Bush: The Oil Man's Friend

[UPDATED BELOW]

This may be an exercise in the blatantly obvious, but what the hey - someone's gotta do it!

First, a bit of background. This is from late September:

Earlier this year, news of record oil profits led many US consumers to believe that energy companies had deliberately kept prices artificially high to improve their bottom line.

Now gas prices have fallen for several consecutive weeks, and recent polls show that consumers have a new suspicion -- that the price break is meant to give a boost to a US president and Republican Congress who had fallen out of favor with voters.

A USA Today/Gallup poll last week found that 42 percent of the roughly 1,000 adults surveyed across the United States believed President George W. Bush's administration had "deliberately manipulated the price of gasoline so that it would decrease before this falls elections."

White House spokesman Tony Snow addressed -- and summarily dismissed -- the speculation at a press briefing earlier this week.

"I have been amused by ... the attempt by some people to say that the president has been rigging gas prices, which would give him the kind of magisterial clout unknown to any other human being," he told reporters.

"It also raises the question, if we're dropping gas prices now, why on earth did we raise them to 3.50 dollars before?" he said.

That's a stupid question from a stupid man. Obviously, if the oil industry is supporting Bush, it is expecting massive profits in return. And that is just what they are getting.

Which is no surprise, given that Dick Cheney launched his Presidency (err, sorry, I mean Vice Presidency, or course) with a secret summit of oil executives.

More than three-quarters of the variation in W's approval rating since he took office in January 2001 can be explained by movements in the numbers diplayed on pumps nationwide. Let's look at a graphic comparison (NB the gas price is inverted):



Pundits say today's cheap gas can be explained by such things as "the end of the summer driving season (what's a driving season???), a mild Atlantic hurricane season, healthy US energy stockpiles and lessening tensions over the Iranian nuclear crisis". But is it that simple?

There's no precedent for this tight relationship. Approval ratings for Clinton and Reagan were mildly influenced by gas prices, but Bush 41's seems not to have been at all. That may mean that the gas-dependency of W's popularity may actually be a reflection of other things: the war in Iraq has driven up gas prices, as did Hurricane Katrina. So the approval rating, rather than being "caused" by gas itself, may just be reflecting growing public dissatisfaction with the war and the stunning incompetence in handling Katrina. But it's remarkable how closely the approval line follows almost every quiver in the price of gas.

If the gas price at the pump in Bush's USA is being manipulated, given that much of the control of global petroleum is outside of US hands, the big question is: how do they do it?

Well, a recent New York Times article described how Goldman Sachs sold-off of more than $6 billion in gasoline futures contracts. Now why would they do that?

President George W. Bush nominated Henry M. Paulson, Jr. to be the 74th Secretary of the Treasury on June 19, 2006. The United States Senate unanimously confirmed Paulson to the position on June 28, 2006 and he was sworn into office on July 10, 2006. Before coming to Treasury, Paulson was Chairman and Chief Executive Officer of Goldman Sachs. So what does Goldman do just weeks after Paulson is sworn in as Treasury Secretary? It announces a subtle move that drives down gasoline prices, short-term. Nice move, coming just months before the election.

This analysis at Lew Rockwell (via Peter Evans at John Quiggin's blog) is well worth reading:

In traders jargon, it’s called painting the tape. Indeed, the Washington Post has revealed that the government has formed something that is casually known as the Plunge Protection Team. PPT is supposed to jump in and buy stocks when things are unruly. Ronald Reagan formed the PPT when he signed Executive Order 12631. It’s just another way of painting the tape (Using your tax money, or newly printed Federal Reserve dollars, of course). Goldman is a member of the secretive PPT...

Goldman doesn’t lose money. This is a managed commodity index. Goldman manages the index, but the actual money put up comes from institutions, hedge funds and other unlucky saps that trusted Goldman to manage the commodity index as a hedge against inflation – not to bail out of $6 billion in contracts over a few weeks. The result: Unlucky saps – Major losses. Goldman – Zero losses and their man running the Treasury. Which side of this trade would you want to be on?

..Goldman had to know they were going to plunge gasoline prices short-term with this type of trading. This smells to me like a Paulson operation all the way.

UPDATE: In Bob Woodward's new book, Bush himself confirms the manipulation of oil prices for US domestic political purposes:

During a meeting in the Oval Office, according to Woodward, Bush personally thanked Bandar because the Saudis had flooded the world oil market and kept prices down in the run-up to the 2004 general election.

UPDATE 2: Much, much more from Joshua Holland at AlterNet:

The Iraqi government faces a December deadline, imposed by the world's wealthiest countries, to complete its final Oil Law. Industry analysts expect that the result will be a radical departure from the laws governing the country's oil-rich neighbors, giving foreign multinationals a much higher rate of return than with other major oil producers, and locking in their control over what George Bush called Iraq's "patrimony" for decades, regardless of what kind of policies future elected governments might want to pursue.

Iraq's energy reserves are an incredibly rich prize...

But even "untold riches" don't tell the whole story. Depending on how Iraq's petroleum law shakes out, the country's enormous reserves could break the back of OPEC, a wet dream in Western capitals for three decades...

Both independent analysts and officials within Iraq's Oil ministry anticipate that when all is said and done, the big winners in Iraq will be the Big Four -- the American firms Exxon-Mobile and Chevron-Texaco, and the British BP-Amoco and Royal Dutch-Shell -- that dominate the world oil market...

Chafing at the idea that the Chinese and Russians might end up with what is arguably the world's greatest energy prize, industry leaders lobbied hard for regime change throughout the 1990s. With the election of George W. Bush and Dick Cheney in 2000 -- the first time in U.S. history that two veterans of the oil industry had ever occupied the nation's top two jobs -- they would finally get the "greater access" to the region's oil wealth after which they had long lusted...

It's clear that the U.S.-led invasion had little to do with national security or the events of September 11. Former Treasury Secretary Paul O'Neill revealed that just 11 days after Bush's inauguration in early 2001, regime change in Iraq was "Topic A" among the administration's national security staff, and former Terrorism Tsar Richard Clarke told 60 minutes that the day after the attacks in New York and Washington occurred, "[Secretary of Defense Donald] Rumsfeld was saying that we needed to bomb Iraq." ...

In February of 2001, just weeks after Bush was sworn in, the same energy executives that had been lobbying for Saddam's ouster gathered at the White House to participate in Dick Cheney's now infamous Energy Taskforce. Although Cheney would go all the way to the Supreme Court to keep what happened at those meetings a secret, we do know a few things thanks to documents obtained by the conservative legal group JudicialWatch. As Mark Levine wrote in The Nation($$):

… a map of Iraq and an accompanying list of "Iraq oil foreign suitors" were the center of discussion. The map erased all features of the country save the location of its main oil deposits, divided into nine exploration blocks. The accompanying list of suitors revealed that dozens of companies from thirty countries--but not the United States--were either in discussions over or in direct negotiations for rights to some of the best remaining oilfields on earth.

Levine wrote, "It's not hard to surmise how the participants in these meetings felt about this situation."

According to The New Yorker, at the same time, a top-secret National Security Council memo directed NSC staff to "cooperate fully with the Energy Taskforce as it considered melding two seemingly unrelated areas of policy." The administration's national security team was to join "the review of operational policies towards rogue states such as Iraq, and actions regarding the capture of new and existing oil and gas fields."

At the State Department, planning was also underway. Under the auspices of the "Future of Iraq Project," an "Oil and Energy Working Group" was established. The full membership of the group -- described by the Financial Times as "Iraqi oil experts, international consultants" and State Department staffers -- remains classified, but among them, according to Antonia Juhasz's The Bush Agenda, was Ibrahim Bahr al-Uloum, who would serve in Iyad Allawi's cabinet during the period of the Iraqi Governing Council, and later as Iraq's Oil Minister in 2005. The group concluded that Iraq's oil "should be opened to international oil companies as quickly as possible after the war."

But the execs from Big Oil didn't just want access to Iraq's oil; they wanted access on terms that would be inconceivable unless negotiated at the barrel of a gun. Specifically, they wanted an Iraqi government that would enter into Production Service Agreements (PSAs) for the extraction of Iraq's oil.

PSAs, developed in the 1960s, are a tool of today's kinder, gentler neocolonialism; they allow countries to retain technical ownership over energy reserves but, in actuality, lock in multinationals' control and extremely high profit margins -- up to thirteen times oil companies' minimum target... PSAs often have long terms -- up to 40 years -- and contain "stabilization clauses" that protect them from future legislative changes.

It's a stitch-up, see? People often think of the Iraq invasion as an attempt by AMERICA to seize control of Iraq's oil, but nothing could be further from the truth. AMERICA just supplied the troops and the strident voices at the UN so that BIG OIL could seize control of Iraq's oil. The AMERICAN tax-payers just funded the project, they don't profit from it.

The big deal is finally about to go down...

People think Bush is a bumbling incompetent, but that is because they judge him as a representative of the US public. Bush's masters are actually the richest of the rich, and they think he is doing a fine job, a fine job indeed. As Bush told a charity dinner crowd in 2000:

This is an impressive crowd — the haves and the have-mores. Some people call you the elites; I call you my base.

We have lost control of our government, now we are losing control of our planet.