Big Oil Just Showed Its Hand
I spent most of my professional life in and around legislative bodies watching and trying to influence public policy. At one time this included substantial work on energy and environment issues before Congress and in over 10 state legislatures. I offer this up not to suggest this has made me an expert on energy science, but to boldly suggest I might know more than the next guy about how private sector entities try to influence public policy. Don’t despair I do not intend a long procedural, because in this discussion I need not get beyond rule one in legislative agent’s handbook, “Always be very specific about what you want done, but never reveal your real bottom line.”
Let me provide an example from the old days when I was in the Maine Senate. The lobby for Central Maine Power and other Maine electric companies would often come to the legislature to oppose some bill which would cause them to be regulated in a slightly different manner. CMP would be very clear in saying they wanted these bills defeated. In the course of this they would lament to lawmakers, the press and anyone willing to listen that they were so heavily regulated and their true bottom line was to be freed entirely for government oversight. This was food for the gullible. At the time they were heavily regulated. They needed government’s permission to build a power plant or make major improvement in power lines. However, in return, they were guaranteed no competition and a return on investment no matter how bone headed their investments turned out to be. Years later when the push to deregulate swept the nation, they opposed it as long as they could.
The consequence of the loss of regulation model was that those Maine companies got swallowed up. In other words, they knew where their interests were, they just weren’t going to tell anyone else. Why, because if they had come to the legislature trying to turn back a regulatory bill while admitting their whole business model depended on regulation, there would have been far less sympathy for their position.
How does this rule of hiding the bottom line apply to big oil in 2015? Well big oil has more hidden agendas than they have oil wells. A good example: Exon goes on news programs and claims they are not working against climate change legislation, while trying to cover up its involvement with ALEC the lobbying arm that is leading the charge for the climate change deniers. But this is just old fashioned duplicity, the stuff that any careful reader will trip over. What prompts this discourse is the industry’s stated reasons for opposing the United States passing meaningful climate legislation. Groups like ALEC offers two reasons for inaction, 1. The science is not conclusive and 2. The United States will hurt its economy when we make these changes and other nations such as Chine do not. And for a while as the science was becoming more and more clear, they were more and more hanging their hat on this international competition argument.
Now here you have to think like a chess player and not a knee jerk fan for one side or the other. If you were truly concerned with the international disadvantage of having America move boldly ahead while the rest of world took advantage by lagging behind, what would you do? You would support the most aggressive agreement possible in Paris. If the USA is going green at least make everyone else play on the same playing field. But what has ALEC had their puppets in the Congress do? This week they passed bills specifically designed to keep the United States from getting such an agreement by undermining our representatives in Paris. The legislation says in essence, don’t agree because we will see to it that the USA four-flushes on any deal. Why? Because Oil’s real bottom line is to make sure that countries like Chinas, India and developing nations don’t do anything about climate change. They don’t care anything about America’s advantage or disadvantage.
They want the demand for oil going up and where are the biggest drivers of increased oil consumption? You need look no further than growth in auto sales. Exon’s real bottom line is we probably have to expect some restrictions in the USA but keep China polluting at any cost. That will limit US action and more importantly do more than anything else to increase demand for oil on a worldwide basis. In other words, this week the tools of big oil have been forced to expose their real bottom line- they are following the same path as the cigarette industry. Hire scientists to muddle the science while looking to overseas sales to continue growing the industry.
Oil is essentially a fungible product. It can be moved around the world at relatively low expense per barrel. Therefore the price of oil anywhere in the world is a function of world market much more than any local idiosyncrasy. Big oil’s play is now and always has been about keeping the price of oil high. That is what serves their investors. But here is the rub. What serves the people who elect their agents in Congress? Who are these voters? Well by and large they live outside urban areas and depend almost exclusively on cars for their transportation. How far would these public servants get if their campaign slogan was, “Let China pollute so our oil prices can go up?” But Obama and the world have made enough progress to force them out of hiding to try and throw a monkey wrench in the works in Paris. At these are the times, when the smart boys step out from behind the shadows, they reassure themselves with the words attributed to H L Mencken, ““No one ever went broke underestimating the intelligence of the American public.”
I spent most of my professional life in and around legislative bodies watching and trying to influence public policy. At one time this included substantial work on energy and environment issues before Congress and in over 10 state legislatures. I offer this up not to suggest this has made me an expert on energy science, but to boldly suggest I might know more than the next guy about how private sector entities try to influence public policy. Don’t despair I do not intend a long procedural, because in this discussion I need not get beyond rule one in legislative agent’s handbook, “Always be very specific about what you want done, but never reveal your real bottom line.”
Let me provide an example from the old days when I was in the Maine Senate. The lobby for Central Maine Power and other Maine electric companies would often come to the legislature to oppose some bill which would cause them to be regulated in a slightly different manner. CMP would be very clear in saying they wanted these bills defeated. In the course of this they would lament to lawmakers, the press and anyone willing to listen that they were so heavily regulated and their true bottom line was to be freed entirely for government oversight. This was food for the gullible. At the time they were heavily regulated. They needed government’s permission to build a power plant or make major improvement in power lines. However, in return, they were guaranteed no competition and a return on investment no matter how bone headed their investments turned out to be. Years later when the push to deregulate swept the nation, they opposed it as long as they could.
The consequence of the loss of regulation model was that those Maine companies got swallowed up. In other words, they knew where their interests were, they just weren’t going to tell anyone else. Why, because if they had come to the legislature trying to turn back a regulatory bill while admitting their whole business model depended on regulation, there would have been far less sympathy for their position.
How does this rule of hiding the bottom line apply to big oil in 2015? Well big oil has more hidden agendas than they have oil wells. A good example: Exon goes on news programs and claims they are not working against climate change legislation, while trying to cover up its involvement with ALEC the lobbying arm that is leading the charge for the climate change deniers. But this is just old fashioned duplicity, the stuff that any careful reader will trip over. What prompts this discourse is the industry’s stated reasons for opposing the United States passing meaningful climate legislation. Groups like ALEC offers two reasons for inaction, 1. The science is not conclusive and 2. The United States will hurt its economy when we make these changes and other nations such as Chine do not. And for a while as the science was becoming more and more clear, they were more and more hanging their hat on this international competition argument.
Now here you have to think like a chess player and not a knee jerk fan for one side or the other. If you were truly concerned with the international disadvantage of having America move boldly ahead while the rest of world took advantage by lagging behind, what would you do? You would support the most aggressive agreement possible in Paris. If the USA is going green at least make everyone else play on the same playing field. But what has ALEC had their puppets in the Congress do? This week they passed bills specifically designed to keep the United States from getting such an agreement by undermining our representatives in Paris. The legislation says in essence, don’t agree because we will see to it that the USA four-flushes on any deal. Why? Because Oil’s real bottom line is to make sure that countries like Chinas, India and developing nations don’t do anything about climate change. They don’t care anything about America’s advantage or disadvantage.
They want the demand for oil going up and where are the biggest drivers of increased oil consumption? You need look no further than growth in auto sales. Exon’s real bottom line is we probably have to expect some restrictions in the USA but keep China polluting at any cost. That will limit US action and more importantly do more than anything else to increase demand for oil on a worldwide basis. In other words, this week the tools of big oil have been forced to expose their real bottom line- they are following the same path as the cigarette industry. Hire scientists to muddle the science while looking to overseas sales to continue growing the industry.
Oil is essentially a fungible product. It can be moved around the world at relatively low expense per barrel. Therefore the price of oil anywhere in the world is a function of world market much more than any local idiosyncrasy. Big oil’s play is now and always has been about keeping the price of oil high. That is what serves their investors. But here is the rub. What serves the people who elect their agents in Congress? Who are these voters? Well by and large they live outside urban areas and depend almost exclusively on cars for their transportation. How far would these public servants get if their campaign slogan was, “Let China pollute so our oil prices can go up?” But Obama and the world have made enough progress to force them out of hiding to try and throw a monkey wrench in the works in Paris. At these are the times, when the smart boys step out from behind the shadows, they reassure themselves with the words attributed to H L Mencken, ““No one ever went broke underestimating the intelligence of the American public.”