The Mises Institute monthly, free with membership
Volume 14, Number 7
Behind the Oil Rip-Off
The rise in oil prices provoked a frenzy of opportunistic
posturing by politicians of both parties. Yet neither Clinton nor
Dole will acknowledge the real reasons for sustained high
prices--taxes and environmental regulations designed to
keep prices high--or the reason for the newest price rise itself.
Both are complicit in their genesis, and both are conspiring to
keep gas prices high and prevent American consumers from getting
The President's response was to release some portion of the
petroleum reserves--an action which put less than one
day's worth of gas on the market. Why stop there? Why not
release the entire stock, which was only established as a subsidy
to big oil in the first place? Bob Dole suggested temporarily
repealing the gas tax--a position that seems incomprehensible
given that he voted to increase the gas tax on no less
than three separate occasions.
Neither the Democrats nor the mainline Republicans want to
talk about the core reason for the gas shortage and the resulting
price increases: the U.S.-led international embargo against Iraq.
This cruel blockade, which has led to the starving of hundreds of
thousands of Iraqi children and untold levels of disease and
death, is also blocking the output of one of the world's most
The result has been a artificial scarcity of crude oil, which
in turn has driven up prices at the gas pump, with a little help
from the oil companies. Oil companies depleted stocks
intentionally over the spring in anticipation of a UN-broker deal
that would have allowed Iraq to sell 700,00 barrels per day. When
the deal was finally approved, prices didn't budge because the
surplus had already been anticipated; it constitutes only a
fraction of what Iraq could be selling.
We need to repeal the federal gas tax, all of it and
permanently, but we also need to understand how Big Oil
manipulated U.S. foreign policy in pursuit of profit. The war in
the Gulf was a war against the competition with the partial
purpose of knocking Baghdad out the world oil market.
American oil companies have since reaped what some Democrats
have called "windfall profits." However, these profits did not
fall out of the sky: they resulted from the harsh economic
sanctions supported by most Democratic members of Congress, as
well as Republicans. These are the same people yelping about the
glories of Nafta and "free trade," except when it comes to Iraq.
The announcement that the Clinton administration is launching
an "investigation" into possible "collusion" between the oil
companies surely sets some sort of record for hypocritical cant.
Price can't be controlled in that manner. But it is collusion, to
be sure: collusion between the U.S. government, the Saudi regime,
and certain sectors of the oil industry not only to prop up oil
prices but also to control and cartelize the oil market.
The instrument of this control has been U.S. foreign policy
since 1945. As Murray N. Rothbard argued, the cozy relationship
between Rockefeller oil interests and the Saudi regime is
embodied in Aramco, jointly owned and operated by the Saudis and
a Rockefeller-controlled consortium, which has a monopoly on the
production and sale of Saudi oil. We were told that the U.S. was
fighting the evil Saddam to keep the price of oil low: but the
American "victories," and the resulting embargo, have naturally
succeeded only in keeping the price high.
The sole victor here is the farflung Rockefeller corporate
empire, of which oil is but a single province. Another key
province is banking: Citibank and Chase Manhattan, which have
extensive loans and other dealings throughout the nations of the
Naturally, the Saudis, and all the statelets of the Saudi
peninsula (Oman, Qatar, the Trucial States, and Kuwait) are also
reaping "windfall profits" because of the contrived shortage. On
the other hand, the banks and the rest of Wall Street, never had
any investments to speak of in Iraq; Wall Street had everything
to gain, and nothing to lose, from Desert Storm. The problem is
that the American public is still reeling from the economic
effects of George Bush's war.
The current oil scarcity is an artificial creation of politics
and is easily corrected. We could loosen environmental laws that
prevent drilling, we could repeal all taxes, and we could
eliminate the pointless embargo against Iraq, which should have
been ended long ago on both economic and humanitarian grounds.
That these obvious options have not been raised by anyone,
Republican or Democrat, is a frightening testament to the power
of the government-connected corporate elite to control the
political debate in this country.
Justin Raimondo is author of Reclaiming the American Right