all the citizens, or only the wealthy (people of “means”). Remember, our forefathers had just fought a war to free themselves of an “upper class” tyrannical government. So the majority of our forefathers won out; the country was to be ruled by citizens from all walks of life, not just by the wealthy. However, we have now, over time, silently elected a government that has successfully changed that. The wealthy and businesses control our government, albeit a government “elected” by the rank & file citizens. I demean the word “elected”, because the wealthy & big businesses have been very successful in convincing the rank & file citizens to vote the way they want them to vote through massive disinformation programs, propaganda, and just plain outright lies designed to tell people what they want to believe based on disinformation and propaganda.

Today you hear a lot about letting companies operate in a “free market”, especially in reference to oil companies. Confined to the basic definition of that two-word phrase, I completely support that theory. However, we have migrated to a point where the marketers want selected enforcement of that phrase.

Ever wonder why “a girl’s best friend”, the diamond, is so expensive. Not because of supply & demand based on how many diamonds mother earth produces. It’s because DeBeers controls over 90% of the worlds diamonds, and they put very strict limits on how many diamonds are released to the market over a given period of time. I’m not saying that there is a limitless supply of oil like there are diamonds, but when there is control without competition, you can charge any price you want.

The end results is that if we want to get back to paying a fair market price for crude oil and the products derived from crude oil, we must force the oil producers to move back into a competitive market. Without competition, oil companies are nothing more than a DeBeers, charging any price they want regardless of supply & demand or cost of production. However, we can’t depend on the Supreme Court to do that for us this time, as they are owned by the same people who own our elected officials.

Rockefeller, you won.