Page 18


The oil industry’s plan is simple, and they’ve followed it to the letter. Secure federal subsidies by the oil and gas depletion allowance. By the write-off of intangible drilling costs. By the foreign tax credit. Then eliminate competition. By state proration, restricting domestic production. By exclusive dealership marketing. By merging with or buying competitors. By vertically integrating. By international cartels and import quotas. OIL COMPANIES have moved, too, to eliminate competition from other fuels. There is an increasing demand for natural gas, but most domestic reserves are now owned by the major oil companies, including the same ones who control international , oil. And the Federal Power Commission which is supposed to regulate gas prices is largely dependent upon the oil industry for information about reserves and the proper level of prices. In the spring of 1972, the FPC took the oil industry’s word “crisis” is the word about a shortage in natural gas reserves and, in effect, took the lid off all gas prices. Oil doesn’t have to compete with gas. Both are over-priced. And owned by the same companies. In some industries, coal is directly competitive with oil and gas. In the near future, that competition normally would be expected to increase to the benefit of the consumer because of new processes for converting coal into synthetic gasoline through liquification and into synthetic gas through gasification. But the oil companies have moved in here, too. Gulf bought Pittsburgh and Midway Coal. Continental, the ninth largest oil company, purchased Consolidated, the very largest coal company. In the last ten years, seven of the largest independent coal companies have been purchased ‘by non-coal companies. Four of these purchases were by large oil companies that are also vertically integrated in the oil and gas business. In addition, Standard Oil Company of New Jersey, Kerr-McGee, Atlantic Richfield, Shell, Sinclair and Sunray DX have bought huge coal reserves. It’s against the law to buy up the competition, but these law violations continue unabated. Demand for coal has gone up at the rate of 5 percent a year during the last two years. Production has gone up at the same rate. But coal prices have nevertheless increased an average of 70 percent. And more than doubled in some places. In uranium it’s pretty much the same. Oil companies own nearly half of all known reserves. Jersey Standard and Gulf are heavily involved in uranium and atomic energy. Kerr-McGee, by itself, owns nearly one-fourth of the total uranium milling capacity in the whole country. The big oil companies are moving in on other new energy sources, also. They are buying up the oil shale and tar sands in the Rocky Mountains and Canada. Underground steam looks promising as a new power source. So, a few big companies, such as Union Oil, Signal and Getty, are rapidly gaining control of it too, though much of it is under public lands in California and the West. The 25 largest oil companies are all, also, in natural gas. Eighteen are in oil, shale and uranium. Eleven are in coal. Seven are in tar sands. Six of the ten largest oil companies are in all four major domestic fuels oil, gas, coal and uranium. Solving the so-called “energy crisis” will not come from more subsidies. It requires ending the subsidies all of them: the direct subsidies and the tax subsidies. It requires ending the government-imposed restrictions on competition. It requires breaking up monopoly power. Stopping vertical integration and exclusive dealerships. Ending the international oil cartel. Deconcentrating the big oil companies and their monopolization of energy sources. It requires de-regulation. Allowing natural gas to compete with other fuels. Requiring pipelines to compete with pipelines, carrying oil and gas, as the law requires, without discrimination among customers. That’s a hard message to get across. The big oil companies spend millions of dollars in tax-deductible advertising to convince us that we are well served by the present system of huge subsidies and no competition. Mobil, for example, runs newspaper advertisements headed “A Stagnant Economy Is the Worst Kind of Pollution.” Their message is that if the energy industry has to join the free enterprise system, economic growth will be killed. Restoration of real competition in the energy industry and ending its special subsidy favors will also have important secondary effects. Among other things, the price we all pay for electricity would come down remarkably. But, there is much more wrong with the electric power industry than just the inflated costs it has to pay for fuels. ELECTRIC POWER is the biggest business in America 60 percent larger than petroleum refining, the second largest industry. Its capital assets now $110 billion have doubled every ten years, a rate of growth twice as fast as the rest of the economy. It uses, for example, half of all the bituminous coal produced in America. The electric power industry is involved in three functions generation, transmission and distribution. Individual customers buy from a distribution system which may be privately owned, municipally owned or owned by a cooperative. Nearly 80 percent of electric power customers buy from privately-owned companies. Their combined consumer electric bill is around $17 billion a year. It is not a free enterprise system. The companies enjoy a “coerced” monopoly that is, one imposed by law. You can only buy electricity from one retail company. By law, that company has no competition the idea being that parallel lines and duplicative plants and services would be inefficient and wasteful. So, one company is given the franchise for a guaranteed, non-competitive territory. Like governments rather than private enterprise electric companies have the right of eminent domain, the right to take private property with reasonable compensation. They also sell an indispensable commodity. And they have a guaranteed profit. Whatever their expenses or their capital investment whether they’re held down or allowed to run high privately-owned electric companies receive a guaranteed rate of profit on their investment. Who owns the private electric companies? It is hard to find out. We know who owns the municipal systems. These publicly-owned electric retailers serve 13.5 percent of the consumers. They’re owned by the citizens in the municipality or power district served by the system. And each consumer is a voter. We know who owns the one thousand rural electric cooperatives that serve 7.5 percent of electric customers. Each customer of a cooperative is also an owner, and each has one vote in the cooperative’s policies. But the situation is far different for the privately-owned companies that serve nearly 80 percent of all customers. They’re increasingly concentrated. Since World War II, the number of private companies has been cut in half. And merger applications are increasing swiftly. We do know that a fourth of the 200 largest privately-owned electric companies are controlled by one of 15 utility holding companies. But, both in the holding companies and in the electric companies themselves, owners use “street January 19, 1973 15 1111. .11111111 1111111. 41111111 41111111. 4111111 411 INI I an I, f 8 DAY WINTER I-161:1 DAY I II 1 Madrid & 1 1Carta del Sol I 1469 ALL-INCLUSIVE FROM DALLAS I I DEPARTS MARCH 17 i I BROCHURE ON REQUEST: ‘ i i DALLAS TRAVEL, INC. I 815 LTV TOWER, DALLAS, TEXAS 75201 I 411111111. 411111111. AMIN. 411010 41111111. .11111r 41111111.