Just a few days ago this corner posted my column "A Rick Perry Presidency? Get Ready for The Next Gas Spike", ruminating on the impact of Texas politicians holding the reins of power in Washington and their impact on the price of oil and your pocketbook. With Governor Perry currently leading the pack of prospective Republican nominees, perhaps it would be wise to examine the prospects of what another Texas presidency would have on the prospects of one of the core economic and environmental issues of the day.
We have as an illustrative preamble the workings of the eight years of the George W. Bush presidency to instruct us on how the levers of power can be used or misused, sometimes almost surreptitiously to maneuver the price of oil from circa $25/barrel at the outset of his tenure to $147/bbl in his last year in office. And no, it wasn't all about the free market forces of supply and demand. President Bush's White House lent a strong helping hand to the dramatic rise in oil's price.
- From the very outset the former Texas governor's priorities were crystal clear. Within days of taking office, and virtually as his first official act he appointed his fellow oilman (ex-Chairman of Halliburton), now his anointed Vice President as head of the Administration's Energy Task Force. Thereupon a 'secret' meeting with prominent oil executives was summoned at the White House, the nature of which and whose agenda is still opaque (pleadings for full disclosure were stonewalled by invoking White House rights to confidentiality. Sen. Lautenberg (D-N.J.) was to comment "The White House went to great lengths to keep these meetings secret."). Environmental groups complained bitterly that they were excluded and were never given a hearing except for a 'show' meeting, hastily organized, which never discussed much of anything.
- The president also had close ties with another Texas politician, Tom DeLay. As House majority leader Tom DeLay was known as "The Hammer" and as the oil industry's point man. Under President Bush's watch he drove home the massive 2003 energy bill providing $23.5 billion in tax breaks for oil and energy companies along with $5.4 billion in grants, subsidies, and loan guarantees. Then -- irony of ironies -- Delay, with Bush's blessing, was able to orchestrate another plum for the industry in the 2005 energy bill -- a last minute insertion of $500 million funding measure researching "ultra deep-water" oil and gas drilling. I'm sure BP can vouch for how effectively those disbursements were made.
- Then of course there was the war in Iraq with all its loss of blood and treasure. Though the Bush administration has vehemently insisted that the disastrously divisive and tragic invasion of Iraq had nothing to do with oil, many countervailing opinions have come to the fore in the context of "It Was Always About the Oil, Stupid." Perhaps most prominent was found in the memoirs of the former and then Federal Reserve Chairman, Alan Greenspan's, The Age of Turbulence: Adventures in a New World. Calling his observation a "politically inconvenient fact", but that "The Iraq War is largely about oil."
- Then once the banner of "Mission Accomplished" was unfurled, the Bush-Cheney team left no stone unturned to assure that a now decimated Iraq would rejoin the OPEC cabal lest its potential future oil production would come into the market freely, and upset the cozy pricing arrangements organized by OPEC to the benefit of all the major oil companies and to the detriment of the economies of the world. Those priorities were so brazen that when civil order was breaking down in Iraq our then resident 'Viceroy' in Baghdad dispatched an armed contingent to protect the offices of the Iraqi Oil Ministry while Iraq's great antiquities museum was left unprotected, to be looted at will.
- As the civil strife in Iraq escalated with thousands of casualties and intermittent disruption of oil pipelines and oil facilities, sending oil prices jumping, there was never a word of condemnation to the Saudis. The Saudis were the major providers of "foreign" suicide bombers and the vast cash transfers to Sunni insurgents in Iraq. A destabilized Iraq was unable to focus on reconstructing its oil production capacity and the price of oil continued to climb, fattening coffers of the OPEC producers and the bottom line of the oil companies.
- Fraternally walking together hand in hand with King Abdullah under the Texas sky. No, I'm not kidding. In April 2005 King Abdullah visited President George W. Bush at his Crawford Ranch in Texas. Understandably oil prices and supply were a topic of discussion. The price of crude at the time was $48/bbl near to and breaching levels that had never before been achieved in the oil market and nearly fifty percent higher than the year before. Whatever was said during those meetings and fraternal hand-holdings gave King Abdullah, and thereby Saudi Arabia, and of course in turn OPEC the comfort to continue its aggressive policy of pushing prices ever skyward. Within four months of the visit the price of oil continued its aggressive spiral upward reaching $65/barrel, a staggering further increase of some 35% costing American consumers an additional $340 million per day (we consume some 20 million barrels oil/day) going into the pockets of OPEC and the bottom lines of oil companies. Even for King Abdullah, it was well worth the trip, while the oil industry cheered as the rest of America paid.
- Under President Bush's Administration those government agencies meant to monitor the activities of the oil trade and the oil industry became toothless entities if not worse. The Department of the Interior was to become so dysfunctional that in 2008, the last year of the Bush presidency, one Earl Devaney, the Department's Inspector General would find cause to comment in response to the Department's record of managerial irresponsibility and conflicts of interest with flawed oil leases costing taxpayers billions, "Short of crime, anything goes at the Department of the Interior." Congressman George Miller (D-CA.) would go one step further, commenting, "If things keep going like this, were going to need two sets of handcuffs--one for the oil companies and one for the bureaucrats."
- Having been tolerant of a miscreant Department of the Interior the Bush administration would go one step further by permitting a toothless Commodity Future Trading Commission (CFTC) to continue its slumbering inactivity undisturbed. As late as August 2008 a morsel of information clearly evident to anyone who had even the slightest connection to the oil trade was presented by the CFTC as a great and new revelation. That this revelation to the CFTC was prima facie evidence of a non-functioning organization that had already caused Senator Levin and his office to comment that traders "hesitate when somebody's watching. And when nobody's watching traders will go wild." And from the Senator himself, that it was time "to put a cop back on the beat, to stop excessive speculation and trading abuse." Under Bush '43 no one was watching and the 'cop' supposedly on the beat was too busy forever holding hearings at headquarters to even direct traffic.
- Then came the great unheralded, barely reported, test of on whose side the political class resides, whether friend or foe of the American consumer. It became a test woefully mangled by the Executive Branch. Through a quirk in our laws dealing with collusionary and antitrust practices, OPEC is permitted to operate freely, immune to these laws, being permitted to hide behind a shield of 'sovereign immunity.' The exemption has made it possible for the OPEC cartel to manipulate pricing in the oil market in a manner that oil companies and oil interests outside the cartel have benefited in the billions without themselves risking indictments for breaching antitrust statutes.
In June of 2007 a 'NOPEC' bill was proposed, so called because it would have set aside the sovereign immunity of the OPEC cartel and its state owned oil companies, permitting them to be sued under US antitrust laws as are other cartels and antitrust violators. In defiance of the strenuous objections of the oil lobby, Congress with a 70 to 23 vote in the Senate and a 345 to 72 vote in the House, indicated its willingness to pass such a bill into law. The issue however became moot when the Bush White House let it be known that the bill would be vetoed, reasons being given were that litigating against OPEC would trigger a variety of legal, political and economic headaches. Thereby the White House set a rather repugnant standard, that when being robbed, better to smile and turn over your wallet, especially when the proceeds are going to the home team.
- In his January 2007 State of the Union address President Bush would convey upon the oil producers throughout the world an unexpected gratuity. Before President Bush's address to members of Congress the price of oil was in a pronounced descent, about to retreat below $50/bbl. By the time President Bush finished his address that all had changed, the direction of oil prices reversed course, rising inexorably upwards, setting off the greatest price escalation in oil's commercial history toward $147.50/bbl a year and a half later.
Either oblivious to its ramifications, or perhaps cunningly aware, the president announced it would become government policy to double the Strategic Petroleum Reserve (SPR) from some 750 million barrels to near 1.5 billion barrels. In doing so he sent a signal interpreted by those who held sway that $50/bbl oil was not only acceptable but viewed as being a modest price level by his administration. On the very day of the speech the price of oil would jump by $2.40/bbl., the biggest single day gain since November 20, 2006.
The Department of Energy at the direction of the White House would blithely continue filling the SPR irrespective of ever ascending prices, and clearly oblivious or uncaring, that with every purchase they were blessing the ever escalating price of oil and in turn ever higher gasoline prices with its impact on American consumers and the economy. It took an act of Congress in May 2008 to get the administration to desist making further purchases, so wedded was this administration to the oil industry boondoggle the SPR program had become.
- Finally there is the unfocused morass of policy issues that over the eight years time of the Bush '43's administration did little or nothing to move us away from our dependency on oil. First there was the skepticism toward climate change, a seemingly Texas political trademark. Then a wasted eight years of lackluster initiatives in the pursuit of alternative energy solutions. The budget, over that eight year period for this issue vital to our economy, security and confronting climate change was a total of $12 billion -- about a third of what the administration was able to put on the line over a weekend to save Bear Stearns, or to cover Goldman Sachs' speculative positions with AIG.
Not only were there no initiatives to improve the nation's mass transportation infrastructure, but, thankfully, the president's request for a $400 million budget cut from Amtrak's $1.3 budget was refused by lawmakers. A request whose shortsightedness is an exemplar of our eight years lack (and sadly counting) of any decisive action on improving the nation's rail infrastructure while billions are being expended in countries all over the world from France to China to build their high speed rail services nationwide.
- Last and not necessarily least, during the Bush years there had been no persuasive attempt to abate fossil fuel consumption by mandating truly meaningful mileage standards for automobiles.
Would a Perry presidency be tempted to follow in this predecessor's footsteps? Given the incestuous interrelationship between Texas politics and oil, in many ways the Bush presidency becomes a cautionary tale.
But then one needs look at the bright side. Never once, never, have either George Bush '41 nor '43 suggested that Texas might do well to secede from the Union!