Smoke, Mirrors, and Sour Grapes

$400,000,000.

That's a lot of money, right?

Chances are, if you've got $400 million in the bank, you're not reading this blog.

Here's another number: $800 Million. Somebody once said, a million here, a million there, and pretty soon you're talking about real money. Bah, that's crap - you want to talk real money? How about $36,000,000,000? That's right 36 billion dollars, now we're talking real money.

What do all these number have in common? Well, we'll get to that in a moment.

First let's talk about a much smaller number, $4.50.

Four and a half dollars. That's what analysts are saying the price of gas per gallon of gasoline is going to be come summer. The war, the mess in Pakistan, Chavez is acting like an asshole, refineries are still off-line, pipes are broken, blah, blah, blah, and etcetera. There's always some excuse, some excuse for the oil companies to keep the prices jacked up just as high as they will go.

What? What's that you say? "Jim, don't be an idiot, the oil companies don't determine the price of gas at the pump. The oil companies don't determine the price per barrel of oil. Don't you understand how a free market works? It's Wall Street, Man."

Yeah, I've heard this. And you know what? It's complete bullshit. Nothing but smoke and mirrors. Here's why:

It's the law of supply and demand. He who controls the supply, controls the price, no matter how convoluted the process.

Every time there is unrest in the Middle East the price of gas jumps, because investors are scared - even if we don't actually get our oil from the country in question, even if the country in question doesn't even have oil, like, oh, Pakistan for example. Every time there's a hurricane, or a refinery fire, or a pipeline break - the price of oil jumps, even if the actual supply is completely unaffected. And each time, when it settles back, the lowest price per barrel is just a little higher than it was before. So sorry, we'd like to pump more oil out of Alaska, say the big oil companies, but there just isn't any. The Pipeline is running at half capacity, true, but that's because the Prudhoe Bay fields are nearly depleted, we can't drill in ANWAR because the tree-huggers and bunny-thumpers won't let us - and so we've got to get our oil from the Middle East, and Africa, and Hugo Chavez, and it just costs more. That's basic economics in a free market. That's capitalism. Don't blame us. It's the investor's fault, say the oil companies, hell we're barely breaking even. It's the federal government's fault, if it wasn't for all these restrictions and regulations and red tape we'd have money for development. It's the Alaskan state government's fault, if they'd just dismiss that damned fine for the Exxon Valdez spill, and stop taxing us, we'd have money to fix the pipes and upgrade the refineries and sink more wells. It's just so complicated. Unless you're Alan Greenspan, you just can't understand the sheer complexity of the market. That's how it is.

Smoke and mirrors. It's a complete load of crap. I know bullshit when I step in it. I also recognize an Information Warfare campaign when I see one, and in this case it's called Market Manipulation, and it's just about as ethical as insider trading, and it's no different than what Enron was doing or Big Tobacco (Cigarettes don't cause cancer, oh no, trust us). Big Oil has no, repeat no, incentive at all to keep those pipelines and refineries in good repair. And they've got no incentive whatsoever to develop new domestic reserves. In point of fact, it is in their best interest to keep the domestic flow of oil restricted, and to throw as many scare-tactics as they can at the international market. It is in their best interest to drag their feet on domestic oil field production and development; less oil in the Alyeska Pipeline means bigger profits - they do not want an assured domestic supply. They want the oil to come from overseas, because it's a hell of a lot easier to manipulate the market if you can throw Middle East conflicts, and Nigerian unrest, and South American dictators at the investors.

Don't believe me? Let's go back to those numbers above.

$800 million. That's what the Big Three (Exxon, BP, and ConocoPhillips) have spent to develop the Point Thompson oil field, on Alaska's North Slope, about 50 miles from Prudhoe Bay. $800 million - over the last 30 years. That's about $26.8 million per year. With the costs being born by three companies, that comes out to roughly $9 million apiece, per year. $9 million. Hardly pocket change for people like you and me. But if you happen to be, oh say, Lee Raymond, $9 million is what you keep in the kitchen cookie jar, and the only thing better than $4.50 for a gallon of gas would be $5.00 per gallon. Who the hell is Lee Raymond you ask? Well, Lee just happens to be the former Exxon CEO who retired last year with a record $400 million bonus package. That's right, four fucking hundred million dollars - this on top of his extensive stock options, million dollar consulting gig, and unlimited use of Exxon's corporate jets.

Oh and what profit did Exxon show it's share holders in 2006? Yeah, that would be the other number above, $36 billion. And now, as the man said, we're talking real money.

You know what? Exxon, BP, and ConocoPhillips can just plain kiss my ass.

Alaska's oil and gas industry is threatening to reduce investment in the state after Governor Sarah Palin recently signed a "fair share" tax increase that will boost state revenues from the industry by $1.5-billion (U.S.) next year.

And then, Alaska Superior Court Judge Sharon Gleason tightened the screws and ruled last week that the state was allowed in 2006 to revoke its agreement with the oil companies and take back the Point Thompson leases. As I mentioned above, the oil companies have held the leases on this oil since the 1970's, and have done precisely jack shit to develop them. $800 million in development is Jack Shit? Over thirty years split between three companies, it sure is. When Exxon can pay $400+ million to it's CEO in an exit bonus. When no oil at all flows from those fields, despite climbing prices at the pumps and huge economic losses because energy prices are putting other companies out of business. When Exxon alone clears an annual profit of $36 billion. Yeah, $800 million is exactly Jack Shit.

So, now big oil is threatening to pull out of Alaska.

Oh, look, more scare tactics.

The oil industry is going to reduce investment in Alaska? Yeah, I'm going to go out a limb here and drop the bullshit flag. Bullshit. Bullshit. and Bullshit.

As an Alaskan, I say to Governor Sarah Palin, go on, call their bluff. Up yours Exxon. Kiss my fuzzy behind, British Petroleum. Don't let the door hit you in the ass, ConocoPhillips. Oh, and Exxon? You're not going anywhere until you pay the the money you owe us, you spilled oil all over Prince William Sound, because your Captain was an unqualified drunken incompetent jackass who shouldn't have had a union card let alone a Master's License, you've spent more on attorney fees trying to get out of the fine than you would have if you just paid the judgment in the first place. So, cough it up and and get out. Go on, I double dog dare you.

Because you know what? We've got oil. Lot's of it. We've got a shitload of natural gas too. And if big oil won't do anything with it, I guarantee you we can find somebody who will. In fact we won't even have to go looking; small oil companies are lined up ten deep right now, screaming for a chance to get at those leases. So, you know what, Exxon, BP, and Conoco? Tough shit. Maybe you could ask your old buddy Lee for a loan.

These corporate assholes have got no problem sticking it to us at the pump on a daily basis, let's see how they like it for a change.