I used to know who authored this report, but have forgotten. The following excerpt doesn't leave me warm and fuzzy enough to feel much guilt about the BP disaster in the Gulf of Mexico.

As I've written before, it is my belief that when big oil permitted OPEC to raise prices during the seventies, two things happened: The resultant inflation, and Paul Volker's defeat of it by raising interest rates did away with the 12% usury rates that big bankers saw as a limit on their new credit card business--state legislatures eliminated the usury rate--and oil companies got the prices we suffer through today.

I've called both, interest rates and high gas prices insidious taxes on the middle-class. Big oil and big banks were for the most part owned by the same people, i.e., the Rockefeller family was and is heavily involved in both.

So when oil man Rockefeller went along with OPEC's desire to raise prices, banker Rockefeller licked his credit card chops. He knew oil price increases would lead to inflation which would lead to high interest rates. The 12% barrier of the latter had to be removed. And it was. It's hard to tell any more which gives him the most profit, oil or credit cards.

"But the most creative way for the majorss to maximize their global profits and to satisfy the producer nations at the same time was to take advantage of tax legislation in the United States on "foreign tax credits." Suppose that Exxon pumped oil in Slobbovia, and paid tax at 35% on its operations there, at a time when company tax rate was only 15%. The foreign tax credit specified that Exxon could calculate the "extra tax" of 20% it had paid the Slobbovian Government, and could deduct that amount from its tax bill in the United States. As critics pointed out, this essentially involved the American tax payer in a direct subsidy to the Slobbovian government, except that the check was written on the American taxpayer by Exxon. All the majors used this tax avoidance scheme from the early 1950s, and it helped to maximize their profits.

How? Surely they were paying the same tax bill, even though the US taxpayer received a smaller amount than before? The trick used by the companies was to have the producer nation increase its tax rate instead of its royalty rate. If the Saudis had pressed for increased royalties, the companies could have deducted that expense only from their profits. Because the Saudis (who didn't care where the money came from) took their cut in taxes, the companies could deduct the same amount, not from their profits, but from their US tax bill. Careful calculation and negotiation between the companies and the producer countries could allow the companies to gain the maximum benefit by manipulating this tax loophole.

The US National Security Council was involved with the US Treasury in promoting this scheme, even though it meant a major shortfall in the US government's tax revenue. Tax lawyers were even sent by the US Treasury to Saudi Arabia in 1950 to help that country formulate the necessary company tax laws to start the scheme. In 1951 the Kuwait contract was revised in the same way; Iranian taxes on the new Iran consortium were set up in the same way in 1954; and the pipelines through Lebanon were taxed in 1956.

Here is how the system worked in the early 1950s. Before the foreign tax credit was used, Middle East oil was sold at $1.75 a barrel; production costs and royalties totalled 41¢, leaving $1.34 pre-tax profit per barrel. About 43¢ went on US taxes, leaving a net profit of 91¢ per barrel for the company.

In the new scheme, there was still $1.34 pre-tax profit. But if Saudi taxes were tuned to yield the Saudi government half of the profit (67¢), the company could now deduct that 67¢ from its American taxes. Not only would it not pay the 43¢ it used to, it could protect or "write off" some of its US profits against tax, with each 43¢ of deduction worth about 24¢ of US profit protected against taxation. The company would make a net profit of 91¢ a barrel, just as it did before. The Saudis receive their royalties as before, plus 67¢ tax. The American tax system would lose the 43¢ the company used to pay, plus another 24¢, that is, the American tax payer would lose the 67¢ that the company paid the Saudi government, and would have to come up with the missing amount.

The transfer of funds was enormous, and growing. In 1951 Aramco's US tax bill fell from $50 million the year before to $6 million, while the Saudis received $110 million instead of $66 million. By 1955 the annual loss was $154 million.

OPEC was founded in 1960, and began to press for further increases in oil revenue. Soon the companies began another scheme to accomplish this without loss to themselves, based on the foreign tax deduction: they began to base their calculations for taxes and royalties, not on the actual sales price of crude oil, but on a mythical "posted price" that was simply a number written on a piece of paper. This procedure increased the revenue to the OPEC countries, and the loss to the US tax payer.

This system ran until 1975, when the bills began to come due for the Vietnam War; but even then, the abuses were constrained rather than eliminated. And as it happened, the losses to the producers and the companies were more than made up by the post-1973 rise in absolute prices (and profit margins).

In the end, the greed and manipulation broke the system, as everyone involved wanted more and more. The history of oil prices from 1960 to today reflects human failures rather than economic principles"