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Spending The Profits

Spending The Profits image
Parent Issue
Day
8
Month
February
Year
1974
OCR Text

Ralph Nader, a long-time critic of corporate practices which take advantage of the consumer to increase profits, is actively campaigning against the latest industrial beast, the "energy crisis". Nader, recently seen stomping on oil and government executives on a late-night talk show, was in Ann Arbor on January 29 to further educate the public on the oil company scandal. Speaking to a full-house at Hill Auditorium, Nader attacked Nixonian policy and oil company collusion leading to the current "shortage." The following anecdotes are taken from that speech and from a press conference held earlier that day.

The White House Creates a Shortage

Did you know the White House can create any shortage in the economy simply by announcing it?

For instance, if the White House wanted to create a shortage of straws, all it would have to do, particularly if straw production was in the hands of a few large producers, is to announce that there is a coming shortage of straws. What would happen?

First of all, people will start running to buy straws. Secondly, industries would begin to stockpile straws. Third of all, the producers of straws would see the price increase and say to themselves, what are we doing, selling all these straws now when we can hold off a bit from the market some of these straws we'll be able to sell at a higher price later.

The important thing to realize is that with government support, we can almost create any shortage, and if you have a concentrated company, that's the compliment to finish the operation.

The Oil Industry Strikes Back

The availability of supply, having been exposed and reverberated upon by a mass of public skepticism about the energy shortage, has now led the oil industry to say "Okay, if our propaganda doesn't make them believe it, we'll make them believe it."

They can tighten it up. Tankers can be diverted. Late last year, for instance, a huge Texaco tanker sailed out of New Jersey loaded with domestically-refined gasoline for a slow boat trip through the Panama Canal to California. The Eastern coast of the U.S. was starved for gasoline far more than California, but I suppose by the time it reaches California, it will be able to be sold at a far higher price.

Spending the Profits

Take the following problem for an oil company. I got to see of those oil company accounts just to see what it looked like. Did you know that Exxon spent $250 million to change its name two years ago. You saw the ads. Everywhere you went Exxon changed it name from Standard Oil of New Jersey. It went to incredible expenses, and imagine the procedures it would take to change its name. Ten, fifteen, twenty over even its wildest estimates of their research and development budget just to change its name. One time I was so fascinated by this campaign and how successful it was, but can you imagine some company doing that on anti-cigarette promotions? Can you imagine a company with that kind of imagination promoting some more worthy educational course?

I just sat down and said, "what could have been done to change Exxon's name more quickly and impressively than Exxon did?"

Controlling the Energy Market

Anyhow, how do the accounts handle that $250 million? How much of that ends of in "drilling" expenses? We don't know what the costs are. 

It's a unique marketing principles that our oil company oligopolies has developed. Since they're in control of a good deal of the energy reserves of the country-they control 20% of the coal production, they won 20% of coal reserves, they're over the 50% mark in uranium, they're moving to take control of our geothermal resources, and they of course, own oil and gas-the market principle they are articulating is that whenever one form of energy (like natural gas) is selling at a lower price than another (like petroleum) it's important to raise the cheaper from to meet the competition.

Now the orchestrated nature of the oil majors, and we're talking principally of seven giant oil companies who set the pace: Exxon, formerly Standard of New Jersey, and Texaco, Mobile, Gulf, British Petroleum, and Royal Dutch Shell. These companies set the pace, and for those who have read the histories of developing oil companies, it comes as no surprise they have a coordinated policy. They don't have to go into a smoke-filled crowded backroom to make policy any more than Siamese twins have to conspire among one another.

The oil companies, first of all, are engaged in a whole host of joint ventures. That is, they are in business together formally. Anglo Armian, Aramco-these are companies that are owned by various consortiums of the big sever, largely speaking.

In this country, the large oil companies have gone into joint business ventures. The big pipelines coming up from the southwest are controlled by a consortium  of large oil companies. They have even gone into joint ventures off-shore, which of course, makes it impossible for a small producer to compete against the initial bid of large producers.

A Consumer Energy Policy

Now, if we start with a consumer approach to energy policy there is going to be a difference. Instead of moving for doubling prices and lessening pollution controls, and driving small business interests out and pushing nuclear fission, we would move in another direction. It's not a direction that's at all going to be sympathized with by Simon and his energy office. Looking as thoroughly as I might, I have yet to find anybody represents consumer interests or small business interest in Simon's office. They're all  ex-big business investment bank operatives before they go back to the industry.

The first step, as least intellectually speaking, in the consumer energy policy (not necessarily from an action point of view)is to get information out to the public. The Federal government has conceded. It depends entirely for its data based on what the oil and gas industries give us through the American Petroleum Institute and American Gas Association gives them. That's how they make Federal policy. Not even a banana republic would allow itself to be put into that position, but the United States government as and its showing very weak signs of initiating moves for developing its own information base.