The more things change, the more they seem to stay the same. With gasoline prices climbing, a new ration of break-up-the-oil-companies invective, along with new efforts at legislative oversight of the petroleum industry, has begun to ooze forth. None of these offerings is likely to improve our deteriorating energy circumstances, but it's not the first time they've been tried.
Most of my Foolish friends either recall or have read that, in the final quarter of 1973, partly in response to U.S. backing of Israel in the Arab-Israeli war, imports of crude oil into the U.S. from the Middle East were brought to a nearly screeching halt. The results included interminable lines of motorists attempting to refill their gas tanks, a sudden escalation in gasoline prices, and a generalized level of vituperation against the OPEC cartel.
A couple of years later, a spate of bills meant somehow to punish OPEC by breaking up the major oil companies was introduced in the U.S. Senate. For instance, what is now ExxonMobil
Later, I researched and wrote an economics thesis on those questionable efforts at legislative repair. After studying the issue thoroughly, I failed then to comprehend how it's possible to fix an energy supply-demand imbalance by sticking it to the big oil companies. I still don't get it. After all, it's been demonstrated that energy companies are operating in a world that, by almost any relevant microeconomic indicator, is far more competitive than is the case with most other businesses, from cola to computers.
But in the first chapter of my thesis, I posited that the movement likely was more dormant than dead. It turns out I was right. After nearly three decades of slumber, and with gasoline prices now having moved above $3.20 a gallon in most places and having skied above $4.00 in some spots, the natives are again getting restless.
The basics
It doesn't take an economics degree to comprehend that escalating gasoline prices are the result of outages among tired, overworked refineries, along with global crude prices that have been steadily inching higher -- in part for geopolitical reasons. Nevertheless, that 1970s drumbeat that the oil companies should be torn asunder has resumed in the Senate and even in individual states.
Take, for instance, what U.S. Sen. Chuck Schumer, D-N.Y., chairman of the Joint Economic Committee, said during a May 23 congressional hearing: "My instinct tells me that a reconsideration of oil company mergers in the last two decades may be in order. ... When markets have been distorted from lack of competition in the past, the federal government has taken action. Standard Oil, U.S. Steel
A year ago, the senator said, "We've got to look very seriously at breaking up the oil companies. This did not happen when there were 10 or 15 oil companies because you found good old-fashioned American competition would work." I'm frankly heartbroken to discover that Schumer apparently has not read a copy of my earlier thesis.
This sort of windmill jousting has not been limited to the U.S. Senate. I live in Florida, so I'm compelled to note that my own still-new Republican governor, Charlie Crist, has demanded that the Federal Trade Commission (FTC) " ... actually do its job. I'm concerned that it doesn't. It allows too many of these corporations to merge together, giving less choice to the consumer. I think we need to bust them up."
More tangibly, and beyond the Schumer-Crist school of grandstanding, the U.S. House recently passed what has been labeled "the Stupak bill," in honor of the Michigan congressman who fathered it. The bill, in my opinion, renders inappropriately vague the facts on which the Federal Trade Commission can base findings of price gouging by the energy companies. The seeming result could be severe penalties based on flimsy charges, along with an endangerment of market forces.
A House undivided
Beyond that, the House also is basking in its passage last week, by a 345-72 landslide, of the latest version of a bill entitled the No Oil Producing and Exporting Cartels (NOPEC) Act. The bill, which has been reintroduced nearly biannually since its first manifestation in 2000, seeks to remove the OPEC nations' legal immunity to lawsuits brought by U.S. citizens in the face of oil production being withheld from the market.
"We don't have to stand by and watch OPEC dictate the price of our gas without recourse," said House Judiciary Committee Chairman John Conyers, D-Mich., who introduced the bill's 2007 iteration. Given the current climate in Washington, the bill could seemingly gain passage in the Senate. And that's fine, if it soothes some legislators, but it hasn't a chance of affecting OPEC or gasoline prices.
Final thoughts
So here's where I come out on what's been mostly negative finger-pointing by the politicos, along with their obvious exercise in assuaging their desire to take shots at long-hated Big Oil: I believe strongly, as I did in my thesis-writing days, that castigating the oil companies, while perhaps a catharsis, will not begin to fix our current energy difficulties.
Indeed, this is not a time for a half-cocked lashing out and blame assessment. Rather, I continue to believe that what we really need is a serious assemblage of industry and academic leaders, whose objective would be a logical, carefully conceived, and comprehensive program that ultimately would dig us out from under our progressively more dangerous dependency on fossil fuels. Call it the "Manhattan Project for Energy" as discussed in my previous articles. Call it what you will, but call it something. Time, as they say, is a-wasting.
In the meantime, Fools, please don't neglect the energy portion of your investment allocations. You might consider ExxonMobil or ConocoPhillips
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments. The Motley Fool has a disclosure policy.
