Tag Archives: oil

50 Year Lie: Sugar Industry Blames Fats

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Whenever someone refers me to a story with alarming facts that should surprise or outrage any thinking human, my spider-sense is activated. Does the story make sense? Is it plausible? If the message contains evidence of being repeated (or forwarded to more than two friends), then whatever is claimed is almost certain to be false.

If the subject is important to me—or if there is any chance that it might influence my view of the world, I check it at Snopes. The reputable web site confirms or debunks many urban legends and all sorts of viral web hype.

You never know what you might learn at Snopes. You can easily be lured into a rabbit hole, digging into the site beyond whatever prompted your visit in the first place.

Fact-checking can be fun! For example:

  • Debunked: There are no alligators living in New York sewers. If a resident flushes a baby alligator in a toilet, it cannot survive the temperature or the toxic soup that flows through the sewers of a big city. Florida: perhaps; New York: impossible!
  • Debunked: Ronald Reagan did not write a diary entry in which he describes his vice president’s son (the future president George W. Bush) as a shiftless ne’er-do-well, who roams about the White House.*
  • Confirmed: This one is true! In 1976, during the filming of TV series, Six Million Dollar Man in Long Beach California, an arm fell off a scary, fun-house prop. A film crew found that it was the cadaver of outlaw Elmer McCurdy, who died in 1911.

I’m still occasionally guilty of passing along a story I long believed was gospel. In a few cases, it didn’t occur to me that something accepted as fact might be an urban legend—or that my acceptance of a tall tale is colored by my opinions about economics, society and business. Hopefully, this is a rare and diminishing lapse. I have learned to fact check narratives—especially if I feel compelled to pass one along.

Conspiracies Theories: Often false!

In general, I am unlikely to suspect a conspiracy behind events of the day—with the exception of national politics, where conspiracy is a natural and pervasive tactic. The problem is my optimistic view of human nature. While businesses have a profit motive and a responsibility to stakeholders, I feel that most are driven by ethics and that executing a plan within the bounds of ethics is simply good for business.

Let me tell you about one viral, big-business story that I had believed for decades and another that I did not believe until I was presented with too many facts to refute.

1. No Conspiracy Here

There was no secret meeting or conspiracy by titans of the car, rubber, oil or steel industries to kill off public transportation and alter city layouts to drive auto sales. Streetcars were already mired in politics and graft; family, income was increasing, and the car was already becoming popular.

That tall tale says that Harvey Firestone, Henry Ford and John D. Rockefeller conspired to eliminate street cars and redesign the urban landscape, so that Americans would need individual family cars, rather than use public transportation—Or that this is the reason that we must drive to a big mall today rather than live in towns centered around a community center, church, city hall and general store.

The theory claims that the three automobile bosses had a secret meeting in San Francisco with a goal of increasing sales of cars, rubber, steel and oil. (In some versions of the story, Rockefeller (oil) is replaced Andrew Carnegie (steel). Ironically, I only learned that the entire story was an urban legend as I started to write this introduction to the true story below.

2. Shocking Conspiracy — This one is true

More than any other lie, here is a food industry conspiracy crafted and delivered by big business. It manipulated one of our most trusted universities, a major medical journal and the public psyche. The result: Thousands of Americans died and millions were misled into obesity and heart disease. More than any other fiendish plot, this one event has killed people and damaged human health more than any other conspiracy in modern history.

In 1967, the sugar industry shaped 50 years of research into the role of nutrition and heart disease, including many of today’s dietary recommendations, by paying Harvard researches to lie about the role of food in obesity and heart disease. They schemed and succeeded at shifting blame from sugar to fats.

Believing lies: I grew up becoming fully indoctrinated!…

For much of the next five decades, the wheat and grain industry promulgated the lie to enormous advantage. I grew up thinking that bread, pasta, rice and potato are terrific sources of healthy fiber and minerals (much like vegetables)—and that they ensure clean pipes. I thought that oil and fats are bad, because they deposit plaque in arteries. It never occurred to me that oils can maintain healthy weight, that your brain needs fat, that carbs lead a body to manufacture the fat that causes cardiovascular disease.

I believed that skim milk is less fattening than whole milk and that margarine is healthier than butter (dairy), tallow (beef fat) or lard (pig fat). Perhaps most damning: I believed that Canola oil (synthetically extracted from rape seed) was a healthy oil, because it is unsaturated. Today, I have learned it is toxic.

How does a 20th century academic
with advanced degrees get so misled?

Answer: I succumbed to a startlingly successful conspiracy; a long game in which it is now difficult to punish sugar industry perpetrators. Ultimately, they will be held to account by journalists, and a new generation of doctors, researchers and academics.

The New York Times article linked below appeared in 2016. More recently, the story is finally going viral. Citation by other reputable outlets is growing quickly.

Some conspiracy theories are true. Instead of passing along an urban legend, forward the shocking truth about sugar and carbs to a friend or colleague. Share this blog article. Think of the good achieved if you turn around the diet of just one acquaintance.

Related:

* Fiction: Ronald Reagan did not write this; (I believed it for 30 years):

“A moment I’ve been dreading. George brought his ne’re-do-well son around this morning and asked me to find the kid a job. Not the political one who lives in Florida. The one who hangs around here all the time looking shiftless. This so-called kid is already almost 40 and has never had a real job. Maybe I’ll call Kinsley over at The New Republic and see if they’ll hire him as a contributing editor or something. That looks like easy work.”

— Incorrectly attributed to Ronald Reagan in a diary entry published May 17, 1986

Increase gas tax as market cost of oil rises

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When the cost of gasoline or oil rises (especially when it ‘spikes’), a reduction of taxes causes great harm to consumers and taxpayers. In fact, we are best served by a rise in taxes tied directly to changes in the cost of oil.

In May 2011, a group calling itself National Taxpayers Union or NTU launched a $1.25 million campaign to fight energy taxes, like the fuel tax added to the cost of gasoline at the pump in most countries.* One of the group’s less controversial public service announcements (or more accurately, a lobbying effort) consist of magazine ads and videos that encourage Americans to write their legislators and demand a roll back of gas taxes whenever market prices spike.

In supplier controlled markets, consumers can contain costs by magnifying spikes.

I hate consumption taxes, especially the ones that target individual commodities or categories, such as alcohol, cigarettes, luxury purchases, or any system of import tariffs. They are a form of social engineering and they bastardize free markets. But when an energy consumer nation gives consumers breaks during periods of price spikes, the result counters the social intent. In fact, each time that oil prices rise, the best thing our government can do is to force them higher still! This may sound crazy, but when the supply of a commodity is controlled a few foreign cartels, it is no longer a commodity. Artificially lowering the consumer price by subsidizing the price simply stimulates consumption. It does not expand supply, and so the subsidy goes directly into suppliers’ pockets.

Apparently, I am not the only one who thinks that lower gas prices is a bad idea. This month, Motley Fool columnist, Travis Hoium filed an Op-Ed entitled, 3 Reasons the US Should Want Higher Oil Prices. His analysis and opinion is articulate and adequately supported, but none of his reasons point to the fundamental economic reason that for a country that aspires to energy independence, oil should be taxed higher whenever the market cost of externally sourced oil rises. Let me spell it out (Hey! That’s what I do in A Wild Duck!)

What happens if we lower the cost of a commodity to consumers in an effort to counteract a higher supply price? That’s easy — It doesn’t take an Economist to answer! Since the supply is not increased, throwing a subsidy to the buyers “fuels” an even faster rise in prices and hands all that money to the supplier.

Let’s say that C = Amount of fuel needed for critical purposes
. . . . getting to work, heating our home, manufacturing
Let’s say that D = Amount of fuel needed for discretionary purposes
. . . . vacation travel, backyard BBQ, mowing the lawn, etc

Of course, with a limited personal budget, high fuel prices influence a consumer’s decision to classify an activity as ‘critical’ or ‘discretionary’. Additionally, the use of fuel is greatly affected by how efficiently you perform a task (taking a train to work instead of driving, vacationing nearby instead of far away, etc).

Foreign cartels wish to maintain high prices and high revenue, so they limit the foreign supply of oil. For them, it makes more sense to charge a lot of money for less product than to charge less money for a lot of product. If we consider again our classification of consumption into two categories, Critical and Discretionary, the supplier limits leave us with only enough fuel to support this much activity:

100%C + 80%(D)

Now if we counteract their production limits and insulate consumers from the higher cost, the formula doesn’t change. We continue to use just as much fuel.

In a free market, limited supply causes prices to rise and this forces consumers to cut back on discretionary use. Some consumers with less money must cut back on critical needs. That’s because some people can afford the keep buying and of course the cost of fuel rises.

In a free market — at least on our side of the ocean, this normally leads to several things — all of them very good:

•  Increase exploration and domestic production (Motley Fool covers this one)
•  Develop alternative fuels, especially domestic and environmentally friendly
•  Increase conservation:

  • Reduce travel
  • Turn off unnecessary appliances
  • Turn down heat, insulating home or office

•  Change modalities:

  • Carpool or use public transportation
  • Reclassify some “Critical” uses as “Discretionary”
  • Buy local (reduces wholesale transportation)
  • Switch electric providers to avoid foreign sources

If consumers are suddenly subsidized when the cost of fuel rises, something terrible happens. Instead of producing more domestic energy, we are not at all affecting the supply. We are simply handing the foreign seller more cash — directly from the taxpayer to their pockets. And they didn’t even ask for it! They raise the cost by $1 per gallon and we give them $2 extra. Heck, why not? It makes us feel good.

What happens if we increase taxes when suppliers raise prices? First, we benefit by all the good things listed above.

Second, since some foreign suppliers are not truly constrained in their production (that is, they have plenty of oil), they will keep costs low in order to sustain revenue. There are plenty of places this “cost reduction” tax can be inserted: at point-of-sale, at import, or in the distribution chain.

What do we do with the money that is raised by taxes? That’s easy too. Give it back to consumers or use it to fund the development of energy sources that are domestic, inexpensive and environmentally safe.

This is how supply and demand should work. Of course, the government can still subsidize those in need. But do it in a way that doesn’t bastardize market dynamics. As a society, we provide assistance to the consumers who cannot afford energy for critical needs, and not by handing money to the supplier (effectively, a reward for cutting production). In this way, we reduce consumption, increase domestic production and provide direct assistance to those who are less fortunate. The effect of subsidizing some buyers will force some other buyers to reduce discretionary use. For example, if some of the higher cost went to taxes, it could be used to help ease the consumers who can no longer afford the “critical” fraction of their use.
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* Americans are taxed for automotive fuel at the pump: A federal tax of 18.4¢ plus a state tax that varies between 12~35¢. The average state tax is about 23¢/gal, so the typical American pays about 41½¢ tax on each gallon, or approximately 10%.