Congressman Markey opened the hearing by pointing out that:
1. Big Oil's profits have more than quadrupled over the last six years and
2. Big Oil should pledge 10% of their profits to support alternative energy research.
Many, too many, of the statements made by the many Congressmen and Congresswomen on the committee focused on the narrow issue of whether Congress should continue to provide an $18 billion subsidy to Big Oil for the purpose of supporting alternative energy research. Clearly, subsidizing an industry that has quadrupled its profits is outrageous. Calls by Chairmen Markey for a 10% investment by Big Oil, while better than nothing, badly missed the real issues at hand.
The questions Congress should have focused on are of much greater significance.
Big Oil once again was preaching the sanctity of the market. Increase supply and prices will fall. The problem is that the oil market has been one of the greatest frauds ever perpetrated on the American people. Here's why.
Every one of the Big Oil men cited studies that showed that by the year 2030, energy production from alternative sources will only reach about 2% of the total energy needed. Most climate scientists have said that we have only about ten years to start making a significant reduction in our burning of fossil fuels. See the disconnect? What is the point in talking about market-directed policy when we are in the process of destroying the planet? Free markets, if truly free, may do a very good job setting the price level based on the interplay of supply and demand; they do a very poor job setting national policy. To conflate the two has led to disaster. After all, wasn't it the "free market" that led to the gas-guzzling SUV craze after the OPEC oil shocks and long gasoline lines of the 1970's? Sane national policy would have mandated much more restrictive CAFE standards and would have looked for strategies to de-emphasize the use of the automobile in favor of more energy efficient transportation modalities.
The journey of a thousand miles may indeed begin with one small step. It's important to note, however, that taking that small step does not ensure that you will arrive at your destination in time nor does it ensure that you have stepped in the proper direction. We need to pull out all the stops on global warming. It's a planet threatening, life threatening foe. There is no time left for politically palatable compromises. There is no time left to let the market "work things out." We need to make radical changes in our national energy policies and we need to make them immediately. Our survival hangs in the balance.
Climate scientists have been shocked at the accelerating pace of damage caused by global warming. Even predictions made in the last few years already seem to have been too conservative. The polar ice caps are disappearing at an alarming rate. Al Gore's "An Inconvenient Truth" now seems far too tame and timid given the accelerating rates of glacial melt.
Those who put so much faith in the "wisdom of free markets" need to understand why the market has failed to guide us correctly on energy policy.
The simple answer is that oil markets are not free at all. The marketplace has been corrupted and distorted due to a variety of factors. These factors have failed to "monetize" certain hidden costs into the price of oil, making oil appear to be much cheaper than it actually is.
In Naomi Klein's excellent best seller, "The Shock Doctrine", she showed in painstaking detail how US policies did whatever was necessary at whatever cost was required to obtain oil and other resources from countries all over the world. Similar examples of this policy have been excellently described by Chalmers Johnson in his books "The Sorrows of Empire" and "Nemesis" and by John Perkins in his book "Confessions of an Economic Hit Man."
The US has used its CIA and its military to exploit resources from countries all over the world. While such policies are clearly immoral and reprehensible, for the purposes of our focus on oil markets and their associated pricing mechanism, let's look beyond the morality of US imperialism. Beyond the issue of simple right and wrong, one point cannot be denied: the cost of CIA and US military operations has not been reflected in the price of oil. If we are to accept the "judgment of markets", it's critically important to set the price of the commodity, in this case oil, at its true level. Hiding costs by passing them on to American taxpayers fails to provide any integrity to the pricing mechanism and corrupts the oil market. Current US military spending, including both spending inside the "formal" military budget and outside it, exceeds $1.1 trillion per year. Exactly what proportion of that has been used to procure oil, and it is a substantial proportion, is anybody's guess. Failing to burden the cost of oil with some amount of this spending has led to tragic national energy decisions by those who worship the free market.
The environment we live in, the earth itself, the world we leave to future generations, are all part of our "common wealth." With each drop of oil we burn, that common wealth is harmed a little more. It may be difficult to put a price on the cost of that harm but that does not mean it doesn't exist. To be a true market, the damage done to our environment would have to be reflected in the price of oil. If the production of CO2 is "free" and damaging our environment is "free" to the oil companies, i.e. if they are not charged for the damage they inflict, they are then able to sell their commodity at prices that do not reflect the actual costs to our society. The result, again, is that the market, because of its deceptive pricing mechanism that ignores the costs of global warming, is unable to counsel the right energy policies.
What will it cost to defend the nation against the ravages of global warming? What will it cost to erect massive "sea walls" and gates to hold back the oceans along the coastlines? What will it cost to relocate tens of millions of Americans? What will it cost when drought severely disrupts American agriculture and threatens our food supply? What will the health care costs be when we are unable to heat or to cool our homes depending on where in the country we live? It may be impossible to assign a dollar value that should be added to the price of oil by levying fees for these hidden costs on the oil companies. Nevertheless, it's clear the real Big Oil subsidy, including the costs of massive support from the US military and the costs associated with the destruction of our environment, goes far beyond the mere $18 billion Congress seems so concerned about. By factoring in these hidden costs rather then passing them on indirectly to taxpayers, competing technologies like wind, solar and geo-thermal become far more competitive. Only then can we even marginally rely on the oil market and its pricing mechanism to guide us on policy.