Today Senator Orrin Hatch (R-UT) and his Republican in the disguise of a Demarcate Max Baucus (R-MT) in hearings before the Senate Finance Committee shilled for the oil companies. The issue before the committee was subsidies in the amount of 4 billion dollars going to the oil companies. The 4 billion dollar extraction of tax payer dollars is being used to support the vertical and horizontal integration of the oil companies. That is to say at one time the drillers where separate from the refiners and the refiners where separate from the sellers. Through integration the producers of oil i.e. the drillers, the refiners i.e. the producers of gas, and the retailers have become one and the same.
While integration can have benefits for the consumer and in most cases it does it can also provide the opportunity for price manipulation. In the environment of High prices for crude oil basic supply and demand theory would suggest that producers of crude would increase supply and maximize profit. Refiners would seek the lowest possible price for the product of the producers creating competition and retailers would seek the lowest price from refiners. But with integration the producer can charge the refiner what ever they wish as they own the refiner and can increase or limit the supply of crude as they wish in order to justify the price. The refiners can charge the retailer what they wish and control the price at the pump as they wish.
Not only can they control the price of there integrated operations the can control the price from independent retailers. The independent retailers must buy there supply from the major refiners or the few independent refiners who in the most part must buy there crude stock from the major drillers.
The simple fact is that there is not an oil shortage in the United States and the price of gas is being manipulated. Ask yourself why has refining capacity in the United State been on a steady decline over the last 30 years? Ask how many wells are there that are capped and not producing? A prime example is the Macondo well which was the source of the largest oil spill in United States history. BP publiclystated that it was there intent to cap the well and not put it into production. That well could be put into production in less than a month and as has been proven by the spill produce over a 100,000 barrels of oil a day.
The oil companies complain that they do not have enough access and demand more permits to drill. Well I say good then here are the conditions for that access and your permits. 1. Drill and produce not drill and cap. 2. All oil produced in the United State must be sold in the United States. (This would reduce the price of crude within the United States as it would be a domestic market and not an international market). 3. The oil companies must bear the full cost of there screw ups. i.e. if you have an oil spill, fail to maintain your pipelines (see the BP pipeline blowout in Alaska). 4. If you go bankrupt because of a screw up so be it. 5. All energy must be recovered. i.e. stop the burn off of natural gas from well heads and refineries. This is usable energy and the capture of this energy would not only reduce your costs but would be a usable product for the United States.
The fact is the oil on public lands belongs to the American people not to the oil companies and while Republicans will not like this thought I believe that the better alternative is for the Government to contract for the drillers to drill the wells on public lands and then sell to domestic refiners with the revenues going to the government and not to private individuals.