Blaine

Exxon Mobil: The Root of all Evil?

Thank you for making my point. The oil price rises of 1973 and 1979-1980 led to inter-fuel substitution, such as the substitution of oil for gas, and conservation measures being implemented by the Organization for Economic Cooperation and Development (OECD) countries as well as fuel-conserving CAFE standards (auto-mileage) that brought about a collapse in world oil demand.

Saudi Arabia was faced with the no-win choice of either cutting production to maintain the official selling price or cutting prices and flooding the market. Between 1980 and 1985, Saudi Arabia cut production from 9.9 million barrels per day to four million barrels per day losing significant market share.

By 1985, Saudi Arabia was tired of shouldering the full burden of price defense and looking on as its revenues declined. In September 1985, Sheikh Yamani, in conjunction with the Aramco partners, instituted a dramatic change of policy to regain Saudi Arabia's lost share of the crude oil market. Between August 1985 and August 1986, Saudi Arabian production increased from 2.2 million to 6.2 million barrels per day, and the spot price of many world crudes fell to less than $10 from their previous 1985 levels of around $26 to $29 per barrel.

Hence, rising oil prices led to oil conservation and substitution; which led to reduced demand; which led to cutting production in an attempt to prop up prices; which led to lost market share; which led to increased production to recapture market share; which led to significantly increased downward price pressure.

Sounds to me like fuel conserving standards and oil substitution in the form of alternatives is a pretty good thing.

Exxon Mobil: The Root of all Evil?

The House Select Committee on Energy Independence and Global Warming slammed executives from Exxon-Mobil et al. for their opposition to eliminating about $18 billion in tax breaks amid record profits for the industry. Several lawmakers, mostly Democrats, want to take the tax break away from oil companies and use the money to subsidize renewable energy projects. This is where we should be putting scarce resources, not into areas that don't need our help.

In the mid- 1970's, Congress implemented CAFE standards to combat an oil shortage driven by the policies of OPEC. The standards raised fuel efficiency in American cars by 7.6 miles a gallon over six years, causing oil imports from the Persian Gulf to fall by 87 percent.

The CAFE standards worked so well that they produced an oil glut by 1986. That's when the Reagan administration intervened to rescue America's domestic oil industry from gasoline price collapse. Reagan's rollback of CAFE standards caused America, in that year, to double oil imports from the Persian Gulf nations and to burn more oil than is in the Arctic National Wildlife Refuge.

If the United States had continued to conserve oil at the rate it did in the period from 1976 to 1985, we would no longer have needed Persian Gulf oil after 1985. Every increase of one mile per gallon in auto fuel efficiency yields more oil than is in two Arctic National Wildlife Refuges. An improvement right now of 2.7 miles per gallon would eliminate our need for all Persian Gulf oil!

Yet the Republican Congress in 1995 made it illegal for the EPA even to study higher CAFE standards. The result is that America now has the worst energy efficiency in 20 years.