Is It Time To Federalize The Oil Industry?

[Oz]

Every person who buys and sells an oil contract becomes a middleman.

What about grain, orange juice, and everything else that they sell futures for? We have a widely used capitalist system that controls prices. Are you going to end options trading on the stock market too? If I buy a $27 Pfizer option for $3, and sell it to someone for $3.50 when the stock price is $28.50, have I driven up the price of Viagra? Speculation and futures market is more akin to the Sportsbook gambling operations. The market drives speculation. Not the other way around. Until refining took a hit from mother nature, the fact that crude doubled didn't reflect a 100% increase in our pump pricing.

I'm not sure I even agree with the middleman point. Are steel suppliers middlemen in the auto industry? Crude doesn't come out of the ground ready to pump, any more than steel comes with 4 wheels attached to it ready to drive off of the dealer's lot. It's simply a raw material that eventually eventually becomes a finished product.

 

[2ndAmendment]

What about grain, orange juice, and everything else that they sell futures for? We have a widely used capitalist system that controls prices. Are you going to end options trading on the stock market too? If I buy a $27 Pfizer option for $3, and sell it to someone for $3.50 when the stock price is $28.50, have I driven up the price of Viagra? Speculation and futures market is more akin to the Sportsbook gambling operations. The market drives speculation. Not the other way around. Until refining took a hit from mother nature, the fact that crude doubled didn't reflect a 100% increase in our pump pricing.

I'm not sure I even agree with the middleman point. Are steel suppliers middlemen in the auto industry? Crude doesn't come out of the ground ready to pump, any more than steel comes with 4 wheels attached to it ready to drive off of the dealer's lot. It's simply a raw material that eventually eventually becomes a finished product.

Did you read post #14?

The stock market is different in my opinion. You are buying/selling shares of a company or options for blocks of 100 shares of a company. The value of a company is affected by many things; product line, future product, market share, book value, earnings, cash on hand, profits, management team, and more plus public perception. Not so for commodities.

 

[willie]

The huge profit in oil is the barrel price out of the ground. No one is going to regulate OPEC. How would it be possible to force our oil companies to sell us a barrel of oil at ½ the price of OPEC's oil? The entire oil industry is so internationally intermingled that we will never have much to say about it. Exxon/Mobil retail aviation division operates in the red while the production division is making money hand over fist. It isn't the middleman, the speculator or the retailer but it is the producer and they are independent of the USA.

 

[Bustem' Down]

I don't get it. Electricity is not even federalized anymore.

 

[Bruzilla]

Do you mean ACTUALLY be in charge of gas distribution?

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

Yep, that's what I'm saying. Why do this? The oil companies made over $30,000,000 in profits just this last quarter. If the price of oil continues to go down, and I think it will, I think we'll see profits for this quarter running about 75% higher than that. Remember that's not $30,000,000 in gross intake... that's just profit! What do you think the price of gas would be if we weren't paying for that profit?

I'm all for free enterprise and profits, but I think there are some items that everyone needs and that are best distributed on a not-for-profit basis, like most water and gasoline are. My electricity comes from a co-op that's like SMECO, and our electricity isn't cheap, but then again it isn't cheap to produce. We pay for the production, delivery, and logistical support for the electricity, but I would hate to think about how much more the power would cost if the provider was a publicly traded company responsible for generating profits for its shareholders.

Now, suppose we get rid of that profit cost, and leased all of the non-fuel related, conveince store, stuff to venders with the proceeds going to further offset the cost of gasoline. How cheap would we see gasoline then? In Venezuela where most of the oil production AND distribution is nationalized, gasoline sells for less than 50 cents per gallon. How sweet would it be to see that price at the pump?

 

[Goofing_Off]

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

This is a false premise; a middleman performs a function that a producer would have to perform and pay for if the middleman did not exist. Taking people out of the distribution process only shifts costs to those left remaining.

 

[Bruzilla]

This is a false premise; a middleman performs a function that a producer would have to perform and pay for if the middleman did not exist. Taking people out of the distribution process only shifts costs to those left remaining.

That's not entirely true as middlemen can set their own profit margins, and you lose economy of scale by having them.

For example, when Clinton opened up the petro reserves to help Al Gore in his election bid, all of that million barrels of oil went to four different brokers... actually none of them were actually brokers, they were front companies, one of which was owned by Jessie Jackson. But, each of those 250,000 barrel lots went to a different broker, with different profit margins, and with their own administrative support costs. If the United States Oil Company (USOC) were formed there would be one standardized distributor, with one administrative pipeline, which reduces the costs.

I'm sure some will point to models of inefficiency within the government, like the Department of Education, as a reason why the federal governmant shouldn't do this, but I think they should look at models of efficiency like the Venezuelan system and say "why can't we do that?"