MOTORMOUTH  

There has been a lot of ink spilled, bandwith wasted and words spoken over the cause of rising gas prices. For me the answer is easy. Over the last eight years oil and gas interests invested mightily in the Presidency of George W. Bush. The resulting prices and corresponding record profits are in business terms a ROI or Return on Investment. We are simply paying the piper.

Oil and Gas companies didn't donate over $4.6 million dollars to George Bush's Presidential Campaign out of altruistic reasons. Bush was the #1 recipient of Oil and Gas contributions to any single candidate running for office in the history of this country. In fact almost 80% of all oil and gas political contributions have gone to politicians in George Bush's political party. Remember these are for-profit companies and when officers make an investment of money they expect a greater return. Officers and directors of public companies have one singular responsibility. Their fiduciary responsibility is to increase value for shareholders. Public companies are not in business to help the public, to make life easier or to deliver goods and services at a cheaper price, unless by doing so it increases value for the owners of the company. Therefore when a political contribution is made, a return on investment is expected.

It's not surprising that they have been rewarded for their support. Rather it's appalling at how broad and deep the rewards have been.

While Exxon Mobile continues to blow the cover off record books for profits, reporting an annual net profit of $36 billion, the real story is that all 12 U.S. oil companies in the S&P 500 reported fourth-quarter results last year averaging a 48 percent rise in earnings. These billions of dollars of additional profit make the lousy $4.6 Million invested in this president a drop in the bucket.

How did this happen?
Is George Bush paying off oil companies for their investment in him?
Why are retail gasoline prices now double what they were when Bush was inaugurated?

Profit can always be described as a mathematical formula. Income minus expenses equals profit. There are only to ways to increase profit, increase income or decrease expenses. George W. Bush has assisted his buddies in the business by doing both. Reducing regulatory oversight and compliance lowers expenses. Together these have combined to produce skyrocketing corporate profits of historical proportions.

Disasters like Katrina really had little effect on the world oil supply. Housewives driving the SUV and CAFÉ standards have minimal effect on the demand for gasoline. Oil reserves are not depleted. Refinery capacity has been limited by the industry itself and not from environmentalist. These are all diversions hiding the real issue. I also don't believe that George Bush is being bribed in traditional terms. Sure this administration is chocked full of former oil and gas executives that still have vested interests in their former businesses. But the payoffs to oil companies are much more nuanced than passing suitcases of cash around. For instance this administration has cancelled audits of energy companies that pay billions of dollars for leases to produce oil and gas on federal property. Instead of audits, they now use a much looser approach known as "compliance review." This allows for undetected cheating because the government cannot confirm whether a company's report was accurate. This is just one example where the government can assist companies' reduction in the cost of doing business. Matched with higher energy prices, and you create real profits.

Yet in the end, the reason companies have doubled the price of gasoline is because they can. The first four years of the Bush Administration the price of conventional regular unleaded gasoline in the Midwest hovered around $1.50 per gallon. It wasn't until George Bush was assured his second and last term that gasoline prices soared. Now that we are used to the 100% increase in price and the economy has adjusted get ready for another jump. Remember that Republicans receive eighty cents of every dollar that oil and gas companies invest in politicians. This next election is very critical to Republicans and I don't believe that oil and gas companies will risk another dollar rise in prices while their friends are in such a perilous position. But hold on to your wallets after the 2008 elections. I would not be unthinkable to see $4.00 per gallon gas become the norm.

So here comes the scary part, I see no way to abate the rise in prices. Truthfully I don't care about profits. Profits are good. Profit is necessary to continue the exploration for new energy sources. I do care that companies and industries can manipulate the outcome of elections to benefit their bottom line. I also care about the rise in consumer prices simply to line the pockets of the already rich and famous.

The automobile has been around for the last 100 years but it was after WWII that the automobile became a necessity for average Americans. Until the wholesale adoption of the automobile, American was full of broke farmers and impoverished urban factory workers. The automobile gave personal freedom and economic opportunity to the common family. Legally, the states would like you to consider driving a "privilege" that the government can dole out rather than a "right," necessary for economic freedom. In truth, the automobile and the ability to drive are essentials for most Americans.

Raising the cost of fuel by 100% over the last four years is immoral. It directly affects the working class. As a point of reference, according to the U.S. Department of Labor Bureau of Labor Statistics average hourly wages of production workers increased $2.22 cents per hour since 2001. That's a 1.5% increase in wages since Bush has been in office. Gasoline has increased 100%. As another point of reference, according to a December 24, 2007 article in the Houston Chronicle, the price of Mexican Marijuana has not increased since Reagan was in office 25 years ago. I'm not sure what this has to do about the price of gasoline except to say that dope is a better bargain than gasoline under Bush.

I don't oppose increased CAFÉ standards, but fuel economy is not the problem and increased fuel economy will not solve our gasoline crisis. This is not a problem of supply and demand. The US has plenty of supply and demand is necessary for a growing economy. The problem is one of deliberate price manipulation.

It is important to understand that we do not operate with a completely capitalistic laissez-faire economic system. Prices are not always a direct relation to supply and demand, as some would have you believe. Both government regulation and virtual monopolies play an important role in price manipulation.

This is a big business and to think that profits are left to the whim of natural economic forces is a bit naïve. Remember, gas companies will raise their price, because they can. The relative small $4.6 million investment in this President has paid off richly. But don't take it personally, its just business.

That's the way I see it.

MOTORMOUTH