At a party last year, an acquaintance asked me why Hugo Chavez, the President of Venezuela, was so anti-Israel. How were Israel and Jews a threat to him? Since Chavez has been president, anti-Semitic behavior in Venezuela (not known as a hotbed of anti-Semitism) has increased noticeably with attacks on synagogues and against the tiny Venezuelan Jewish community.

I said then and I still believe that a country does not experience such changes randomly: they are countenanced by behavior implicit or explicit from the top. The only logical reason for going after the Venezuelan Jewish community was that Chavez thought it would ingratiate him with his Arab oil colleagues. He may want Venezuela (him) to lead OPEC (which Venezuela last led in 2003) or just fit in with the gang.

Last week, Chavez welcomed Iranian President Ahmadinejad to town and, to make him feel at home, launched into some anti-Israel rhetoric, with the added benefit of taking an indirect swipe at the US.

The visit must have been a welcome distraction. Sure, Chavez likes the attention of created controversy.  I am just as sure he would not mind trying to get attention at home away from the recession and inflation, which, in Venezuela, is the highest in the region. The contraction of the oil market has hurt Chavez and his budget for social services.

A more modest goal for Chavez as an oil leader would be to assume the position of Latin America’s oil leader, but that role seems to have gone now to Brazil’s President Lula da Silva. When Ahmadinejad visited Brazil, Lula refrained from anti-Semitism while still making nice with his oil colleague

Iran itself, because of its tainted election, its repression, its support of terrorism, its economic weakness at home, was in Latin America also looking for friends. But alliances between weak countries that seek to become powerful by association do not often work.

The banks thst lent about $40 billion to the state-owned corporation Dubai World must have figured, “Okay Dubai doesn’t have oil, but it’s part of a larger oil country (United Arab Emirates), and it’s in an oil region, and so they’re good for the money.”

Apparently, no one thought that an enterprise based on ridiculously over-priced real estate — remember the palm shaped island, the world’s tallest building, the indoor ski resort? a playground for the Arab oil-rich — would ever hit trouble. But trouble came this week, with Dubai World suspending payments to creditors, including a number of high profile foreign banks, for at least six months.

Yesterday, Abu Dhabi, another part of the UAE which does have oil, agreed to help with repayments on a selective basis. Dubai World will restructure, but the news temporarily shook global markets which had somehow convinced themselves that having survived 2009 everything was now fine.

With much less fanfare, the largest bank in another oil-rich country, Kazakhstan, Bank Turalem has been taken over by regulators. According to the New York Times,  it too had huge Western investment ($10 billion) which it  sank in real estate dealings in Ukraine and Russia, and other places where  it had little business or experience in. Now those loans have gone bad, too.

There were warning signs — Bank Turalem was not very transparent in its dealings,  it lacked investment history, the bank’s former chairman Mukhtar Ablyazov is an opponent of the country’s president, Nursultan Nazarbayev, and Kazahkstan is a notoriously corrupt country — but those factors don’t seem to have mattered to the foreign banks, like Credit Suisse, that invested there. They pursued loans in a country they thought was too oil-rich for anything to fail. One investment banker was quoted as saying, “Kazakhstan was very sexy at the time, and foreign banks were just shoveling in money, so much so that that banks here had more money than they knew what to do with.”

There is one unexpected thing working in Dubai/Dubai World’s favor: like Iceland and Latvia which experienced terrible financial crashes this year, it is surrounded by larger and more stable neighbors with a vested interest in seeing it not fail entirely. It will survive.

There is a lot of noise that Dubai is the first of a second round of failures, and it may be, but that shouldn’t come as a surprise in this recession. Adjustable rate foreclosures were followed by unemployment foreclosures in the US, smaller bank failures have followed the bigger near-failures. It cannot come as a shock that the pilot fish of the oil countries should follow the trend of the shrunken oil market — oil may be between $70-80 a barrel but demand is still down. The second-hand leverage that proximity gave to those near oil has evaporated.

It is normal for oil countries to do what Dubai did: spend the cash as fast as possible — faster than it actually comes in — either in a desperate attempt to develop the country as fast as possible (if it is a good government) or to steal it the same way through corruption though bribes, payoffs and so on (if it isn’t). All countries create national budgets based on projected income, but the country that relies on the global oil market is on an unpredictable ride.

Dubai, with oil by proximity, thought it would bet on developing itself as an ambitious resort destination — an alternative to oil. Even at the best of times in a better setting, this would be dangerously dependent, but it wasn’t stupid or dishonest. It means that Dubai’s leaders bought into the oil market hype that oil would only go up, up, up to $200 barrel.

Oil budgets often fail. Just ask Venezuela or any of the dozens of other countries who have depended on “the devil’s excrement” to save them from their own poverty. It isn’t that Dubai’s planners did anything wrong, they just were unlucky. The terrible difficulty facing so many of these countries is to figure out what besides oil is their comparative advantage in the global marketplace, so they can move ahead and create a real complex economy. Even where the Dutch disease doesn’t hurt the economy with a too-strong currency, these countries can’t compete with China for manufacturing or India for well-paying services or Brazil for diverse resources; they don’t have the same complexity of human, social, financial or historical capital as the West or Japan.

As Voltaire wrote in Candide, we must cultivate our gardens. The struggle for Dubai and so many countries is to try to live up to the impossibly high living standard set by the West without an edge except oil or its geography.

The International Energy Agency is out with its 2009 World Energy Outlook. Some of the revelations presented at the Council on Foreign Relations in New York on Monday were hardly startling: energy demand and investment down due to global recession, but demand expected to return and grow, China using more energy, etc.

But a couple of its predictions and analyses are both surprising and useful.
• To use an image, unless we cut back on energy needs, within 20 years we will need the equivalent of four Saudi Arabias to meet demand.
• Depending on the policies chosen, China alone could bring about 25% of the needed reductions in emissions to help with climate change. And they seem to be interested in moving that way. It isn’t so much that China is keen on greening the planet as it is concerned about its own energy security. Fatih Birol, the chief economist for the IEA, calls it the fear-of-the-return-of-$147-a-barrel-oil.  This sentiment is echoed not only in China but in much of the developing world, where countries have much shallower pockets, face local pollution problems from increasing fossil fuel use, and still remember the economic catastrophe of the oil shocks of the 1970s.
• The third was the emphasis on unconventional natural gas, mostly meaning shale gas. Although the IEA predicts a glut of natural gas, especially in the US, and that low prices mean that there won’t be sufficient investment (at least till gas hits $5 per million BTUs — it’s in the $3-4 range now), I do know that it has not slowed corporate interest and leasing in the Marcellus gas field. Recent leases in north central Pennsylvania were going for around $5,000 an acre with steep royalties. In Texas, sections of the Barnett shale deposit have gone for $25,000+ an acre (proven). There is a glut but at least in the US, investment in gas is moving forward fast.

Last year, Tim DeChristopher, a student in Utah, bid $1.8 million he did not have in a federal oil lease auction. He won the leases. He stated he did it to protect the environment and to prevent further global warming, arguing that the danger from this drilling was too great and immediate to try to stop it any other way. This week the judge in the case, Dee Benson, disagreed, citing the lack of imminent danger. DeChristopher is now facing felony charges of making false statements and interfering with a (government) auction.

Coincidentally, several days earlier in New York City, the State of New York Department of Environmental Conservation held a public hearing on new regulations allowing natural gas drilling in the Marcellus shale deposit in upstate New York.

The Marcellus, which supposedly holds enough gas to power the entire country for 20 years, also crosses the Catskill/Delaware River watershed, a major source of water for the City.

Stuyvesant Auditorium was packed, with the audience, many with placards, overwhelmingly against the drilling. Public input started with local politicians fulminating (this is what talented politicians do well). Their anger was directed at the hydraulic fracturing process used to release the gas during drilling; their fear is that there will be an accident and some of this probably poisonous fracking glop will end up in the New York City water supply, which is comes from the Catskills almost totally untreated. They can yell, but their anger was misdirected and so, ineffective.

There are any number of perfectly good reasons to be concerned over the leasing of land for oil or gas drilling, but to voice a complaint effectively, there are some common sense considerations:

1) Do your homework so you know what you are talking about. The problem with the city’s analysis is that it is infinitely more likely that gallons of the fracking fluid will mess up some rural site, ruining that land and maybe the water for local farmers (who don’t seem worried enough about this and should know better — it has happened before). Even in a worst case scenario, only the most miniscule amount of the fluids will make it into the watershed, and then be diluted by trillions of gallons of water before getting to the City. Ironically, the environmental groups that got up afterwards to give public comments made more sense. Their objections very sensibly focused on the horrendous mess of a plan the state government has offered in its haste to cash in on the Marcellus craze. Some of its allowances include drilling and using explosive technology within 1000 feet of  century-old water tunnels. Anyone with a brain has to ask: Really? Is this for real? The plan is badly thought-out and needs to be re-done with more sensible regulations, protections, oversight and back-up plans. New Yorkers might be comforted by the knowledge that because of competent regulation and oversight, the City of Fort Worth has allowed shale oil drilling and hydrofracking in hundreds of wells within city limits for years without contamination of the city’s water — although there have been problems in the less regulated rural areas. In Mr. DeChristopher’s case, he should have understood the whole situation even a little, before reacting on emotional impulse. Any drilling takes years to bring to fruition and there are many other means, especially legal, to protest or halt the sale of the leases.

2) Focus on the real problem. The marginal information used by all the New York politicians must have come from some external press release because it was so universally parroted and so completely unrelated to the very real dangers that can occur from poor drilling regulation, oversight and drilling. These include the disposal of the “salty” waste water that comes with drilling and the subsequent extraction (much worse and in much greater volume that hydro-fracturing fluids), the preventable careless overuse of local water supplies to drill and frack (a million gallons per well – which can be recycled if the companies are pushed), and the lack of adequate oversight or emergency and clean-up plans. Surely Mr. DeChristopher is not (and was not) the only one extremely concerned about the wholesale land sale by the Bush administration, its lamentable environmental record, and excessively cozy arrangements with energy companies. Mr. DeChristopher might have worked to rally people of the West, who have vastly inadequate legal, regulatory, and environmental protections and sought legal challenges. Plenty of people in Western states are working on the same issue: he ahd a ready-made constituency.

3) Understand the entire picture. No matter how New Yorkers City demands a moratorium on leasing upstate, it will not protect the water supply in total, because Pennsylvania also shares the watershed and is unaffected by any New York regulations.

4) Be honest about why you’re doing it. Is it concern about the environment or a distrust and dislike of oil or gas companies? Is it water protection or is it you don’t want your bucolic country retreat less bucolic? In short, are you representing your own interest or a genuine public one? Nothing wrong with self interest — but any argument is strengthened if you are coming from a legitimate place, and self interest is quite often as legitimate as anything else. And honesty usually makes for a better solution.

4) The solution is public and legal, hire a specialist, and expect the fight will cost money and take time. Both Mr. DeChristopher and the City protesters are right to be concerned — the problem is that each acted in a way that would have been better for the other scenario — Mr. DeChristopher in a public fight using a legal or state challenge, the city people in offering to buy the most risky sites. Fortunately for the people in Western states, Secretary of the Interior Ken Salazar has begun to smell a rat in how oil and gas leases were distributed under the last administration. At the end of last month, he resumed shale oil leasing in the West with dramatic curtailments of the previous leases.

Not all gas leasing can or should be stopped. Energy is essential for the country too and the overwhelming majority of gas wells have not been damaging to people or the environment in any meaningful way. (Leaving global warming out of the immediate equation.) But oversight is critical.

The best ways to challenge leasing for oil and gas is to get all the information, figure out the realistic costs and benefits and dangers, and weigh the best legal and economic options. Certainly the man who spoke up for the local people of upstate New York’s Sullivan County made sense. He had requested a state list of the previous accidents and problems from drilling, demanded that protections and environmental considerations be put in place first, and that New York State regulations be re-thought and re-written. He had a worthwhile point.

Perhaps it is a complete coincidence that Brazil experienced a massive blackout affecting 60 million people only days after last week’s 60 Minutes showed a segment on cyber attacks on infrastructure including banks, internal governmental computer systems and power grids. In it, they mentioned a previously successful attack on a major electric power grid, which sources reported to be in Brazil. Apparently, either it wasn’t Brazil or the country didn’t learn the first time. The world does hope that they get it fixed in time for the Olympics in 2016, if not for the everyday lives of the inhabitants.

This time, a hydroelectric plant between Paraguay and Brazil suddenly and without explanation went offline. It stayed offline in Brazil for hours, affecting hundreds of communities as well as Rio. (Paraguay only lost power for a short time.) The failure has been blamed on a short-circuit, on transmission lines, falling trees, and lightening, but none of the explanations has stuck. Everyone denies sabotage. This is undoubtedly both embarrassing and puzzling for Brazilian officials who, according to the New York Times, have spent $47 billion in new plants and transmission systems.

Of course, Brazil isn’t the only country to have power issues. Many countries like Venezuela and Pakistan have electric problems because they do not invest in essential upkeep or development and because of poor management and planning. All countries experience power issues based on weather; in 2003, the US experienced a blackout blamed on a stick falling on transmission lines. (I experienced the blackout – it must have been a very, very large stick.)

But perhaps hackers did bring down the Brazil power system. Security experts have discussed it for years — what would happen if a hostile power used our computer dependence against us? I think it is worth thinking about.

Almost always these security experts build scenarios where an enemy attacks the US and its opening salvo is to turn off the lights in some major city and have the country drive itself crazy trying to figure out what’s happening. And then the Defense Department computers fail (for things like weapons systems and communications) and the banks fail etc etc.

I confess I have always thought that the above was a silly scenario since that would be more vandalism and harassment that actual war strategy — these glitches can be fixed and it’s hard to say that they constitute war — unfriendly, certainly, but hardly a real war that determines the fate of nations.

A more likely scenario, I think, is, that once we (or any other country) did get into a real shooting war with a powerful equal, to see cyber attacks on the power grid, communications and beyond. They would happen in the middle of the war, with sophisticated and complex tactical maneuvers. Fooling with the electrical power — to businesses, homes, urban transportation systems, and more —  in random patterns around the enemy country, attacking the computer controls on dams and nuclear plants, disinformation  (or telecommunications, military systems, banks and even more monetary records like currency and the central bank) — the creative mischief horizon recedes into infinity. You can bomb an enemy only so much, but you can harm and harass this way to amplify the effect exponentially.

We should take a moment to think about how totally messed up our way of life would be if we lost control of or could not depend on our energy supply, and other infrastructure controlled by computers. We have not had an all-out war between major powers in a very long time. As any student of military history will tell you, after a long peace, a new war is especially horrible because of all the new, terrible, unexpected and underestimated weapons and strategies developed in the interim.

Even if Brazil’s blackout turns out to be innocuous, perhaps it would serve us better if we look at the disruption it caused and think of it as a harbinger — and take a moment to consider what it says about out weaknesses and daily assumptions when it comes to energy.

Last week, it was revealed that the supposed informant in the bribery case against the Ecuadorean officials deciding the $27 billion pollution case is a convicted felon. (Conspiring to traffic 275,000 pounds of marijuana, sic-ing his pit bull on a woman.)

It doesn’t necessarily mean that he’s lying about the bribery charge — just that he doesn’t seem to be the most ethical, upstanding person to begin with. How did he get involved in this lawsuit?

On the other hand, Ecuador, as an oil-producing country, does not seem to have learned anything substantial from the whole sorry episode, either. October saw increasing tensions between the indigenous Schuar people and government, which is now trying to develop new oil and mining sites on their land without their consent, and possibly privatize the water as well.

It’s hard to know what to feel about this saga. It’s tit-for-tat, like a ping-pong match with the people and land caught between Ecuador and Chevron. On the one hand, it is impossible to deny that there was major environmental damage and probably significant damage to the health of the local people because of Texaco’s sloppiness and malfeasance. It’s also true, it wasn’t by Chevron — they inherited it. It’s true that the operator was Texaco and they are usually legally responsible for such practices; it’s also true that Petroecuador was the majority stakeholder of the project(s), did know about the problems at the time, and did clear Texaco legally after a $40 million clean up job. And that the damage is visible today, oil is still being extracted, and Texaco and Chevron are long gone.

The real bone of contention in the Ecuador case is the price tag, $27 billion. It’s the equivalent to about ¼ of Ecuador’s entire GDP. If the number was just for environmental clean up, health care and compensation for those affected it would be much smaller. One thing that sticks in my mind is that the horrific spill of the Exxon Valdez resulted in a much smaller financial settlement — about 1/3 as much.

There seems to be this sentiment among the developing countries to, one way or the other, squeeze everything possible out of a multinational company, rather than just run the project right and responsibly as partners. Multinationals are seen as evil cash cows that it is okay to milk. It isn’t that they totally don’t deserve the image, it’s just that there is more to the equation, and those who milk are often not the most upright either — Ecuador also has serious corruption issues.

I am not a huge fan of oil (or other extraction) companies — I know they have done and will do a lot of extremely questionable things to preserve the bottom line. But I know everyone, when if comes to oil/gas/mining, goes totally crazy to get every last dime they can out of it, using contracts, legal action, enhanced security problems, criminality, anything possible. In this sad and bizarre case, perhaps it is in the best interest of those most affected — those sick and living on the land — to come up with a more balanced number without the padding and get them the money now.

For at least three decades now, personal wealth has been a political asset. In both the industrialized and developing worlds, in the words of Deng Xiaoping of China, “to get rich is glorious.” Money was access to political power, political power (especially in the developing world) access to money. I remember about four years ago, when Michael Bloomberg ran for a second term as New York City mayor, a Nigerian editorial,  voicing the people’s fury about oil corruption, that complained that in Africa people sought political office to get rich, whereas in America, you first had to be rich to run for office.  It was not the right lesson to be learned.

This past week, hopefully, has been the beginning of a political sea change.

Money has always been and will always been vitally important in real life and in politics, but something seems to be shifting ideologically. Michael Bloomberg squeaked out a win for his third term only after spending $90 million of his own money, against a pleasant, little-known man who spent $6 million. Governor Jon Corzine of New Jersey lost to a man who does not reflect New Jersey’s social or cultural beliefs. The public turn against these two for the same reason: being a self-made billionaire doesn’t mean you’re so smart anymore.

Both Bloomberg and Corzine had always run on the platform that, as giants in the business world, they could provide jobs and sound economies if they governed. In Bloomberg’s case, being rich had seemed to mean he could also override election law and run again — ostensibly because his financial acumen was needed to save the city in the recession. Needless to say, the past year has given lie to this. It was the guys who spoke to change, willing to face problems on a humble level, who mattered.

For the decades since the 1980s, when we in the West promoted the ideas of free market capitalism to the rest of the world, we have been fairly sheltered from the wildness and dangers of what we preached. Communism died, but Russia descended into chaos for a long time. Much of the world got a terrible taste of the risks during the Asian financial crisis of the mid-1990s.

The idea of make-money-at-all-costs has dominated the developing world as it races to catch us. Too often this means survival of the financial fittest: corruption has always abounded, but rarely so universally and so proudly as recently. Developing countries have too often been willing to sell anything that isn’t nailed down (oil, gas, minerals, land, timber, etc) to make a quick buck for themselves.

Commodities had been one of the two forces that led to the crash in 2008 (with derivatives being the other). During the crash and last winter’s terrible losses, commodities sold at record low prices, and as China snapped up everything available, it looked like commodities would lead the world back out of the slump. Now most commodity prices are no longer a steal and inflows in the third quarter, according to the Wall Street Journal, are half of what they were during the first.

“Investors plowed a record $50 billion into commodities this year, helping drive prices for crude oil up 79% and gold 23%, but just $2.2 billion of new money flowed into commodities in October.”

As at the end of the 1920s, another time when greed trumped honesty, when stockbrokers, financiers, bootleggers and gangsters had assumed near heroic status, we are awakening from that dream. We now look at those mired in corruption as a public threat. It isn’t just American bankers and mortgage brokers. In the past two weeks, huge corruption probes have arrested thousands of accused crooks in China (9,000+ suspects) and in India (telecommunications, iron, oil and gas).

Let’s hope for the end to the day and belief that businessmen are  the saviors of the world and should be trusted with our economic and political future. Stability in business and finance would be a welcome relief.

In the past couple days, the New York Times has published two stories about new energy. In one about new controversial gas drilling in Colorado, The Times is pretty clearly against drilling. There is a risk of pollution (there always is an environmental cost in all energy, including green energy). But what upsets The Times is its aesthetic damage to the Roan Plateau.

“The rugged hills are dotted with sage and aspen groves. Some creeks are watering holes for cattle, but most appear untouched, rushing through the deep shale canyons that define the plateau’s topography. Vegetation hangs from some escarpments, and smooth shale slabs hold back pools of trout.”

The Roan has roads and development but its beauty holds a special meaning to many inhabitants who want to preserve it.

The following day, The Times condemned a similar aesthetic concern about Nantucket Sound where the Wampanoag tribes have objected to a wind farm.

“Tribal officials say their culture requires them to greet the sunrise each day and that this ritual requires unobstructed views. Their claim should be rejected by the responsible federal and state officials. Another round of bureaucratic reviews would drag out an approval process that has gone on much too long and give opponents time to find some other way to derail the effort… The alliance includes many local people but has been largely underwritten by wealthy homeowners from Nantucket, Martha’s Vineyard and Cape Cod who hate the idea of having 440-foot windmills on the horizon.”

I’ve never been to either place: I’m sure they’re both lovely. Of course, neither may be the Grand Canyon or other place of such wonder and beauty that they become an international treasure.

But I am not sure why one is aesthetically worth preserving and the other isn’t — except that The Times is pro-green energy, the same way the gas companies, which seem rather more immune to the delights of the Roan plateau, are pro-gas. It’s not the beauty of the landscape to The Times — it’s the beauty of the idea.

I’ve seen wind and shale gas projects — there are both near where I live, and I have to say, the huge turbines are strange and majestic but somehow not hideous (although they do apparently harm migratory bird populations and cause other problems). On the other hand, a shale gas well, after drilling, is roughly the size of a garden shed — not a terrible blight on the landscape and possibly easier to hide than a cell phone tower or a ranch. And I am not choosing with any side. There are significant problems with all the choices.

Giant oil rigs, coal strip mining, careless traditional well placements are ugly. They absolutely do ruin a beautiful landscape. In calculating wind or gas projects, the natural landscape must be considered – but fairly and equally.

Remember the fable of the grasshopper and the ant? The ant toils away storing grain for winter, while the grasshopper parties through the summer and dies of starvation in the winter.

Something like that is happening in Chile. Chile is the world’s largest copper producer. Like several resource-rich countries — especially those with oil like Saudi Arabia and Kuwait — Chile has a sovereign wealth fund, meant to increase the country’s wealth through external investments, independent of reserves.

(Actually, Chile set up two — one to be held against future federal pension shortfalls; the second, created in 2007 out of the old 1985 Copper Stabilization Fund, was to save when copper prices were high in order to smooth the economy when times were rough.) Dozens of oil countries have sovereign wealth funds but only a few are as transparent, well organized, or publicly accountable as Chile’s.

Most poor resource countries will say that Chile, a middle-income country, was better off to start than they were, and that they cannot have sovereign wealth funds: they need the money from the resources immediately, for urgently needed projects. Yet, with few exceptions (Botswana and Norway come to mind), their use of the money has rarely had the positive impact on their people or helped their economies as Chile’s approach.

Michelle Bachelet, the single mother who is Chile’s current president, is widely credited with the economic judgment that saved her country — and especially its most vulnerable citizens — from the worst of the global economic crash. She will leave office in a few months with the highest approval rating (76%) in history of any president of Chile. She had not been popular till the economic crisis.

The New York Times reports, like the ant of the fable,

“Ms. Bachelet resisted the cries of politicians to use revenues from copper sales to try to close Chile’s inequality gap, one of the world’s worst. Instead, during her first three years in office, her government set aside $35 billion in revenue from the boom. When the global financial crisis hit, the value of Chile’s exports sank by more than 30 percent. But by then Chile had nearly $20 billion invested in overseas sovereign wealth funds alone.
“We have the distinction of perhaps having the only sovereign funds that made money during the crisis,” said Andrés Velasco, Chile’s finance minister.
With billions of dollars saved, Ms. Bachelet’s government legalized alimony payments to divorced women and tripled the number of free early child care centers for low-income families. It added a minimum pension guarantee for the very poor and for low-income homemakers.”

And as importantly, in January, Chile announced a $4 billion economic stimulus including direct transfers to lower income families.  The IMF had recommended less.

Bachelet said in a speech to the OECD (Organisation for Economic Cooperation and Development) Council in May:

“… instead of reducing social spending in the face of the crisis, we are actually raising it. And we are doing so without increasing public debt.
A few months ago, we modified our unemployment insurance system so that Chilean workers are better protected if they lose their jobs. This year too, thanks to a pension reform approved last year, my government will increase the basic solidarity pension, received by the most vulnerable Chileans, by 25%.”

Other countries (like China) have used their savings to smooth their economy during this downturn. But few have been as wise and humane as Chile’s.

Let us now all mourn the passing of Paul Bloom.

Who?

I hadn’t heard of him either till he died. So I took a few moments to research.

Why should you care that he died?

Paul Bloom was one of those bureaucrats who — to many people who do not want to be bothered with cumbersome federal regulations — is a killjoy and someone who makes life so much harder than it has to be. In this case, those grumblers would be the oil companies and their Reagan Administration pals of the 1980s.

Paul Bloom was also one of those bureaucrats who gives a good name to government workers who actually try to do right by the American public, and to remind institutions — even those of such long-standing power that they can urge the overthrow of annoying Third World governments — that they cannot be above the law. (This wasn’t such an easy assumption back then.) Bureaucracy can work to a country’s advantage.

Originally a natural resources lawyer, Bloom got to be Special Counsel for Compliance at the Carter Energy Department, it appears, mainly because the people the Administration wanted weren’t interested. According to the Denver Post, his widow recalled after the appointment, his friends offered their condolences.

He was brought in to investigate the oil companies’ compliance with the price controls started under Richard Nixon. (Whatever you think of price controls, they were still laws that had to be obeyed.) The idea of taking on Big Business wasn’t new at the time: this period was the height of consumer protection. But gasoline had been cheap for so long, and American commercial power so overwhelming in the world, that most of the public’s wrath in the 1970s had been reserved for OPEC. At the time, it hadn’t occurred to them, I don’t suppose, that the industry could be jiggering the prices.

Bloom and his office found widespread non-compliance: 33 out of 35 of the largest oil producers and refiners were accused of overcharging the American public to the tune of $11 billion.

The oil companies unsurprisingly balked. The regulations were undoubtedly complex and arcane, and yet, multibillion oil dollar companies with hundreds of lawyers on the payroll could probably have figured them out if so inspired.

(This is the difference between then and now. In today’s derivative debacle, it seems so much of the financial catastrophe was created by years of federal “oversight” that just couldn’t be bothered to do the accounting — to hunker down and crunch the numbers with any understanding. What else can account for AIG? Bernie Madoff? All the banks? Crooks assume you won’t care enough to dust off your math skills once you graduate. Luckily, by coincidence, a week ago,  Ken Salazar, the Secretary of the Interior, stopped a last-minute Bush provision granting an unnaturally low royalty rate (of 5% versus a more normal 16.7%) to shale oil companies operating on federal land in the West.)

Many oil companies tried to wait it out. It didn’t work. Bloom won a surprising number of his cases. After Ronald Reagan was elected, on the day before he left office in 1981, Bloom gave $4 million he had collected to several charities to help the poor heat their homes through the winter.

Soon after setting up shop, the conservative new Administration demanded the money back from the charities. This quickly turned into a PR nightmare, with the Salvation Army offering to return their Christmas Santas to the streets to collect for the federal government. (The money that had not been already spent was returned.)

The Administration then sought to gut the program by slashing the department’s budget by 80%. The pro-oil move was transparent. Time Magazine in 1981 quoted, then- Representative Barney Frank of Massachusetts: “If this was a budget decision, then I’m Lady Diana Spencer.”

By 1987, the department had collected $6 billion from the oil companies, including over $2 billion from Exxon alone. Much of the money went to states to help with energy programs.

Back in private practice, a few years ago, Paul Bloom and his law firm fought and saved the Zuni Salt Lake from a mining concern.

The Denver Post obit adds,

“In New Mexico, Paul Bloom was known for his knowledge of water law. He started at the state engineer’s office in the 1960s and filed the Aamodt water rights case for the state in 1966, his family said.
In May, Democratic Sens. Jeff Bingaman and Tom Udall introduced an act to realize a 2006 settlement of the 43-year-old fight between the Nambe, Pojoaque, San Ildefonso and Tesuque pueblos along the Rio Pojoaque basin. The act would authorize construction of a regional water system.”

Paul Bloom was born in Virginia, attended law school at the University of New Mexico, died of pancreatic cancer at the age of 70, and leaves behind a widow, brother and three children.

We often think of bureaucrats as faceless paper-pushers — politicians can seem more glamorous. Paul Bloom was perhaps the first to hold the great and near-great oil companies to account.

For more reading on these cases against the oil companies, check out my main source: “Chalk one up for the permanent government; the bureaucracy took on Reagan and big oil - and won “; Washington Monthly, Oct, 1987 by Rich Jaroslovsky.