David Byrne, of Talking Heads fame, on gas prices and the American automotive industry.
Last week GM - once one of the largest, most powerful companies in the whole world - went begging for a government bailout, along with the other 2 big U.S. automakers. Needless to say, Bush got this country is such deep debt that the prospect of bailing out all these entitled knuckleheads seems less and less do-able, never mind whether people agree and can stomach the idea.
These companies do not have the country's best interests at heart - for years they have fought tooth and nail against fuel economy, defeating 2 bills in congress that would have resulted in cars that use less gas and burn cleaner. They saw that they could sell the macho U.S. car buyers on gas-guzzling giant SUVs and pickup trucks, and got the government to exempt those vehicles from many of the rules that apply to cars - and we're supposed to help these guys? They could give a shit about us!
I feel bad for the working stiffs who will be and have been laid off by the thousands - though I didn't see too many of the unions fighting hard for fuel efficiency and smaller cars - they mainly fought for more pay for less work and they aren't getting much public sympathy either as a result.
I guess I'm in favor of a bailout, with severe conditions applied. Ideally all the managers, every last one of them, including the union management, would be replaced by Japanese and Koreans, and told we also need mass transit, light rail and an end to fossil fuel consumption. The Japanese/Korean thing is a bit of a joke - but seriously; these guys should NOT be replaced by their brethren. Their thinking is stuck, frozen, blinkered, no matter how much they might claim they've learned their lesson. They haven't. They flew to DC on separate private jets while their companies have less than no money. They should be replaced by either foreigners or managers outside the auto and oil industries. Then their companies might stand a chance of reviving - but if these same guys are left in change, say goodbye to that money. Their thinking is too ossified to change.
They'll claim that they know their business, so they should the ones who should be allowed to fix it. But them "knowing" their business is exactly the problem.
Oil is down to $50 a barrel from a high of $145 during the summer. Why? The newspapers claim it is because of lowered demand, meaning that as (Americans) drive less they force the oil companies (and the Arab states who supply the oil) to lower the price in order to increase sales. I don't think I'm buying this explanation.
As much as they might wish to decrease their spending on gas and heating oil by 2/3, it's just not possible that most businesses or ordinary folks could do that kind of reduction in a couple of months. People live in places that necessitate commuting, driving their kids to school, to the mall, etc. etc....and businesses are the same, they are set up in ways that demand the consumption of a large amount of oil and gas just to move the product, heat the buildings and run the machines. They can't all of a suddenly be closer to their warehouses and retail outlets, closer to their sources of supplies. Decades of cheap gas has created a world, a continent at least, in which everything is spread out all over the place. Moving goods and people was always relatively cheap and fast - though this summer gave a hint at things to come. But all of that can't be readjusted in a few months to reduce demand by 2/3. It's just not possible - or so it seems to me.
Here's a wacky but not altogether unrealistic alternative explanation. I remember as a kid there would be 2 - sometimes 3 - gas stations on some street corners in suburban Baltimore County. Occasionally there would be what came to be known as gas wars, in which one station would lower its prices to drive more business its way, and the others would have to follow suit. Usually the station that initiated this "war" was a big company like Esso, Texaco, or Amoco. The Seven Sisters. The indie gas dealer across the street was then forced to lower his prices too, or risk losing all his business, though the indie owner didn't have the deep pockets to allow him to survive when the prices got so low that they didn't cover his overhead. The little guy would then get driven out of business, and the big company's station would pop their prices back to where they were before the gas war. They would have successfully driven out the competition - I saw it happen over and over - and not just in the gas station business; look at the policies of Microsoft over the years. Anyway - could it be that the Saudis might have initiated a gas war here? It would be plausible to use the economy as an explanation for lowered prices, but here the lowered prices seem to be running ahead, anticipating the collapsing economy. I suspect the Saudis see the looming oilfields, pipelines and refineries in Nigeria, Kazakhstan, Brazil and a host of other places - places who, with the price of oil so high as it was, could afford to fund all the capital-intensive ancillary aspects of the oil business. However, if the price got lowered, as it has, they won't (and it turns out aren't) able to finance the building of those refineries, pipelines, shipping terminals, drilling and exploration. The rivals will, if the prices stay this low for long, be driven out of business, just like the independent gas stations I saw go under in suburban Baltimore.
Call me conspiracy-minded or a crackpot, but why should OPEC behave differently than Exxon, Shell and Amoco? As soon as the rival oil producers stop production and go bankrupt the big boys will swoop in, take their corner and jack the price back up.