Who's afraid of Big Oil? Apparently, California's elected officials. Gasoline prices are stuck well above last year's record highs and about 50 cents above the national average. Yet state politicians are not saying or doing a thing, except for raking in political cash from the oil companies and flying around the world on their dime.
Take Gov. Arnold Schwarzenegger, who once claimed that he was so rich he did not need anyone else's money - and who isn't running for another office. Yet as gasoline prices were breaking last year's record of $3.38 a gallon, Schwarzenegger collected a $100,000 check May 1 from Chevron, the West's largest refiner. The company certainly had the cash on hand. Just three days earlier, it reported a $4.7-billion first-quarter profit, up 18% over the same period last year.
The contribution brought Schwarzenegger's take from Chevron to $665,000 (making it his 15th largest donor) since 2003, and his total political tribute from the energy industry is now $4 million. According to a recent Schwarzenegger fundraising solicitation, Chevron's $100,000 buys the company special briefings with the governor, something that beleaguered motorists aren't getting.
Like power plant owners during California's 2001 electricity crisis, refiners such as Chevron have discovered that they can make more money by producing less gasoline. So they do. They have, over more than 20 years, deliberately reduced their capacity until they can barely meet California's needs under the best of circumstances. Industry spokesmen defend this as efficiency. But there is no slack in the production system, which shorts the market and raises prices.
Any planned or unplanned refinery outage, pipeline break or power failure causes prices to jump.
Take the case of a possum and a raccoon that, in March, bit through power substation lines feeding two refineries in the South Bay. The critters expired, but the outage caused a 7-cent jump in local wholesale gasoline prices. The cost of refining gasoline is stable over time, so these price spikes equal pure profit for Chevron and Co.
Gasoline isn't like potato chips or even automobiles, which are made by competitive companies that have to persuade purchasers. Gasoline is a product we can't spurn and for which there are no widely available alternatives. The lack of competition makes the situation worse.
Chevron refined 22% less oil in the U.S. during the first quarter of this year than in the same quarter of 2006 because of longer "planned maintenance" downtime and accidents. Yet its total profit on U.S. refining increased 66%. Making less gasoline, it made much more money.
So why is there no special legislative session on the gasoline crisis? No talk of regulating refiners to make supply meet demand?
Oil companies poured $90 million into California political campaigns during the 2006 election cycle. This display of sheer political muscle deters even well-meaning politicians from clashing with Big Oil.
Democrats take Big Oil's millions too. The state Democratic Party accepted $50,000 from Chevron just last week. Campaign finance rules don't tell us which candidates Chevron might find most deserving of that money, but it's foolish to think such suggestions are not made.
Just as troubling is the access that oil companies have to our elected officeholders that the public doesn't.
Schwarzenegger's powerful chief of staff, Susan P. Kennedy, and her partner spent a legislative spring break in Rio de Janeiro at the posh Copacabana Palace with Democratic Assembly Speaker Fabian Nuñez and his wife - on the tab of a foundation largely financed by Chevron and other energy companies. During the 12-day conference, Chevron's lobbyist got an entire day on the official agenda, which the public knows about only because of our Public Records Act request. Nuñez, who last year was highly critical of oil companies, seems to have nothing to say this year.
The chairs of the state Senate and Assembly energy committees spent spring break in Japan sipping sake and munching sushi with energy and telecommunications executives. The trip was financed by the same foundation, the California Foundation on the Environment and the Economy. On board was an executive with Sound Energy Solutions, a company working with ConocoPhillips to establish a liquefied natural gas, or LNG, terminal at the port of Long Beach. Residents have stalled that particular project, no thanks to a junket itinerary that included a lengthy LNG plant tour.
No matter what underlies the current inaction on gas prices, the governor and legislators should understand that consumers' rage may not be fleeting. Former Gov. Gray Davis discovered that in the 2003 recall as the energy crisis lingered in memory. Schwarzenegger is more popular, but he is not immune to the anger mounting over every $75 fill-up of the minivan.
Jamie Court and Judy Dugan are founders of Oilwatchdog.org, a project of the Foundation for Taxpayer and Consumer Rights.
© 2007 The Los Angeles Times