The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

Energy prices:
Whatever they can get away with

Sep 26, 2005

Baltimore Gas & Electric (BGE) warned customers to expect their costs to go up 25 to 33% this winter in Maryland, blaming the effects on Hurricane Katrina. Washington Gas also warned customers in the DC area to expect increases during the winter heating season. And home heating oil companies already told customers in Washington D.C. to expect their bill to rise more than 50% this winter.

The energy giants – whether for electricity, heating oil, gasoline or natural gas – were looking for an excuse to raise their prices as quickly as possible. And they found it in Katrina – which supposedly took a quarter of U.S. refinery capacities out of production. Then Hurricane Rita was supposedly going to affect another quarter of all refinery capacity. If it were true – instead of simply being a scare tactic – then how were these energy companies suddenly able to make sure that gasoline was available when the Bush administration began to worry about public outrage – before they started to push it up again?

But even if they had a temporary shortage – so what? The oil and natural gas companies are well aware that hurricanes happen every year in the Gulf of Mexico. That means, companies should have ample reserves in production capacity and inventory to ensure there aren't shortages during these regular weather problems.

And in fact, there WERE large reserves of crude oil. At the end of July, crude oil stocks in the United States were at their highest levels since 1999. The U.S. is awash in crude oil and so is the rest of the world.

BUT, say the oil companies, there is a shortage of refining capacity. If that is so, it's a contrived shortage. An internal memo written in 1996 by a Texaco executive bluntly stated, "the most critical problem facing the refining industry ... is the surplus of refining capacity, and the surplus gasoline capacity." Note it said surplus, not shortage. The memo concluded: "Significant events need to occur to assist in reducing supplies and/or increasing demand for gasoline."In fact, it's obvious, the energy companies are using these hurricanes as a "significant event" – an excuse to allow the companies to charge higher prices and make greater profits.