Joe Kennedy Challenges the Oil Companies Citizens Corp. Brings Cheap Heat to the Poor

In 1978, the American economy was sent reeling when the Organization of Petroleum Exporting Countries [OPEC] hiked the price of crude oil to over $20 per barrel--the second major increase in less than a decade. The dollar plummeted on the exchange market; inflation spiralled upwards. The evening news carried stories of record setting gas lines as motorists jockeyed for position to purchase gasoline at over $1 a gallon. And, as the winter approached, homeowners watched anxiously as the average price of home heating oil rose from 53.7 cents to 90.8 cents in January of 1980, an increase of about 170 per cent.

The major oil companies contended they were at the mercy of OPEC. But the year between the first quarter of 1979 and the first quarter of 1980, Occidental's profits increased 236 per cent, Mobil's rose 105 per cent, and Exxon's jumped a tidy 102 per cent. Poor Gulf could only boast of a 56 per cent profit increase.

A Department of Energy report released in January 1980 showed the price of fuel to the American consumer was rising faster than OPEC crude oil price increases--the report stated that between January 1977 and May 1979 the retail price of home heating oil has risen twice as fast as the price of crude. And, in 1980, the report predicted a typical family using home heating oil would pay an additional $130 from "unjustified" price increases.

In the summer of 1979, Joseph P. Kennedy II--son of Robert F. Kennedy--decided to form a non-profit oil company to distribute low cost oil to the poor.

"The idea of forming a non-profit oil company came out of the native notion that if you could return the billions of dollars in oil company profits you could do a lot for people," Kennedy says. "After all, in 1979 the whole national fuel assistance plan budget was only 11.6 billion. But Exxon's profits alone were $4.3. billion. Four billion dollars," he adds, "You could do a lot with that kind of money."

Incorporated in July 1979, Citizen's Energy Corporation (CEC) was launched out of Kennedy's basement. Armed with a list of oil ministers' addresses, a letter of credit from Chase Manhattan, very little capital and the Kennedy name, Kennedy and a few friends sent their proposal to the oil producing countries. Most of the ministries did not respond; a few were curious; and then Venezuela said yes. Less than a year later, 8.4 million gallons of CEC-imported heating oil entered Boston harbor.

"If some one had told me two years ago I'd end up working for a non-profit oil company, I'd have said they were crazy," Steven Rothstein, one of the original members of CEC, says. "When Joe first came to me with the idea I thought he was crazy. I worked for him for four months because I was his friend. But still I thought it was crazy. Imagine," he adds, "starting a non-profit oil company to help low-income people. It's brilliant. And it takes a lot of guts."

Rothstein says CEC could not have been started without considerable volunteer labor. A banker helped draft a self-financing letter of credit. They received free legal services. And Kennedy got advice and assistance from the former chief oil purchaser for Gulf.

"People said it couldn't be done. They said Citizens was a one year thing. A political thing. And now we are back again," Rothstein says. "We do what Exxon does, only we are non-profit--and we don't have exploration costs. But out basic philosophies are directly contradictory. We are competitors, in an absolute sense, not a real sense. We are an idea. And if we are legitimized other people may decide to try it."

However, establishing a program like CEC is considerably more complicated than solely purchasing and refining crude oil and shipping heating oil into Boston. And, although CEC arranges to get the refined heating oil into Boston harbor, the Massachusetts state government actually delivers the oil to eligible families. Last year, using federal home energy assistance funds, the state purchased 8.4 million gallons of home heating oil from CEC for 47 cents a gallon--less than half the retail price of home heating oil. The state distributed half the oil last winter. The remaining oil will be distributed this year, and, in addition, the state plans to purchase an additional five million gallons of CEC imported heating oil for under 60 cents a gallon--45 cents less than the current retail price.

"When we first started Citizens Energy Corp., we weren't going to involve the state, we were going to use community action agencies to help distribute the oil," Kennedy says. "Then the federal government gave the state $76 million for fuel assistance and we figured we should take advantage of it. But," he adds, "CEC itself does not have any federal government attachment. I don't like anyone who gives out money with strings attached."

Kennedy is, in general, extremely critical of federal government bureaucracy--although CEC has no federal connections, it is indirectly dependent on Washington through its links with the state of Massachusetts. According to Kennedy, CEC has been prepared to bring heating oil into Boston harbor since early September, but until recently the state was unable to purchase the oil from CEC because of federal delays in approving the state's energy plan.

"We have been prepared to bring in heating oil since September 8th," Kennedy says, "But we were tied up because Washington would not approve the state's plan. And the refinery would not give us back our oil without a letter of credit from the state. Because of bureaucratic delays, the price we can bring our heating oil in for has risen by one million dollars," he adds. "the only thing I like about Ronald Reagan is he says he is going to get after bureaucrats," Kennedy adds. "If this is the case, I'm all for it."

If Kennedy is reluctant to speculate on the effects of the upcoming Republican administration on CEC, he is equally hesitant to discuss what role politics will play in his own life. A graduate of the University of Massachusetts and manager of uncle Edward Kennedy's 1976 Senate campaign, he worked in Washington for the Community Service Administration until shortly before he started CEC. Kennedy says his experience in Washington was one of the worst in his life--although he is aware of the rumors that he is using CEC as a political stepping stone, Kennedy insists that at this point he is not entering politics.

"I just take things day to day," he says. High energy costs are a problem I can do something about. The freedom I feel and the enjoyment I get out of Citizens is much greater than I had imagined. Citizens does make a difference. Politics is not even comparable," he adds.

Kennedy and CEC are currently expanding. Earlier this month, CEC launched the Home Oil Transfer (HOT) program, which will allow consumers who have converted from oil to natural gas to donate whatever oil remains in their tanks to the Robert F. Kennedy memorial fund. The consumers will have their oil removed free of charge and will be able to deduct the donation from their income taxes, and the oil will be resold. CEC estimates the funds arising from the resale of the oil from HOT's pilot program in Newton alone will bring in more than half a million dollars.

Eventually, Kennedy says he would like to see CEC operating nationwide. However, although there has been sufficient demand for CEC oil to warrant expanding to other states, CEC has been unable to find an oil producing country willing to sell them the additional oil. And the shortages caused by the Iran-Iraq war has strained currently available supplies, making CEC--already completely dependent on Venezuela--vulnerable to interference from a major oil company.

"I can't tell if there's been any specific, identifiable effort to stop Citizens," Kennedy says. "But the relationships between the oil producers and the entire U.S. oil system does not encourage new energy systems like Citizens. It is more convenient for the oil producing countries to continue business as usual than to deal with some sort of new breed of cat. And it might be that innocent," he says. "And it might be something more."

"If we could get a billion dollars worth of crude oil, of course I'd set up CEC nationwide. That's where we could use the federal help," he continues. "If the federal government can send Schlesinger to Saudi Arabia to negotiate on behalf of the four American members of ARAMCO, you would think they could step in and help us increase our oil supply. But here we are providing heating oil at 40 per cent below market prices and not one person in the federal government has ever asked me about this program," he says. "We have something that can work if given the chance. I just don't know if we'll be given it."