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 Day 19

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Hanging Together

Why Won’t Corporations Take on Big Oil?

by RALPH NADER

Here is a counter-intuitive story for you. Why don’t organized corporate interests challenge damage or risks to their clear economic interests?

Think about oil prices for big consumers, not just your pocketbook. Airlines are groaning, limiting flights, and laying off employees because of the skyrocketing price for aviation fuel. Executives in that industry say that fuel costs are close to 40 percent of the cost of flying you to your destination.

The powerful chemical industry is under pressure from the prices they’re paying for petroleum—probably their main raw material.

The powerful trucking industry is beside itself with diesel fuel going to $5 per gallon.

You can add your own examples—cab companies, tourist industry, auto companies, etc.

Why aren’t these very influential lobbies throwing their weight around Washington to get something done about the speculators on Wall Street determining what is paid for gasoline and related petroleum products? It is in their own economic interests.

To do what? Well, for starters, push Congress to legislate higher margin requirements for the speculators at the New York Mercantile Exchange—the same fellows who, based on rumors, took the price of a barrel of oil up another $10 in one day.

Higher margin requirements (and wider disclosure rules) result in dampening speculation by reducing the amount of borrowed money these traders can use in their gigantic commodities casino.

Long-time member of the New York Stock Exchange, Michael Robbins—an astute and fair analyst—says margin rules have historically been used to dampen speculation on stock exchanges. He mentioned a time years ago when the Federal Reserve raised the margin requirement to ninety percent—meaning the traders had to put up 90% of their own money on trades.

There are other moves that can be made by Washington to ease the oil price crisis that is fueling inflation throughout the economy and shocking consumers. Suffice it to say that ExxonMobile testified earlier this month in Congress that absent the speculators, the price of a barrel of crude oil would be half what it is today. That would mean about $65 a barrel instead of $130 a barrel.

What else do these big corporate buyers of oil need?

Another area of major business firms not acting in their own interests involves the proposal in Congress (HR 676) to establish a single-payer health insurance system. That would mean government health insurance, private delivery of health care, free choice of doctor and hospital and saving about half a trillion dollars in insurance company administrative expenses and computerized billing overcharges a year.

Presently, tens of millions of workers have employer-based health insurance. For years, CEOs have complained that this cost puts them at a competitive disadvantage with their corporate competitors abroad and in Canada where there is universal government health insurance.

Former General Motors CEO, Jack Smith, publicly approved of the Canadian medicare system, which he had experienced when he was head of GM Canada. Under full medicare, these companies will pay less even with an assessment.

So, what’s up here? We don’t see these weighty corporate lobbies on Capitol Hill supporting the 91 House members who have endorsed HR 676.

Then there is the small business lobby ostensibly represented by the large National Federation of Independent Business (NFIB). Small business is regularly subject to government policies and market discriminations that put them at a disadvantage with their large competitors.

Presently, for example, a Small Business Administration report concludes the following:

“Small businesses in their commercial sector faced a 30 percent price differential for electricity and a 20 percent price differential for natural gas. In the manufacturing sector, small businesses faced a 28 percent price differential for distillate fuel oil, a 27 percent price differential for natural gas, and a 14 percent price differential for coal.”

Are these volume discounts all fair for the Big Boys? Doubtful. Don’t count on the NFIB to protest. More often than not, the NFIB talks small business but walks the walk of the National Chamber of Commerce, which primarily lobbies for the interests of large companies.

So, why the overall reticence to fight for their own economic interests? First, corporations do not like to fight each other because they may need each other on other matters. Second, hey also have exposable skeletons in their own closets. Third, they do not have to initiate a business war of retaliation. Fourth, they do not want to give their traditional labor, environmental and consumer adversaries cause to strengthen their own power by, in effect, siding with these groups’ traditional causes.

If investors in this country had any power over the companies they own—as individuals, or through mutual funds and pension trusts—an inquiring process could open up on this fascinating question.

But as Robert Monks—a leading shareholder activist and writer—has said many times, those same CEOs have their own economic interests—think CEO compensation—in keeping investors powerless.

RALPH NADER is running for president as an independent.

 

  

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