THE GREAT "oil crisis" of the summer of 1979 may well go down in history as one of the greatest frauds ever perpetrated on a helpless people. The reality is that there was no shortage of oil; this is verified by every responsible source. Indeed, solid statistics show that there was more oil available than there had been in 1978 when there were no gas lines, no murders of frustrated motorists - in a word, no "crisis."
President Carter's Sermon from the Mount on Sunday night, July 15, ignored this reality. He insisted that the shortage was "real." To have admitted that it was not would have entailed an admission of the culpability of Big Oil and of President Carter's own recumbent Department of Energy.
The naive may say to themselves, "Why, this cannot be." So let's begin by citing some sources: A Federal Trade Commission study concluded on May 30 that gasoline supplies were up from 4 to 8 percent (depending on the month in which the comparison was made) during the first four months of 1979 over the comparable period in 1978. U.S. Customs figures, independently verified by House of Representatives researchers, show that the "Iranian shortfall" so widely trumpeted to validate the "crisis" was a red herring, because imports of oil during the first five months of 1979 actually increased 10 percent over 1978. A world energy assessment by the Central Intelligence Agency shows that world oil production in the first quarter of 1979 was up despite the Iranian disruption; that U.S. imports through May showed a big increase over 1978 figures - and that American firms, in this time of supposed "crisis," were exporting more oil than they had in 1978.
When President Carter came down from the Mount, he thumped the table in the Oval Office and announced that he was not going to permit the importation of a single gallon of oil more than we had imported in 1977. But we imported so much oil in 1977 that Big Oil suffered acute glut pains and couldn't get those prices up.
The industry's own figures show total crude oil stocks (in millions of barrels) at yearend 1977 reached 339,859, a 19.1 percent increase over 1976. At yearend 1978, total stocks had dropped to 314,462, a decrease of 7.5 percent, bringing us into 1979 with a potentially short situation.
But, as in almost every facet of this story, things weren't what they seemed. In addition to the normal crude oil supplies, the federal government has established a strategic petroleum reserve. Into this reserve, stored in salt domes in Louisiana, it has poured literally billions of gallons of imported oil; and the Department of Energy, with its usual efficiency, has dumped all that oil into the caverns without thinking about installing pumps to get it out.
If one indludes the extra millions of barrels that were committed to the government's strategic reserve in 1978, the figures on the nation's total petroleum stocks, expressed in millions of barrels, read this way: 381,322 at end of 1978 compared with 347,689 at the end of that 1977 "glut" year.
In other words, the nation came into 1979 with 9.7 percent more crude stocks on the market and in the reserve than it had had at the start of 1978, when the industry was moaning because it had so much oil it couldn't even get gasoline prices up to the permitted ceilings. It is enough to make one ask, "What the devil goes on here?" What went on is fairly obvious, though only the naive would expect to get a straight answer from James L. Schlesinger's Department of Energy.
Big Oil drew down stocks during 1978 and by late fall had created a situation where there began to be alarming talk of shortages. Shell Oil led the way, imposing drastic cuts on the delivery of gasoline to its retailers; Mobil, Citgo, the whole tribe fell into line behind the force play. Retail gasoline dealers roared their outrage; there was a nasty flareback of damaging publicity, and the big oil companies backed off for the moment, restoring deliveries to nearly normal.
Then, heaven sent, came Iran. The Iranian revolution closed down the oil fields, and the myth of the "Iranian shortfall" was born. Actually, only 5 percent of our imported oil came from Iran, and this shortage was quickly offset by stepped-up production in Saudi Arabia, increased Alaskan supplies and lesser increases from other sources. CIA figures show that free world production (expressed in thousands of barrels daily) rose to 46,515 in the first quarter of 1979 compared to 46,305 in 1978. Customs figures, as recorded by the Bureau of Census, show that imports through May increased 10 percent over those for the first five weeks of 1978.
Indeed, the imports for these first five months of 1979 almost matched the levels established in the "glut" year of 1977.The CIA in-depth study echoed the Customs Bureau's findings. It showed imports in the first five months of 1979 outstripping 1978. During the first three months, imports averaged well over 8 million barrels a day, and in April and May they were only slightly below that figure. By contrast, in 1978 imports reached the 8 million-barrel-a-day figure in only two of the first five months, and in the remaining months, they trailed considerably behind the 1979 import figures.
The CIA assessment revealed another curious fact. In this 1979 year of "crisis," American firms actually exported more oil in every one of the first five months than they had in either 1977 or 1978. Exports ranged from 329,000 barrels daily in January to 445,000 barrels daily in both April and May. Yet, in lush 1977, exports had ranged from only 192,000 barrels daily to 288,000. The fact that we were exporting more oil in 1979 than we had in the two previous non-crisis years would seem to indicate manipulation of the market.
This suspicion, shared by more than two-thirds of the American people, according to public opinion polls, is reinforced when one reads the Federal Trade Commission memo of May 30. Reporting on a study made by the commission's staff, the memo said:
"The data indicates, among other things, that gasoline supplies in 1979 were up by 4-8 percent, depending on the time period, over 1978s. Net supply of gasoline in April was particularly plentiful compared to the previous April (up by 22.9 percent). Signigicantly, however, every time period - month, quarter, third - shows increased supplies and no indication of a shortage." Not only were supplies of gasoline more plentiful in 1979, but demand was down. According to figures from the OECD [Organization for Ecomonic Cooperation and Development] in Paris, United States oil consumption in the period from January to April, 1979, was nearly 1 percent below the level of the same period in 1978.
Yet it was in late April and early May that the gasoline pumps in California suddenly went dry, beginning the drought that was to spread across the nation to New York, Washington, D.C., and cities in between. In a nation whose whole economy since World War II has been structured around networks of superhighways on which federal and state governments have lavished billions of dollars, panic struck, accompanied by frustration and fury.
The evidence established that none of this was necessary; it suggests that this was a "crisis" carefully orchestrated by Big Oil, aided and abetted by the complacent non-watchdog in the DOE and even by the president himself.
Jack Anderson, the Washington columnist, has published excerpts from secret White House minutes indicating that President Carter deliberately cut back gasoline supplies to keep his pledge to other industrial nations that the United States would reduce oil consumption by 5 percent. At a May 7 meeting, just as motorists were queuing up for miles in California, Carter told his Cabinet: "Our priority will continue to be some heating, agriculture and emergency needs over highway driving...There will be less gasoline, and it will cost more." Those last words confirm Jack Anderson's scoop. They match word for word the public presidential refrain that all of us have heard for months: "There will be less gasoline, and it will cost more."
Cost more! That is what this scenario is all about. The Carter administration for months has backed every move that would make gasoline and other fuel products more costly, on the theory that higher prices would "force" conservation. For months, the administration talked about $1-a-gallon gasoline. Privately, it was scripting an even more brutal program.
Jerry Ferrara, the outspoken executive director of the New Jersey Retail Gasoline Dealers Association, described in a television appearance on July 2 how he and his associates had "pounded on every door" in Washington seeking adoption of a more sensible policy. He said he had met face to face with Schlesinger, and he added: "He [Schlesinger] said that, if gasoline got up to $2 a gallon by 1981, the American people would have to conserve. And then he walked out of the room."
Justice Department antitrust lawyers have been trying to find out why it was that, just at this time of supposed shortages, crude oil production went into its steepest decline in seven years. In a preliminary and relatively unnoticed report, Justice Department attorneys, concluded that, from December through April, the falloff in domestic drilling had cost the nation some 11 million barrels of gasoline.
This falloff in domestic production came at a time when oil company profits in the first quarter of 1979 were going through the roof. While the companies were demanding price decontrol as Sen. prerequisite for increased domestic production, first quarter profits at Exxon were up 37 percent; Gulf was up 61 percent and other majors like Standard Oil of Ohio were registering increases of more than 300 percent.
The drop in domestic drilling was accompanied by a second cutback, a reduction of refinery output. "That is where it all hangs out," one industry critic says. It does, indeed. Refineries capable of operating at 91 to 92 percent of capacity (this is virtually full-out considering inevitable maintenance delays) dropped their runs in this season of our travail to 84 percent. The American Petroleum Institute itself acknowledged that, in the second week of June, refineries were operating at 84.1 percent of capacity. The following week, the runs were stepped up to 84.5 percent - still far below capacity at a time when, all reliable evidence shows, crude stocks were in plentiful supply, waiting to be processed.
The situation infuriated Rep. Benjamin S. Rosenthal (D.-N.Y.), chairman of the subcommittee on commerce, consumer and monetary affairs of the powerful House Committee on Government Operations. It also upset Schlesinger, who, in June, confessed that he found the disparity between abundant crude oil stocks and low refinery runs "distressing" and "disturbing." He threatened action against oil companies that had poor refinery performance.
The sequel is perhaps best told in the words of Rep. Rosenthal as recorded in the Congressional Record of June 29. The congressman said:
"Following the hearing on June 14, Secretary of Energy Schlesinger admitted that we had more than adequate oil inventory stock and that he would undertake to use the Department of Energy's allocation authority to urge recalcitrant refiners in the direction of serving the consuming public...On Thursday, June 24, Secretary Schlesinger reversed his stand, expressing that the U.S. multinational oil companies might retaliate by withholding oil from the United States. Thus, it becomes obvious that much of the blame for the current gasoline shortages must also be ascribed to deliberate actions by the oil companies and the Department of Energy. This "blackmail" threat by the U.S. multinational oil companies that ship crude oil to Europe instead of the United States calls for a vigorous response by this nation."
It would be difficult to find a clearer demonstration of the power of the oil forces that hold this nation in thrall, but what Rep. Rosenthal called "this "blackmail" threat" is not the only indication of the contempt in which Big Oil holds the government and the people of the nation.
The brutal price escalation, which puts Schlesinger's $2 gasoline in our immediate future, has been achieved through the delightful collaboration between Schlesinger's DOE and the oil industry. All during 1978, when the gas glut made it impossible to sell gasoline at ceiling prices, individual gas station owners were allowed to "bank" on their records the differential.
Came 1979, the "shortage," zooming OPEC prices; and, with frustrated motorists on gas lines willing to pay anything, those deferred, spurious "banked" sums were tacked on to the already zooming prices. As usual, the consumer got zonked. The DOE has now ended this "banking" system, but prices have already been driven to levels from which it is almost certain they will never come down.
All of this has taken place during the administration of a president who, in his first fireside chat in 1977, pleaded with the average American to sacrifice for the national good. Wear heavier sweaters. Turn down the thermostat. Car pool. Drive at slower speeds. "Sacrifice" one and all like a band of brothers for everyone's good and the national welfare.
Coming down from the Mount in July, the president is still saying that if we all band together and sacrifice, we can lick the devil dogs of OPEC. One has to wonder where the president has been all these years.Whatever gave him the idea that Big Oil comsiders itself part of a national brotherhood? The record is undeniable. Big Oil has just one concern - the bottom line. When it comes to "sacrifice," let the poor average American schnook do it.
The latest severe OPEC price hike, announced while President Carter and leaders of the industrial nations were conferring in Tokoyo, seems to have shocked these statesmen to the tips of their toes. One has to marvel.
Before the previous price increase earlier in the year, OPEC spokesmen had put the blame squarely on the consuming nations, and Radio Riyadh, before this last bit of extortion, returned to the theme by charging that oil shortages were due to "the operation by certain major powers of huge stockpiles [those salt domes in Louisiana?] or price manipulations by the companies."
What the Arabs were saying quite clearly was:
"You asked for it, and you'll get it."