The oil industry is a game of restricting supply and raising prices. It's been that way since the 1800s when John D. Rockefeller's Standard Oil company employed monopolistic tactics to take over competitors' pipelines, gaining control of more than 90 percent the country's refined oil flows by 1904. The Supreme Court dissolved Standard Oil in 1911, but its successors are still at the core of today's U.S. oil industry, and the story of the Rockafeller dynasty's oil monopoly is frighteningly similar to today's Big Oil narrative, and some of its most prominent characters coincidentally run our University.
Paul Foster, a UT regent who also sits on the University of Texas Investment Management Company Board of Directors, adds an interesting chapter to the story. The El Paso businessman is worth about $1.9 billion, according to Forbes, and UT's not the only thing he's got some control over: He sits on the boards of the American Red Cross El Paso chapter, the Texas Economic Development Corporation and Baylor's business school, to name a few. He's also Texas Tech's largest benefactor and has millions of dollars in ties to UT and a host of other entities he supports financially. His gifts have definitely given back in the form of control: For example, he has given $281,239 to Texans for Rick Perry since 2001, according to personal financial statements he submitted to the ethics commission. In one day alone in 2006, he even gave two $25,000 donations to Perry, who is responsible for appointing him to such high places as the Texas Higher Education Coordinating Board and the UT regents.
Foster's got a lot of control in the realm of higher education, but his background is oil, and that's where the story starts to resemble Rockefeller's. In 2000, Foster bought an El Paso refinery that had gone bankrupt and founded Western Refining Inc. Three years later he purchased the nearby Chevron Texaco refinery, and last May, he bought (for $1.23 billion in cash) Giant Industries, a close rival that was experiencing a financial crisis due to a 2004 fire that seriously injured six workers. Foster's company shot up to the rank of the fourth-largest independent petroleum refining company in the U.S., and its shareholders had a very merry Christmas that year as well.
Since the Rockefeller days, the U.S. has instated entities such as the Federal Trade Commission to protect citizens from the harmful effects of monopolization, but they've failed to have much of a role in the whole narrative. For example, the FTC sought a restraining order injunction to stop Western Refining from buying out its rival, alleging that the acquisition would lead to reduced competition and higher prices for consumers. But the FTC let Foster off the hook: In its statement concerning the dismissal of the complaint against Western Refining, the FTC admitted that it had reason to believe that the merger "may be substantially to lessen competition, or to tend to create a monopoly," but "after weighing all relevant factors - and recognizing that this is a close call - we conclude that continuing to pursue the case would not be in the public interest." Two commissioners even gave a dissenting ruling, stating that there was "substantial evidence" that the deal would cost consumers "millions of dollars annually." The FTC statement further noted: "In this sensitive area of the economy, that is a substantial injury to consumers."
Those dissenters might have been right. Just this month, the Navajo Nation in New Mexico appealed the federal government's acceptance of rates set by Western Refining to ship crude oil on the company's pipeline - and the pipeline, specifically, was what Western Refining gained in its acquisition of Giant. The tribe contends that Western Refining has refused to offer an exchange service on the pipeline, preventing oil from reaching certain markets in southeast New Mexico and West Texas. The tribe also says that selling crude oil at the price Western Refining offers for its production will reduce revenues of Navajo Nation Oil and Gas Co. by $4.2 million a year, The Associated Press reported on April 8. Western Refining declined to comment to the AP.
When asked if there was any follow-up or monitoring of Foster's acquisition of Giant, an FTC spokesman told The Daily Texan that the investigation was closed - which, considering the uncertainty and dissention surrounding the FTC's ruling, doesn't sit well. And the thought of our policy makers and enforcers, including those who run our universities, being creatures of the oil monopolies is even harder to stomach.
Foster is just one chapter nearing the unhappy ending to the story of oil monopolization that began more than a century ago when gas-powered transportation became a staple of society. Last week, retail gasoline prices rose to a new average national record of $3.39, according to AAA, and the pinch is not only at the pump; it's felt in costs of rent, utilities and any commodities carried by air, truck or train. Monopolizing on America's oil dependency hurts everyone's quality of life except those few oil tycoons who are rolling in the dough. And their financial success continues to soar in unison with gas prices.
In 2005, Forbes estimated there were 41 oil industry billionaires, which was 15 more than in 2003. Both Foster and UT Board of Regents Vice Chair Robert Rolling, who's worth $6.4 billion, make the oil and gas billionaire list - right alongside David Rockefeller Sr., who, at 92 years of age and $2.5 billion in net worth, is still reaping the everlasting benefits of what his grandfather started.
- CH
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