"We need to nationalize the energy industry to conserve and restructure our resources"

[Better Believe It]

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Week In Review
A Weekly Column by Bill Onasch
February 27, 2012

A Penny A Day
That’s been the average daily increase in gasoline price at the pump in the USA for weeks now. In response to an NBC reporter, a spokesman for the American Petroleum Institute explained the steady rise was attributable to the rising price of crude oil. That’s sort of like saying a heat wave is caused by high temperatures.

Most experts blame faceless crude speculators--that they are unwilling or unable to identify–for price gouging. Certainly these masked men are taking advantage of the threats by Israel and many U.S. politicians to go to war against oil-rich Iran--a conflict that could also disrupt shipments out of the Persian Gulf-- to push the price panic button. I’m not so sure they are completely unconnected to Big Oil.

In any case, Big Oil is exploiting the present suffering at the pump to redouble their efforts to obtain “energy independence” through unrestricted drilling in the Arctic region and off the West Coast--as well as completion of the Keystone XL pipeline from the Alberta tar sands.

One fact ignored by the media is that increasing the supply of crude would mean little to domestic gasoline production. Refineries were already running at virtually 100 percent before recent closings and accidents further reduced capacity. Any gasoline refined from the dirty syncrude coming through XL to Gulf of Mexico facilities will likely be exported.

The present oil crisis highlights twin dangers, economic and environmental. Working class consumers will have to reduce consumer spending even more. Non-energy capitalists feel the same consumer pain as the rest of us when fuel prices shoot up. Either they absorb the increases, cutting in to profits, or they raise their prices–losing customers, cutting in to profits. If not soon contained fuel gouging will bring about the second-dip recession.

Yielding to demands for more drilling–and especially embracing the dirtiest of all fuels from the tar sands–will inevitably create new environmental disasters. Even maintaining the status quo in oil consumption is leading to irreversible damage to our biosphere.

The only acceptable way to avoid both the economic and environmental threats from today’s oil market is to take oil–and all energy sources–out of the market. We need to nationalize the energy industry and run it according to a plan that can conserve and restructure our resources for an ecologically sustainable and full employment economy.

http://www.kclabor.org/wir2272012.htm

KCLabor.org
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http://www.kclabor.org/good&welfare.htm

[badtoworse]

1. No way I'd trust the government with our energy supply.

I'd rather pay a premium price to private industry than trust the government to maintain a steady supply at any price.

[Better Believe It]

2. Seek a premium price to big oil companies and you shall receive!

Hell, the oil tycoons are exporting more oil now than they are selling for domestic use!

Have fun with those premium prices coming down the pike!

[badtoworse]

5. If the government were running it, gasoline would be a lot more expensive...

...and the supply would be unreliable. Sorry, I don't have a lot of faith in the government to do a good job from either standpoint.

[white_wolf]

7. Have any stats to back up your claim that nationalized oil industries don't work well?

I bet Norway's works well.

[badtoworse]

9. My opinion is based on how our government operates

There are lots of things it's not good at. I don't want to add our energy supply to the list.

[gulliver]

11. The government generally does a really good job at things.

Should it be in the oil business? I don't know. I mean the corporations are really just little governments. Their shareholders vote, etc.

[badtoworse]

12. You mean like the Post Office, Medicare, costs for national defense, maintaining infrastructure,...

balancing the budget, protecting domestic jobs, educating our kids, etc. I would not give the government high marks for any of those things and it doesn't matter whose fault it is.

Maybe I'm the problem - I expect excellence and I'm not seeing it. I don't have any reason to believe they would do a better job with producing crude and refining it.

[gulliver]

13. It needs more money for some of those things.

But by and large, it does a good job. If Medicare were available for purchase at cost, it would quickly drive other health insurance alternatives out of business. The Post Office delivers places no one else delivers for lower prices. The budget would be easier to balance if Republicans were completely out of power. As long as Republicans have power, "faith based economics" prevails, and it always creates misery and decline for the country.

I like private industry and work in it, but you have to give the government its due. The things it does, it does well. Indeed, much of what corporations do is work done for the government. Government is the single biggest customer.

Again, corporations are just little governments. Some of them are little democracies. Some are little dictatorships. Like government, corporations are all composed of humans. I like a nice checks and balances situation. Government and corporations are both fine.

[badtoworse]

16. Here's what would happen if the government took over the oil industry

There would be immediate pressure to lower costs and reducing executive compensation would be a high profile way of doing something. That would also satisfy the public's desire to punish the people viewed as responsible for the high gas prices we have now. As a practical matter, the money saved would be tiny compared to the overall production costs, so there would be little impact on prices. What would happen is that the most talented, motivated people would leave and be replaced by marginally qualified, political appointees (otherwise known as political hacks). In the long run, this would reduce the reliability of supply and raise production costs.

The profit motivation would be gone, as would any competition. This would drastically alter the decision making process in terms of where to drill and when to shut down unprofitable operations. Here's an example: A few weeks ago, Chesapeake Energy shut down a substantial number of their drilling operations because the price of natural gas had fallen to a level where it was not covering the cost of production. They made the decision very quickly, as do most privately owned businesses. How long do you think it would take the government to make such a decision? Let's look at some analogous situations. The Post Office is trying to cut costs and wants to close some offices and processing centers, and possibly reduce service. There is political hell to pay for this because of the lost jobs and impact on local economies. Legislators are using their influence to delay the process and prevent any impact on their constituencies. The result? Little or nothing will happen and the Post Office will continue to lose money. What happens when the military wants to close down bases it doesn't need? Legislators start screaming about jobs and the impact on the local economy. They use their political leverage to keep the bases open despite the fact that the military doesn't need or want them. The result unnecessary expense that we all pay for in our taxes. What makes you think closing down an unprofitable drilling operation would be any different? The result? Higher costs.

Decisions on where to drill would be driven by political considerations rather than the likelyhood of finding commercially important deposits. Some communities might want drilling and get it even though the chances of developing an economical resource are not good. Other communities might scream about exploration even though they're sitting on potentially important oil reserves. (We already have a lot of that now, but it would be much worse with politicians directly involved.) The result? An unreliable and probably more expensive supply of crude.

In time and for the reasons described above, gasoline would become very expensive and the supply would become unreliable. We would see a return to the gas lines we saw in the 70's and rationing would be a definite possibility. The public would be justifiably pissed off and the government would deal with the cost issue by mandating a lower price that did not cover actual costs. To make up the shortfall, subsidies would be necessary, as would taxes to fund them. What kind of tax would that be? A uniformly applied tax would be viewed as regressive by the Left who would want a progressive tax. The Right would not agree to such a tax and a compromise would be worked out that did not supply enough revenue to cover the costs of a reliable supply of crude. We would have an annual political fight over subsidies and the cost of gasoline (sounds like the Post Office doesn't it?). Look on the bright side: Gasoline would be reasonably priced, when you could get it (which wouldn't be very often).

Thanks, I'll stick with what we've got now.

[gulliver]

18. Just let the government participate then.

Let it compete with private industry. Let it sell us Medicare, and we'll see if private industry can compete. Let the government manufacture the pharmaceuticals that its research discovers. Let the government drill on the land it owns instead of leasing it to private industry.

That's just more competition, right? And everyone knows competition is good. Make the government's position in these markets unsubsidized and non-profit by law. Let the best provider win.

The reason this sort of thinking chiefly scares Republicans is because they are afraid of the boogeyman and the dark. Their philosophy is purely faith-based nonsense. They think they are worshiping the free market, but for most of them, they are just worshiping airy dogma. Watching Republicans talk about the economy is like watching seven-year-olds play house. They say cute things that are basically just a naive parody of a reality they simply don't understand.

Republicans are afraid that the government will grow so big that it will drown their religion (a hapless, self-destructive worship of a parody of selfishness) in the bathtub. Their fantastic and juvenile fixations on the evils of a democratic government and on the supposedly inherent righteousness of corporate power will dissolve under the test of time.

[girl gone mad]

14. The Federal government should not run a balanced budget.

That would be lunacy.

[badtoworse]

15. That is arguable, so I'll take it off the table.

The budgeting process is certainly a mess.

[JNathanK]

20. The Post office would have a surplus if it weren't for the PAEA passing in 2006

You don't hear about the full story in the media, probably because its all been bought off by UPS and Fedex, but congress wrecked the postal service by passing legislation under a Republican dominated congress (also bought off by Fedex and UPS) and senate that mandated it to fund 70 years of pensions in a 10 year period. There's no other agency where this is a requirement. Surprise, surprise though, more than 4 years later they're bankrupt. Were lead to believe this is a problem with the post office and that the postal service wants a bailout from the government. However, they simply want money from their own funds that the USPS generated on its own. BTW, the postal service receives no money from taxes. They're completely self funded by sales revenues.

If you like Fedex or UPS so much, go ahead and use their services. I'm sure you'll be very happy with their shiping rates.

[Better Believe It]

8. How do you know that's a fact? And what exactly would make it more expensive?

The ending of oil speculation would drive up the price of oil!

Sure it would.

[badtoworse]

10. See Post 9

Speculation might actually be worse if traders expected the cost of domestically produced crude to rise because of government inefficiency.

[WhaTHellsgoingonhere]

3. ^^^

[JNathanK]

23. Why? Removing private profit incentive can keep prices low.

When a CEO or a board of investors isn't trying to maximize personal income, then there's more available funds to keep the price of a service low or to invest in growth. It can be very effective for very basic commodities, like the mining of non-perishable, raw materials, but its not very efficient in terms of developing end, consumer goods, as was the case in the USSR during the cold war era.

If mining operations and oil excavation were run as government co-operatives, more money could also be set aside to pay for worker pensions, compensation, and to pay them for living costs during periods of low demand.

A lot of the mining sites are already on government land, which is leased to private firms, so I don't really see what the opposition would be to just organizing the excavation completely through government.

[spanone]

4. agreed. any commodity we're willing to go to war for, should profit the people

[unkachuck]

6. K&R...."We need to nationalize the energy industry..."....the sooner, the better....n/t

[FSogol]

17. And then we should nationalize all the IHOPs. So we can all have tasty waffles!

PS. Is as likely to happen as the article's suggestion.

[joshcryer]

19. Uh, not possible constitutionally speaking. All energy sources would require recompense.

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

We're talking trillions of dollars of "just compensation."

Simply infeasible.

Now, there is an opportunity to require mineral leases to give the American people 90% of the profits, and I wholly support that idea. It is ridiculous how the American people are only allowed to have 1-5% of the profits on mineral leases on public land. Appalling.

[white_wolf]

21. True, though and I'm blatantly stealing socialist_n-Tn's suggestion here...

but if you really wanted to nationalize this and do it within in the letter of the law you could always pay the owners government bonds redeemable 100 years later.

[joshcryer]

22. That's a fair enough point.

However, that would fall outside of "due process" and "just compensation" almost assuredly. Unless we packed the benches with paid off crony judges who just overlooked logic and reason and decades of precedence.

Pack the benches and I might change my stance that it is infeasible.

[white_wolf]

24. Okay, well how about this...

If these oil companies are drilling on publicly owned land, can't we just tell them they aren't allowed to drill there anymore and pay them for the cost of their equipment, but leave their company intact?

[joshcryer]

25. You'd have to pay them for the equipment.

And since there's no national oil agency, we'd wind up having to hire their employees or train our own. And then there's an issue about anti-competition or anti-trust. If the government takes all the equipment and hires all the employees, the company will go under, and could maybe sue the US on that basis alone (Sherman Act). I think it would still be in the trillions of dollars either way you cut it.

My argument is simple, just make them give us 90-95% of oil revenue. Simple. Really simple. Most new oil exploration is on public land. A lot of natural gas is still on private land, and those private owners get justly compensated (to the tune of thousands of dollars a year). Why can't every American? We're sitting on the largest deposits of recoverable oil on the planet, and it's only going to get bigger: http://www.democraticunderground.com/11277814

But we're just going to let the oil companies take the lions share of profits. All it would take is a modification of the mineral lease laws, if not, actually, simply telling the BLM to raise the rates (I can't remember if the rates were set in stone or if the BLM decides what they are).

[JNathanK]

26. Oh, but you've surely heard of trickle down economics, haven't you?