How to Break Up Big Oil
by Antonia Juhasz
Breaking Up Is So Hard to Do (remix)
How are we to change course? The first step must be to unlock the hold that Big Oil has on U.S. government decision-making. We cannot engage in a truly democratic process for determining the best path forward for the country States with the 800-pound gorilla or Big Oil in the room, and the public all but shut out.
One hundred years ago, activist, journalists, politicians, and others looked at an analogous set of problems and chose as their solution the break-up of the largest corporation in the world, the Standard Oil Company. They introduced a new set of powerful antitrust laws specifically designed to counter the unchecked power of corporations over the U.S. Government.
Anthony Sampson’s description of Standard Oil could easily be written of Big Oil today: “It was almost untouchable by the state governments which seemed small beside it, or the federal government in Washington, whose regulatory powers were minimal. By bribes and bargains it established “friends” in each legislature and teams of lawyers were ready to defend its positions. Its income was greater than that of most states.” This description of the intent of the Clayton Antitrust Act from a congressional report written in 1914 could also have been written today: “The concentration of wealth, money, and property in the United States under the control and in the hands of a few individuals or great corporations has grown to such an enormous extent that unless checked it will ultimately threaten the perpetuity of our institutions.” And finally, President Woodrow Wilson’s words while campaigning for the presidency in 1912 may be even more relevant today: “The trusts are our masters now, but I for one do not care to live in a country called free even under kind masters. I prefer to live under no masters at all….The government has never within my recollection had its suggestions accepted by the trusts. On the contrary, the suggestions of the trusts have been accepted by the government.”
The nation’s antitrust laws were written to ensure that corporations did not grow so large that they could overrule the power of the government. Today our nation is once again ruled by a handful of corporate oil interests—and the stakes are arguably far higher. Any formula designed to lessen the control of Big Oil over our government and the world’s most vital natural resource must therefore consider the break-up of the nation’s largest oil corporations, the spawn of Standard Oil: ExxonMobil, Chevron, ConocoPhillips, Marathon, Valero, Shell-U.S. and BP America.
We know that this can be done because we did it once before. The break-up of Standard Oil provides inspiration, tools, and guidance for the “do’s and don’ts” of breaking up Big Oil today. The most significant failures of the 1911 break-up of Standard Oil were allowing the company to design its own dissolution, and the failure of the government to enforce the break-up through regulatory action. Moreover, the people largely left the fight against Standard Oil to the government after the break-up was achieved. Vigilance was not maintained. Any break-up or even attempt at a break-up today should be carried out simultaneously with a host of other proposals and actions required of both the government and the people. We should reduce not only Big Oil’s size, but also our reliance on its product. These efforts would weaken Big Oil’s hold on our government and thereby make the government more willing to regulate the post break-up companies.
Breaking up the companies is a key place to start, but, if the past has taught us anything, we know that it cannot be achieved in isolation. If Congress is the source of both the problem and the solution, new proposals for reducing Big Oil’s hold on our nation must be pursued in tandem with new calls for a break-up. These proposals should present tools for getting Big Oil’s money out of politics; cutting off its subsidies and taxing its operations; constraining and regulating Big Oil’s activities; investing in public transportation and sustainable alternative energy; reducing our consumption of oil; and demanding that our military get out of the oil-protection business altogether.
SOS: Separation of Oil and State
Elected officials at all levels of government should demonstrate that they are not and will not be beholden to Big Oil. A fundamental demand of all people running for and holding elected office should be that they are committed to a “separation of oil and state”: a commitment to renounce money from the oil industry and support sustainable clean energy alternatives. Such a commitment could provide an element of demonstrable proof that election promises can turn into real policy change once the electioneering is over. At the same time, voters can pledge only to vote and campaign for the least “oily” candidates.
Separation of Oil and State (SOS) is a campaign launched by Washington, D.C.-based Oil Change International and endorsed by another twenty organizations, including Greenpeace USA, Rainforest Action Network, Sierra Club Student Coalition, and the Center for American Progress. Oil Change International works to remove the legal and political impediments to shifting our economy away from oil. SOS is modelled after the successful campaigns of the 1990s that led many politicians to reject campaign contributions from the tobacco industry. Through public education and protest, politicians came to view any association with the tobacco industry as a toxic relationship better to be avoided altogether. As a consequence of these campaigns, the power of the tobacco industry has been significantly reduced. Meaningful legislation has been passed at the local, state, and national levels regulating the industry, eliminating subsidies, and even eliminating tobacco altogether from restaurants, neighbourhoods, and cities. Such an outcome was believed impossible in the heyday of the tobacco industry’s political power. If it could happen to tobacco, it can also happen to oil—another product for which the nation has developed a deadly addiction.
A vital corollary to the SOS campaign is the need for real campaign finance reform that removes the stain of corporate money from our elections. The first meaningful campaign finance laws in the United States were put in place by the same political momentum that reined in corporate power over government with the nation’s antitrust laws. I recommend Public Citizen’s Clean Up Washington website, which provides legislative proposals for both campaign finance reform and for curtailing the power of lobbyists.
No More Free Ride
Big Oil maintains its wealth and size through billions of dollars of local, state, federal and international tax breaks, subsidies, royalty refief, and loopholes. We should no longer consider it a priority of the government at any level to subsidize the activities of Big Oil. Our national wallet is too small and the costs associated with Big Oil’s wealth are too large. Big Oil is more than capable of financing its own affairs. Eliminating its free ride will help create a more level playing field for the development of alternatives to opil and free up money for direct investments in public transportation.
In order to eliminate the free ride, the industry must be taxed adequately. Sate measures such as California Proposition 87 to impose excise taxes on oil production should be implemented across the country. A windfall profits tax should be imposed. Such a measure would bring an additional tax to bear on Big Oils current liability whenever the price of oil tops a certain predetermined marker. There is tremendous support for such legislation all across the nation.
Progress Through Regulation
We must turn a very sceptical eye toward the “cap and trade” proposals gaining currency with ConocoPhillips, BP, and Shell. Under this system, the government decides how many tons of a given pollutant can be emitted state- or nationwide and passes out credits to the emitters. Polluters then trade the credits. Energy traders will then step in to facilitate and seek to make a profit off the trades. There are several problems with such a system, the most pressing is that it does not work. The European Union implemented a cap and trade system in 2005, but, thanks in good part to intense industry lobbying, the initial cap was set so high that the polluters fell under it without making any reductions at all. The Europeans are trying to fix the system, but the politicization inherent in the allocation process makes this very difficult. One can only imagine the type of industry influence that could be expected under a U.S. system.
Rather than allow companies to trade in pollution, local, state and national governments around the world need support in their efforts to better enforce and expand control over polluters, particularly as companies seek to retool refineries to burn dirtier crude. The same is true for pipelines, gasoline stations, ships, trucks, trains, and, of course, production and exploration facilities as well. Only when facilities have proved that they are using the safest, most technologically superior equipment and maintaining the highest standards of worker safety and public health should companies be allowed to expand existing refineries, refit them to burn dirtier crude, or build new refineries.
Reduce Oil Consumption
What better way is there to reduce the power of Big Oil than to make its product obsolete? We hold in our power the ability to dramatically reduce the wealth and influence of Big Oil by simply refusing to use its products. Reducing our consumption of oil and gasoline is paramount to strengthening our own democratic voice. In the United States the first order of business is reducing how much we drive. Next would be using resources other than fossil fuels in our vehicles. However, the bottom line must still entail reducing consumption. For example, ethanol is a good idea, but only in moderation. Trying to replace gasoline with ethanol is leading to the clearing of rain forests and the conversion of vast tracts of land from agricultural production for human consumption to biofuel production. Similarly, a global shift away from industrial agriculture which uses energy-intensive crop production for export and toward small-scale, sustainable production of crops for local consumption would address food security issues and reduce consumption would address food security issues and reduce consumption of oil and gas. We can help countries like China and India leapfrog the oil stage of development altogether both by leading by example and by providing support (financial and otherwise) for alternative energy solutions. We can also lead by example by committing our nation to meaningful international climate change agreements, including and exceeding the Kyoto Protocol.
Public Ownership of Refineries & Strategic Reserves
Many proposals have been made to increase public control over the U.S. oil industry. State-owned refineries have been proposed all across the country. California’s assistant attorney general for antitrust, Tom Greene, told me that he supports a strategic reserve of oil held by the state of California. A national oil company to produce the oil on federal land has been proposed. Nationalizing the nation’s largest oil companies—taking ownership from the private sector and putting it into the federal government’s hands—has also been proposed. Most countries in the world place ownership and control of oil in the hands of the public. Doing so in the United States would simply put us in line with the majority of the people on the planet. All such ideas should be debated and discussed.
Informed Choice—a Sustainable Future
We now find ourselves in a critical moment of opportunity. We have information that can empower our action. We have organizations, community groups, elected officials, journalists, academics, unions, and people around the world who are inspired to bring change. To disentangle ourselves from the natural resource that has guided global economics, politics, and consumption for a hundred and fifty years is a profound endeavour. To break the lock of the largest corporations on the planet is equally challenging. We must think radically, challenge ourselves in new ways, and believe in our own capacity to stop wars, protect our climate, communities, and workers, and build a more secure, sustainable, and peaceful future.
This article was extacted from the ninth chapter of Antonia Juhasz's groundbreaking book of the same name. Ms Juhasz is a director at Global Exchange in San Francisco, and a leading oil, trade and financial policy expert. She writes for the New York Times, International Herald Tribune & LA Times among other publications, You can view a related video presentation by Antonia Juhasz here.