The Free Market 14, no. 7 (July 1996)
The rise in oil prices provoked a frenzy of opportunistic posturing by politicians of both parties. Yet neither Clinton nor Dole will acknowledge the real reasons for sustained high prices—taxes and environmental regulations designed to keep prices high—or the reason for the newest price rise itself. Both are complicit in their genesis, and both are conspiring to keep gas prices high and prevent American consumers from getting relief.
The President’s response was to release some portion of the petroleum reserves—an action which put less than one day’s worth of gas on the market. Why stop there? Why not release the entire stock, which was only established as a subsidy to big oil in the first place? Bob Dole suggested temporarily repealing the gas tax—a position that seems incomprehensible given that he voted to increase the gas tax on no less than three separate occasions.
Neither the Democrats nor the mainline Republicans want to talk about the core reason for the gas shortage and the resulting price increases: the U.S.-led international embargo against Iraq. This cruel blockade, which has led to the starving of hundreds of thousands of Iraqi children and untold levels of disease and death, is also blocking the output of one of the world’s most oil-rich nations.
The result has been a artificial scarcity of crude oil, which in turn has driven up prices at the gas pump, with a little help from the oil companies. Oil companies depleted stocks intentionally over the spring in anticipation of a UN-broker deal that would have allowed Iraq to sell 700,00 barrels per day. When the deal was finally approved, prices didn’t budge because the surplus had already been anticipated; it constitutes only a fraction of what Iraq could be selling.
We need to repeal the federal gas tax, all of it and permanently, but we also need to understand how Big Oil manipulated U.S. foreign policy in pursuit of profit. The war in the Gulf was a war against the competition with the partial purpose of knocking Baghdad out the world oil market.
American oil companies have since reaped what some Democrats have called “windfall profits.” However, these profits did not fall out of the sky: they resulted from the harsh economic sanctions supported by most Democratic members of Congress, as well as Republicans. These are the same people yelping about the glories of Nafta and “free trade,” except when it comes to Iraq.
The announcement that the Clinton administration is launching an “investigation” into possible “collusion” between the oil companies surely sets some sort of record for hypocritical cant. Price can’t be controlled in that manner. But it is collusion, to be sure: collusion between the U.S. government, the Saudi regime, and certain sectors of the oil industry not only to prop up oil prices but also to control and cartelize the oil market.
The instrument of this control has been U.S. foreign policy since 1945. As Murray N. Rothbard argued, the cozy relationship between Rockefeller oil interests and the Saudi regime is embodied in Aramco, jointly owned and operated by the Saudis and a Rockefeller-controlled consortium, which has a monopoly on the production and sale of Saudi oil. We were told that the U.S. was fighting the evil Saddam to keep the price of oil low: but the American “victories,” and the resulting embargo, have naturally succeeded only in keeping the price high.
The sole victor here is the far-flung Rockefeller corporate empire, of which oil is but a single province. Another key province is banking: Citibank and Chase Manhattan, which have extensive loans and other dealings throughout the nations of the Saudi peninsula.
Naturally, the Saudis, and all the statelets of the Saudi peninsula (Oman, Qatar, the Trucial States, and Kuwait) are also reaping “windfall profits” because of the contrived shortage. On the other hand, the banks and the rest of Wall Street, never had any investments to speak of in Iraq; Wall Street had everything to gain, and nothing to lose, from Desert Storm. The problem is that the American public is still reeling from the economic effects of George Bush’s war.
The current oil scarcity is an artificial creation of politics and is easily corrected. We could loosen environmental laws that prevent drilling, we could repeal all taxes, and we could eliminate the pointless embargo against Iraq, which should have been ended long ago on both economic and humanitarian grounds. That these obvious options have not been raised by anyone, Republican or Democrat, is a frightening testament to the power of the government-connected corporate elite to control the political debate in this country.
