Is It Time To Federalize The Oil Industry?

[Bruzilla]

I was wondering what you'all think about the idea of federalizing the oil industry in the United States by declaring oil a public utility and treating it the same way as most areas handle electricity, water, natural gas, etc. It seems that we have a precedent set with the federal takeover of the aiport security business, so maybe it's time to take over oil.

My thinking was that the government could take over end-to-end control over oil production, importation, and delivery and take the "for profit" costs out of the equation. We're already paying for a lot of this effort in the form of tax breaks, paying for research and exploration, and other federal subsidies, so why not just pay for all of it? Even better, since most gas stations are now convenience stores the government could lease the non-oil side of the businesses to private venders who would continue to offer all of the service we have now, and the rents from the venders would go towards further lowering gasoline costs.

 

[blacklabman]

Are you a communist?

Having the federal government take over would only drive the prices even higher.

 

[Bruzilla]

Are you a communist?

Having the federal government take over would only drive the prices even higher.

Not the last time that I checked. BTW, is having government controlling most of the electric and water resources driving the costs up? I don't think so. So, why would having the government take over gas distribution raise the prices? What's the basis for that? The distribution channels are already in place, the infrastructure is already in place, all we need to do is convert the needed workers to civil service.

What's even better is that for a change, the civil service people will actually be doing something that generates sales, rather than just operating at a loss as they usually do.

 

[Railroad]

I'm against it. The Government is in too many things already. I'd rather pay somebody's (justifiable of course) profit than more money toward the national debt.

Regulation should be handled at the State level, I think, but the way Maryland's handling that regulatory function is ridiculous.

 

[Bruzilla]

I'm against it. The Government is in too many things already. I'd rather pay somebody's (justifiable of course) profit than more money toward the national debt.

Regulation should be handled at the State level, I think, but the way Maryland's handling that regulatory function is ridiculous.

Good points, and I would usually agree save for the fact that gasoline, like electricity and water, is a commodity that just about everyone needs. Allowing market forces to just have their way, with no restrictions on prices, creates a bad situation for most of the population.

The oil companies are talking about the gas lines in 1973 that resulted from Nixon capping gas costs, which meant that when gasoline started costing more than what dealers could sell it for, they quit carrying it. The talk now is not of capping price, but capping profits, and the oil execs are already decrying that by pointing to the overall price caps of the 70s. I think a non-profit set up, like most power co-ops, would be the way to go.

 

[Fred Hoeck]

Power companies are profit making operations. Water companies are profit making corporations. It is only little rural Coops like SMECO that are non profit.
Anytime the government gets involved, costs go up, quality goes down, service goes down, and supply goes down. The market is best suited to decide the price. If you don't like the price of gas, get rid of your gas guzzler and get a small, diesel car.
The left eco freaks like Algore wanted high fuel prices to force people out of large cars, and all cars, so now they have their wish and they complain.

 

[2ndAmendment]

I am against the Feds taking over anything. They are already into too much and they usually screw it up.

How is this? Take the speculation out of the oil market. Pass regulations that if you don't own (not lease) storage facilities large enough to store at least one oil futures contract, you can't buy or sell oil futures. That would take the speculators out of it. Additionally, if you have storage, you must have enough empty space or projected empty space for the contract(s) you buy. There are other details that would need to be addressed to keep the fat cats from installing a tank just to be able to play the game of "futures roulette".

 

[Sparx]

Power companies are profit making operations. Water companies are profit making corporations. It is only little rural Coops like SMECO that are non profit.
Anytime the government gets involved, costs go up, quality goes down, service goes down, and supply goes down. The market is best suited to decide the price. If you don't like the price of gas, get rid of your gas guzzler and get a small, diesel car.
The left eco freaks like Algore wanted high fuel prices to force people out of large cars, and all cars, so now they have their wish and they complain.

This is crap. The states that have privatized their utilities have actualy seen an increase in their bills. Before, the utilities were guarenteed a certain profit and had to go to the PUCO to get rate increases and had to prove they deserved them. Today, the reliability and cost has gone up because it has become a profit driven industry.

 

[Larry Gude]

Seeking clarification...

So, why would having the government take over gas distribution

Bruz...do you mean REGULATE oil like electricity, IE, somewhat telling private, for profit entities what to do via price controls, support of monopoly in terms of lines of transmission etc...

Or...

Do you mean ACTUALLY be in charge of gas distribution?

Uncle Sams oil well, refinery, tanker and gas station?

 

[Larry Gude]

What is the value in...

That would take the speculators out of it

...doing that?

 

[Oz]

Last time I looked at my electric bill, it seems that if the government is controlling the electricity industry (which they aren't) then I wouldn't want them involved in anything else.

Although crude pricing has increased, our real problem is refining. That would have been crippled by this storm no matter who owns the equipment.

 

[Triggerfish]

Although crude pricing has increased.

It has increased but now it's starting to go down after the EU, Japan, and others have agreed to open up their strategic reserves to the U.S. Some countries have agreed to donate crude oil to the U.S.

As for the refining, I agree.

 

[ylexot]

What is the value in doing that?

My understanding is that oil prices are mostly driven by speculation (not actual supply and demand). Gas prices go up because speculators think that there will be a shortage of oil. That's why pump prices jump within hours of bad news. They are speculating on oil/gas that doesn't even exist yet which is affecting the oil/gas prices that are currently available. I think 2A is pushing for the ability to trade on oil/gas that is currently in the possession of the oil companies and not the stuff that's still in the ground somewhere. Although, I'm not sure it would have a great effect. It might smooth out the fluctuation some.

I could be completely wrong on all this...this is just how I understand the oil market to work.

 

[2ndAmendment]

...doing that?

ylexot has the gist of my reasoning. Take the speculators out and the prices do not fluctuate so drastically. If a person cannot store the oil, why should they be able to bid on oil they can only sell in the hope of an increase price? I think the futures market is just a form of legalized gambling the way it is now whether it is oil or pork bellies. Commodities that effect the everyday life of Joe Blow on the street should not be subject to arbitrary, speculative, market forces. If you don't produce it, or can't store it, or use it in an end product, you shouldn't be able to buy or sell it.

 

[Larry Gude]

ylexot...

Oil pricing is entirely driven by speculation.

Gas prices go up because speculators think that there will be a shortage of oil.

Yes, and when they are wrong and there is plenty of gas when their contract is payble they lose money.

Speculation places discipline on the entire chain, from pumping to refining to number of gas stations.

The pumpers want to pump the proper amount to both get the highest price AND keep competitors at bay.

The refiners want the same thing.

Same for the gas stations.

People don't just run around making life miserable for the guy putting gas in his truck. They are trying make make intelligent guesses in order to make money.

 

[2ndAmendment]

Oil pricing is entirely driven by speculation.



Yes, and when they are wrong and there is plenty of gas when their contract is payble they lose money.

Speculation places discipline on the entire chain, from pumping to refining to number of gas stations.

The pumpers want to pump the proper amount to both get the highest price AND keep competitors at bay.

The refiners want the same thing.

Same for the gas stations.

People don't just run around making life miserable for the guy putting gas in his truck. They are trying make make intelligent guesses in order to make money.

Too many middlemen cause prices to go up. Every person who buys and sells an oil contract becomes a middleman.

 

[Larry Gude]

We had that...

ylexot has the gist of my reasoning. Take the speculators out and the prices do not fluctuate so drastically. If a person cannot store the oil, why should they be able to bid on oil they can only sell in the hope of an increase price? I think the futures market is just a form of legalized gambling the way it is now whether it is oil or pork bellies. Commodities that effect the everyday life of Joe Blow on the street should not be subject to arbitrary, speculative, market forces. If you don't produce it, or can't store it, or use it in an end product, you shouldn't be able to buy or sell it.

...it was called Standard Oil. They pumped it, refined it, delivered it and sold it to you.

There are attractions to monopolies and dictatorships to the little guy; stability.

As long as the monopoly and the dictatorships are well run.

Speculators could not speculate on Standard because there was nothing to speculate about. Speculation provides motivation to pump more efficiently, refine more efficiently, deliver better, research more, explore more and so on.

Same with agriculture. If all of us wheat guys jsut do what we do and agree, collude, on given production and given pricing, there's more stability for you.

But it is corrupt. It is not free market. It is not innovative.

Speculation provides motivation.

 

[2ndAmendment]

...it was called Standard Oil. They pumped it, refined it, delivered it and sold it to you.

There are attractions to monopolies and dictatorships to the little guy; stability.

As long as the monopoly and the dictatorships are well run.

Speculators could not speculate on Standard because there was nothing to speculate about. Speculation provides motivation to pump more efficiently, refine more efficiently, deliver better, research more, explore more and so on.

Same with agriculture. If all of us wheat guys jsut do what we do and agree, collude, on given production and given pricing, there's more stability for you.

But it si corrupt. It is not free market. It is not innovative.

Speculation provides motivation.

We disagree.

 

[Larry Gude]

So?

Too many middlemen cause prices to go up. Every person who buys and sells an oil contract becomes a middleman.

Buy an oil contract. Go ahead, guess what it's going to do in 6 months when your contract is due. 42,000 gallons. Payable on delivery. I bought oil in 2000 for .349 a gallon...

...because of the middlemen. It is not a one way street. You are not guaranteed a profit when you buy an oil contract and no one bails you out if you buy or sell wrong.

BUT the market does respond to your interest.

 

[Larry Gude]

I agree...

We disagree.

...absolutely.