Energy Policy and Oil Profits

What have the oil companies been doing with their enormous profits? We know that executives are getting huge pay packages out of all proportion to what they bring to their companies. Where else are the profits going? The above chart (from opensecrets.org) shows how much the oil business donates in two-year cycles to the two major political parties. Clearly, the oil companies donate heavily to the Republicans and clearly the Republicans return the favor with highly profitable legislation.

For all practical purposes, the United States has no longterm energy policy. And yet, in a sense there has been a de facto energy policy since Reagan's first year: leave the energy policy to the oil companies. We've known for thirty years that the world has a longterm energy problem when it comes to oil: there are only so many oil reservoirs in the world and the supply is limited. We all know what nonrenewable resources mean but we conveniently forget that it applies to oil. And we conveniently forget that the numbers of yesterday were never particularly accurate in the first place. I can remember being told thirty years ago that there was enough natural gas to last the modern world for centuries. That appears not to be the case.

Repeatedly, over the last thirty years, oil companies have claimed that a certain amount of their profits has been going towards developing alternative energy but the alternative energy sector in the United States still supplies only a small percentage of total energy consumption. After thirty years, we are far more dependent on foreign oil than we once were and nothing has changed. Failure by the oil companies to have a realistic longterm energy policy should not be profitable. Over the last ten years, rewarding incompetence has become a corporate theme Americans cannot afford.

In the White House we have two former energy executives in George W. Bush and Dick Cheney; if their perpetual incompetence is a sign of what oil executives are like these days, this country is in trouble. I'm aware of engineers and specialists in the oil industry who truly do amazing things and one can argue that oil companies think longterm more than most companies but our culture rises or falls based on the availability of energy—the failures of the oil companies are significant and cannot continue. The rising oil and gasoline prices represent a crisis Bush and Cheney have refused to address. There are a variety of reasons why energy prices are rising: Katrina, trouble in Nigeria, falling production in Iraq due to the war, the possibility of war in Iran, the emerging economies of China and India, a fiercely competitive and manipulative oil producer in Russia, the failed energy policies of the last thirty years, refinery problems at home and abroad and finally the changing nature of oil supplies.

The dirtiest secret in the world (pun intended) is that light sweet crude is getting harder to come by and companies are increasingly forced to use heavier oil. We may be heading towards a time very soon when the oil sector will be significantly impacted by the production of heavy crude, oil sands and the conversion of coal to oil. These involve extremely dirty technologies with major pollution issues involved. More important, they are simply stopgap technologies that produce less and less energy for the work put in and they simply put off the inevitable need to start dealing realistically with energy and the development of reasonably nonpolluting sources of energy.

Republicans have been in denial for years and have spent an entire generation blocking the significant energy legislation that America needs. No doubt in the coming months, Republicans will make noise about the need to do something. House Speaker Hastert is already making noises about dealing with the oil companies and no doubt other games will be played, but Hastert and his fellow Republicans have been major beneficiaries of those same companies. It's time to send these guys home and begin work on real energy solutions.