From Enron to Exxon

[Joanne98]

by Hunter
Sat Aug 02, 2008 at 10:15:15 AM PDT
I think there's something almost refreshing about the new "Drill Here, Drill Now!" battle cry from Republicans, oil companies, and conservatives. It's at least blisteringly up-front about being a giant screw-you to environmentalism, to the oncoming freight train of peak oil, and in fact to having any actual energy policy in general. The Republicans have decided that, since they don't have anything better to do, they're just going to use soaring gasoline prices to screw with everyone else. Soaring energy prices? Bah! Converting to alternative energy sources? Bugger off!

It's the legislative equivalent of mooning a tollbooth attendant.

But just to insert a good dose of conspiracy theory into the mix, isn't all this playing out suspiciously similarly to the Enron debacle?


It was the first years of the Bush administration: prices are soaring uncontrollably in the newly deregulated California energy markets. Enron, a company that has newly decided there is far more money to be made in marketplace speculation than in actual energy production or transmission, is powerful enough to control the flow of electricity throughout the state and region in question, which they do, squeezing supply further so that prices soar. They idle plants under their control in order to artificially reduce capacity; they reroute power away from the state, leading to an ongoing rotation of community blackouts. They and other energy companies then use the entirely manufactured demand "crisis" to demand long-term state contracts -- at locked-in rates far above what they would have gotten before the "emergency" -- as the only possible way to "solve" the problem. Republicans and Republican-controlled regulatory agencies take the side of the Enron and the corporations throughout the entire process. (Yeah, they were hoping we'd all forgotten about that -- we haven't.)

In the end, the contracts are signed, the Democratic governor of California is recalled due to a brilliantly plotted, corporate-financed campaign of misdirected consumer outrage, and the looting of the state energy markets would have gone off spectacularly except that in the process, the jackasses at Enron managed to leverage the company into a complete collapse via a number of similarly speculative/manipulative/illegal activities. Until the day they collapsed, though, they had politicians eating out of the palm of their hand, willing to grant them anything to "help" with the "crisis" that all of that unnecessary environmentalism and cruel corporate taxation had supposedly led us to.


Cut to 2008. Gasoline prices are soaring uncontrollably, and become a huge political issue. Oil companies and oil-connected politicians say that if certain corporate-friendly steps are taken to further consolidate the power of the extraction companies over existing regulation, prices will be better controlled. Republicans are at the forefront of this effort, taking the side of the corporations: we need to abandon our environmental protections, because they are suddenly killing our marketplace. We need more subsidies, and more cheap leases, and more corporate tax breaks, all so that noble but terribly put upon companies like Enron -- sorry, I mean Exxon -- can help us in this time of crisis.

What happens next? Let me guess, it's exactly what the Republicans and the oil companies are assuring us of -- we abandon the offshore drilling restrictions and, remarkably, prices almost immediately start subsiding this fall, even though not a single drop of oil is being drilled that wasn't being drilled the months before. The crisis is "solved", merely by acquiescing to something that didn't have any actual production or refinery impact. In the meantime, billions of dollars worth of new assets have been added to the very companies currently enjoying higher profits than any companies in the history of mankind.

Of course, there are differences. What Enron did was unequivocally corporate terrorism -- by intentionally cutting power to traffic lights, homes, elevators and whatnot they created an uncountable number of situations that could have led directly to injury and death, statewide. It wouldn't be reasonable to assume the same level of collusion here -- and it would be terribly irresponsible to muse on whether or not there aren't plenty of other energy executives and speculators who saw the Enron model of governmental blackmail, and decided that it was nothing short of brilliant, and looked to use it in a model in future anti-regulatory efforts.


But the similarities are striking, and in some ways, the Republican and energy company efforts to open offshore drilling -- something that everyone who isn't a baldfaced liar all agree will have zero impact on current production or prices -- are a very good analogy to the Enron blackmail. The entire purpose of new offshore leases would be as a boon to energy companies and market speculators, by infusing the speculative market with billions of dollars worth of new product at almost no expense to the companies themselves.

The oil companies can't drill those new leases, that much is clear. There's plenty of existing leases to drill, and they aren't drilling those either, and there seems no particular interest in rapidly expanding capacity in order to actually drill them.

But each company can hold those leases, and borrow against the value of those leases, and trade those leases, so that's the primary value of the new offshore plots -- as tradable assets on the speculative market. If we give them the leases (that is, charge them at the usual pittance), we're vastly increasing their available capital, vastly increasing the capital of the entire speculative market, and they don't have to lift an actual finger to see it happen. No drilling; no additional exploration; nothing. Only the creation of new paper.

In that sense, it is identical to Enron, in that these companies want these leases purely as tradable commodities in and of themselves, without actually having to do any actual extraction. It's 100% giveaway to the companies, it has nothing to do with the actual current cost of oil or gasoline, and it's being done in an environment of record profits and near-blackmail.


You have to admire the chutzpah of Republicans actually staging a pizza party on the floor of the darkened, shuttered House in order to actually celebrate their desire to help another set of corporate speculators plunder the energy markets at taxpayer and consumer expense.

Truly, the word "shameless" has lost all meaning.

http://www.dailykos.com/storyonly/2008/8/2/13152/24931