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    watching the waters rise..., 2005-09-07 12:46:46 | Main | tal afar..., 2005-09-07 15:32:37

    demand, meet supply:

    demonstrating how monopolist oligarchs hate free markets and love writing regulation in order to loot the little guy, calling it "de-regulation", meaning "re-regulation". It's like something straight out of Kolko:

    The memos from Mobil, Chevron and Texaco show the following:

    * An internal 1996 memorandum from Mobil demonstrates the oil company's successful strategies to keep smaller refiner Powerine from reopening its California refinery. The document makes it clear that much of the hardships created by California's regulations governing refineries came at the urging of the major oil companies and not the environmental organizations blamed by the industry. The other alternative plan discussed in the event Powerine did open the refinery was "... buying all their avails and marketing it ourselves" to insure the lower price fuel didn't get into the market. Click here to read the Mobil memo.

    * An internal Chevron memo states; "A senior energy analyst at the recent API convention warned that if the US petroleum industry doesn't reduce its refining capacity it will never see any substantial increase in refinery margins." It then discussed how major refiners were closing down their refineries. Click here to read the Chevron memo.

    * The Texaco memo disclosed how the industry believed in the mid-1990s that "the most critical factor facing the refining industry on the West Coast is the surplus of refining capacity, and the surplus gasoline production capacity. (The same situation exists for the entire U.S. refining industry.) Supply significantly exceeds demand year-round. This results in very poor refinery margins and very poor refinery financial results. Significant events need to occur to assist in reducing supplies and/or increasing the demand for gasoline. One example of a significant event would be the elimination of mandates for oxygenate addition to gasoline. Given a choice, oxygenate usage would go down, and gasoline supplies would go down accordingly. (Much effort is being exerted to see this happen in the Pacific Northwest.)" As a result of such pressure, Washington State eliminated the ethanol mandate -- requiring greater quantities of refined supply to fill the gasoline volume occupied by ethanol. Click here to read the Texaco memo.

    Emphasis added. There's little detail in the documents themselves, and I have a job to attend to so I'm not able go banging against google and industry websites figuring out what additional requirements Chuck Morgan got put into the regs and whether those additional regs really had serious support from enviros, who usually offer pretty straightforward standards, etc. I need to get out of debt and back into school, really. My gutless fascination by these sorts of fiascos - and how industry written regulations of narrow minutae to undermine smaller competitors and raise the cost of market entry always gets pinned on the environmentalists - really ought to have a useful outlet.

    Anyway, this shouldn't be surprising, industry has been writing a great deal if not most of public policy since the progressive era, when business leaders realized they had to control an emerging political working class by getting political themselves. Compare, say, Clintonoid failures during the 90s to get industry to agree on universal health coverage policy to particular progressive era healthcare 'reforms'. More recently we have industry basically running homeland security and energy policy in their entirety, and into the ground. Note that that energy bill was really in opposition to the original Whitehouse proposal, where it was the House - which we might imagine as less beholden to the oil industry than the Exxon Condosleeza administration - that insisted on the massive petrol subsidies.

    It's not unimaginable, on that note, that many oil industry flaks might have in fact preferred the original Bush proposal (afterall they're the ones doing much of the so-called "alternative energy" stuff that stood to benefit), but that the House increased the subsidy to get transport industries and SUV owners off their backs about fuel prices, knowing that any real alternatives to the path we're on would face certain political doom in due to industry resistance. The Republic has, you might say, become the corruption.

    update: Kevin Carson explains said Clintonoid failures. Straight out of Kolko indeed. And Max explains to me that the economic jargon is 'strategic behavior', in this example a cartel prevents market entry by manipulating governemnt regulation (the monopoloy of last resort) so that it can continue charging monopoly rents. Fun!


:: posted by buermann @ 2005-09-07 14:06:02 CST | link





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