As the stock market and overall economy slowly improve, the GOP continues to blame President Obama for rising gas prices as November’s election approaches. A barrel of oil is now selling for $106, reflected in $3.77 average gallon prices at the pump. The drumbeat of the GOP message is constant: The Obama administration is at fault for limiting oil companies’ access to potential domestic sources in environmentally-fragile locations.
This narrative has dominated media coverage, as Jocelyn Fong insightfully dissects on Media Matters. Yet almost totally absent from the news has been how oil companies are pinching off the supply of gasoline by shutting down refineries. Strangely, this is occurring at a time of plentiful domestic oil supplies; the United States now exports more oil than it imports.
But NPR recently broke the mold of poor mainstream coverage — much of which blames rising prices on increasing tension between Iran, Israel and the United States — by broadcasting a story about the curious chain of refinery shutdowns on the East Coast. The United Steelworkers union (USW), which represents many oil refinery workers, has also been calling attention to three shutdowns in the Philadelphia area; two other refinery have closed on the East Coast during the last two years.
Fadel Gheit, senior energy analyst at the investment firm Oppenheimer & Co., says there’s an even bigger reason than Iran.
“The supply of gasoline has been declining,” Gheit says. “We have 700,000 barrels of refining capacity [that were shut down] in the last three months. That is almost 5 percent of U.S. gasoline production … now offline.”
Energy analyst Phil Verleger says that’s an amazing drop in refining capacity.
“I’ve been following the industry since 1971,” he says, “and never in my life have I seen so many refineries close all at once.”
The oil giants have also been failing to uprgrade other refineries to handle high-sulphur oil.
While about 2,200 workers have been directly employed at the three refineries, a total of about 20,000 workers will eventually lose their jobs as a result of the three latest shutdowns, according to Lynne Hancock, spokeswoman for USW, which represents many of the workers.
Hancock took aim at the oil companies central pretext: “They claim they’re not making money in refining, that they’re making money upstream in exploration and production,” Hancock relates.
But just like the complex and expensive process of exploring for oil, refining the oil is an essential link in the process of converting oil to gas. Given the hundreds of billions realized in profits at the end of the process, operating refineries can hardly be characterized as an unaffordable burden.
However, the oil companies are using this rationale to close more and more refineries, which means a heavier reliance on transporting oil over long distances from foreign refineries or already over-burdened U.S. operations, Hancock explains.
It also creates critical bottlenecks in the flow of oil and production of gas, driving up prices. Despite these high prices, the major companies are reducing the supply.
“Their mentality is focused on their company and not the community at large, and we think the government needs to step in. If the government regulates electricity, it should regulate gasoline production,”Hancock insists.
The refinery closings will lead to higher prices for gas, home heating oil, and diesel fuel. Inevitably, these will translate into higher prices for virtually every commodity and service, she says. “Once gas goes up, groceries go up, clothing goes up, everything. High gas prices have a snowball effect.”
What is so extrarodinary about the woefully weak mainstream media coverage of oil giants’ role in rising prices is that industry is widely recognized as hugely profitable, yet nonetheless rake in enormous tax breaks from the government.
Th top five oil companies — BP, Chevron, ConocoPhillips, ExxonMobil, and Royal Dutch Shell—hauled in a record $137 billion in profits in 2011, up 75 percent from 2010. They effectively used their lobbying and campaign-contribution muscle to shield those profits from fair taxation. As the Center for American Progress notes:
For every $1 the big five spent on lobbying in D.C. last year, they effectively received $30 in subsidies disguised as tax breaks. This is equivalent to a 3,000 percent return on every dollar they invested in strong-arming Congress.
More than $1.6 million was spent on campaign contributions in 2011 from just four of the top five oil companies. And more than 90 percent of these campaign contributions were made to Republican candidates or committees.
Despite a century-long muckraking tradition that has repeatedly revealed oil barons’ awesome power, major media have been utterly unwilling to expose their political influence and explain how recent refinery closures are related to the high prices Republicans are now blaming on President Obama to push him out of the White House.
Further, as Fong points out:
Beyond the shame of being used by political operatives to distribute a powerful and thoroughly inaccurate message, news reports that privilege the myths over the facts help cement a short-sighted perspective on our energy challenges.
Full disclosure: The United Steelworkers union is a sponsor of In These Times.