Pumping Us Dry

Katrina tragedy is an absolutely perfect storm for oil companies

Bush refuses to increase the energy efficiency standards for motor vehicles, which use 70 percent of total oil production, and he recently signed the energy bill that hands out billions in new subsidies to the industry. Even he seems to recognize what a shuck this is: In April, with prices moving ever higher and the Congress debating the energy bill, Bush said, “With $55 oil, we don't need incentives to oil and gas companies.”

But this summer, Congress, with the president's enthusiastic support, adopted a series of new subsidies for the oil and gas industry. “Officially, the energy bill's giveaways are supposed to cost $14.6 billion over the next 10 years, offset in part by $3.1 billion in higher gasoline taxes on consumers,” says Robert S. McIntyre of Citizens for Tax Justice. “But that doesn't include the bill's $70 billion in authorized but unfunded subsidies, for which cash will have to be appropriated later.”

Now they get another handout in the form of the strategic oil reserve. This is a complicated setup whereby rather than paying the federal government (i.e., the general public) for the right to drill oil on public lands, the industry puts some of this oil into the reserve. When times get bad, it then extracts some of the 750 million barrels stored in salt domes under the Texas and Louisiana coasts-with the promise to return it later on. It can therefore get cost-free oil, turn it into gasoline and sell it at high prices, hoping to buy back crude oil later on at lower prices and return it to the reserve.

In addition, the petroleum reserve will buy oil to fill its reservoirs on the market to jack up crude prices. So the industry makes a killing both ways. The public is left shelling out $4 a gallon at the pump.

Additional reporting: Isabel Huercuga

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