With the Midwest and Northeast finally getting a taste of colder temperatures, the cost of winter heating is back on consumers' minds. The Department of Energy has estimated that the average US household will spend $860 for natural gas or $1550 for heating oil this season, down 9% and up 6% from last year, respectively. For those on low or fixed incomes, this is a real burden, and a broad array of federal, state, local and private agencies provide discounts and other assistance to help low-income people heat their homes. So it sets my teeth on edge to read headlines such as the one in yesterday's Washington Examiner, "Venezuela's Hugo Chavez delivers cheap oil to Baltimore's poor." I'm not sure who should be more embarrassed by this: President Chavez for thinking he can influence American voters with the same techniques he uses at home, or American companies for letting a foreign dictator score PR points this way.
It's not just that Hugo Chavez is hardly my favorite world leader. Set aside that this program to help poor people in the US represents yet another means for Sr. Chavez to spend his under-developed country's wealth on enhancing his own reputation, rather than Venezuelans' well-being. Perhaps the lost revenue on a product that "obviously...is never used in Venezuela" wouldn't be tallied, anyway, in Bolivarian economics. Mainly, I regard heating oil assistance as yet another instance of letting him beat us at our own game.
When they hear about this program, I'm sure many Americans will be puzzled that Citgo, Venezuela's wholly-owned US subsidiary, was the only oil company to respond to the solicitation for assistance from Joseph Kennedy's Citizens Energy Corp. The structure of the heating oil market bears at least some of the blame for this. To my knowledge, none of the major oil companies sells heating oil directly to consumers, other than independent refiner Valero, through its Ultramar subsidiary, or Sunoco in the Philadelphia area. Instead, they sell their output in the spot market or to distributors who re-sell under their own house brands. In order to offer low-income heating oil discounts, the majors would have to rely on these distributors to pass them on, and they wouldn't get any recognition for it. It's hard enough to make sure your distributors are selling your products, rather than your competitors', and the laws surrounding these relationships would inhibit the intrusion required to audit low-income sales.
In a year that has been as good to oil companies as 2006 has been, this structural impediment could probably be overcome with a bit of creativity and determination. But corporate philanthropy in this industry, as in many others, has generally narrowed its focus to efforts that contribute directly to brand recognition and reputation, by influencing opinion leaders. In an era when customer relationships are managed by data mining, how many CEOs would say that it is within the purview of their company, rather than the government, to buffer the impact of the market on individuals? But while I understand why ExxonMobil, Chevron, ConocoPhillips, BP and Shell haven't matched Citgo in offering heating oil relief, the result still casts them as Mr. Potter to Hugo Chavez's Jimmy Stewart.