SOTU: Big Oil Haz a Sad
President Obama threaded a tight needle of bipartisanship in his SOTU address last night, but he slipped in a few chewable moments for progressives too. One of them was almost a throwaway. I nearly missed it and had to go back to the text to make sure I heard right. At the California Institute of Technology, they’re developing a way to turn sunlight and water into fuel for our cars. At Oak Ridge National Laboratory, they’re using supercomputers to get a lot more power out of our nuclear facilities. With more research and incentives, we can break our dependence on oil with biofuels, and become the first country to have 1 million electric vehicles on the road by 2015. We need to get behind this innovation. And to help pay for it, I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. I don’t know if you’ve noticed, but they’re doing just fine on their own. So instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s. The American Petroleum Institute is disappointed. They’re the folks who ran all of those “Energy Tomorrow” ads last year when there was still a sliver of a chance for the cap and trade bill to get through the Senate, as you might recall. Their statement : American Petroleum Institute President Jack Gerard, who had lobbied the White House in advance for Obama to promote the economic virtues of expanding oil drilling, said Obama missed an opportunity to highlight real job creation and economic recovery opportunities.” I’d call that a slap in the face of oil companies. A pretty hard one, at that. Oil subsidies have a long history and just about every Democratic president has tried to end them, to no avail. I have my doubts that this one will, but by naming this specific subsidy, the president put Republicans into the position of having to be overt in defending their masters in something unpopular with most Americans, or come up with another way to handle investments in the clean energy sectors. In his book Griftopia , Matt Taibbi deconstructs the myth that high oil prices are tied to consumption or to anything ordinary people can control: But it wasn’t the consumption of real oil that was driving up prices — it was the trade in paper oil. By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country’s commercial storage tanks and the Strategic Petroleum Reserve combined. It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up present-day profits by selling suckers shares of a fictional fantasy future of endlessly rising prices. In what was by now a painfully familiar pattern, the oil-commodities melon hit the pavement hard in the summer of 2008, causing a massive loss of wealth; crude prices plunged from $147 to $33. Once again the big losers were ordinary people. The pensioners whose funds invested in this crap got massacred: CalPERS, the California Public Employees’ Retirement System, had $1.1 billion in commodities when the crash came. And the damage didn’t just come from oil. Soaring food prices driven by the commodities bubble led to catastrophes across the planet, forcing an estimated 100 million people into hunger and sparking food riots throughout the Third World. Now oil prices are rising again: They shot up 20 percent in the month of May and have nearly doubled so far this year. Once again, the problem is not supply or demand. “The highest supply of oil in the last 20 years is now,” says Rep. Bart Stupak, a Democrat from Michigan who serves on the House energy committee. “Demand is at a 10-year low. And yet prices are up.” It’s interesting to me that this point-by-point rebuttal to Taibbi’s arguments doesn’t question the accuracy of what happened. It only questions whether the real cause of the price spike and crash was related more to a weak dollar than creating a demand in a commodities market by flooding it with pension cash. It seems pretty clear to me that the President is right to push on oil companies with what little leverage he has. By eliminating Big Oil’s tax subsidies, billions in revenue is recovered to invest in more efficient and better energy sources for the planet. The Koch brothers will hate it, and Republicans will defend it, which allows us the luxury of tying them all together in a big bow. Yes, I’d say that particular piece of the SOTU was a big fat middle finger to President Obama’s biggest detractors, and something we should support and pressure Republicans to deliver now that they’re in charge.
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on January 26, 2011. Filed under