The New York Times December 10th edition ran a front page article, High Payments to Halliburton for Fuel in Iraq, about Halliburton’s gross overcharging on its contract to import huge amounts of fuel into Iraq. The amounts of the overcharge and the sheer effrontery of Halliburton’s justifications for its profits invokes that age old phenomenon: the war profiteer.
Here’s the math as I understand it:
The U.S. government pays Halliburton $2.64 per gallon (though lately that number has risen even higher to $3.00) to import fuel to Iraq from Kuwait. The gas costs 71 cents a gallon wholesale in the Middle East. The Iraqi state oil company, SOMO, pays 96 cents a gallon, which includes the cost of gasoline, transportation and security. The Pentagon’s Defense Energy Support Center pays roughly $1.10 for the gas it imports from Kuwait. Gas from all three sources is often carried in the same trucks, same convoys and delivered to the same terminals. So it beggars the mind to imagine a justification for such an extraordinary markup.
A company’s profits on the transport and sale of gasoline are usually razor-thin, with companies losing contracts if they overbid by half a penny a gallon. Independent experts who reviewed Halliburton’s percentage of its gas importation contract said the company’s 26-cent charge per gallon of gas from Kuwait appeared to be extremely high.
“I have never seen anything like this in my life,” said Phil Verleger, a California oil economist and the president of the consulting firm PK Verleger LLC. “That’s a monopoly premium — that’s the only term to describe it. Every logistical firm or oil subsidiary in the United States and Europe would salivate to have that sort of contract.”
We should give Halliburton its due & state its defense for such price gouging:
A spokeswoman for Halliburton, Wendy Hall, defended the company’s pricing. “It is expensive to purchase, ship, and deliver fuel into a wartime situation, especially when you are limited by short-duration contracting,” she said. She said the company’s Kellogg Brown & Root unit, which administers the contract, must work in a “hazardous” and “hostile environment,” and that its profit on the contract is small.
The Iraqi state oil company pays less than a buck for the same gas INCLUDING security and all transportation costs and Halliburton wants us to understand that they couldn’t reasonably charge any less than 300% MORE than SOMO?? Phew, that’s a little hard to swallow.
After this damning piece of evidence surfaced in the Times, the Pentagon launched its own investigation. A December 12th Times article, U.S. Sees Evidence of Overcharging in Iraq Contract, notes that Pentagon investigators found that Halliburton overcharged the government as much as $61 million for the fuel contract; and as much as $67 million for a separate food services contract.
Halliburton’s current war profiteering takes us back a few months to the aftermath of the Iraq war when the White House first announced that much of the reconstruction effort would be pursued with limited- or no-bid contracting. Many of us at the time knew this was a recipe for precisely the kind of shenanigans and skullduggery we are seeing now.
Similarly, I’m reminded of Paul Wolfowitz’ statement earlier this week justifying eliminating from the bidding process companies from any nation which held back support for the Iraq invasion: “Limiting competition for prime contracts will encourage the expansion of international cooperation in Iraq.” Limiting competition will also encourage the expansion of the pocketbooks of any company participating in the sweetheart bidding guaranteed by the Pentagon’s current reconstruction bidding policy.
The Pentagon seems to want to guarantee sheer, naked war profiteering for a few of America’s richest corporations while our young men and women from hardscrabble backgrounds and small, unassuming places make the ultimate sacrifice for their country. It’s a goddamn shame.