Like you, I’ve been thinking a lot about the price of gasoline lately. I have a solution which I will share with you, if you promise not to bring Sen. Joe McCarthy back from the dead and reactivate the House Un-American Activities Committee to come and get me.
Simply put, I propose that we nationalize the oil industry.
No, I haven’t pulled out my old Che Guevara T-shirt from the dresser and poured one too many Cuba Libras, I’m serious. And, yes, I have a good rationale for my proposal, but I need to set the economic scene a bit first.
I realize that there are some much-less radical proposals out there, like waiting for Detroit to produce more fuel-efficient cars, or harnessing the power of wind, or increasing the use of mass transit, but I was thinking we might actually want to find some solutions during our lifetime! And, of course there is the current proposal of eliminating the gasoline tax for the summer.
Well, excuse me for a second while I laugh out loud, and try to decide where I’ll spend my extra 30 cents.
Actually I’m not really amused by our local representatives proposing such “grandstanding” measures (Daily Gazette, May 4, 2008). Does anybody really think the oil companies won’t eat up those little savings? And can’t you just imagine what the prices will look like in the fall? No, New York can keep my 30 cents and fix the bridges and roads rather than pretending I’m saving money while it’s taken out of another of my pockets. I admired Jim Tedisco more when he was helping animals with Buster’s Law than I do with this nonsense. I’m guessing that we could save a lot of 30-cent pieces if Sen. Joe Bruno would pass up a few rides in his — our — helicopter once in a while, and I’m nervous that all that extra coinage in our pockets might cause our deteriorating bridges to collapse from the weight.
Basis for proposal
So back to my rationale for nationalization. I am basing it on the following facts (OK, assumptions):
- Gasoline is not a luxury, it is a necessity, and there are no other choices (remember, I’m talking about in our lifetime).
- It is not sold in a pure, free-market economic model, but is in the hands of a precious few oil companies, who essentially form a monopoly. There is no competition among the companies; the price is fixed. Exxon-Mobil alone recorded a 17 percent increase in profits during the first quarter of this year, totaling $11 billion!
- The price of commodities in a capitalist economy is supposed to be based on supply and demand. With oil, the supply is controlled by the oil-producing countries (OPEC) and the demand is fixed. Yes, we can reduce our demand, but only to a set level. Once we reach that level (which I suppose we could determine by measuring the number of people who freeze to death in their homes this winter), then the demand side becomes a constant.
The supply-and-demand model, therefore, does not apply to oil. It is impossible to let the price of oil float fairly as if it were a free-market commodity, because it won’t. We’re not choosing Wranglers over Levis here; we have a fixed demand and a monopolized supply. If someone controlled and was making billions on the selling of the air, we’d probably start by taking shorter breaths, but soon I think we’d want some more drastic action taken.
- One of the essential responsibilities of government is to protect its citizens from this very form of exploitation. Therefore, I am calling upon our government to do just that.
How would it work? Do I really mean to say that the government should take over the oil industry?
Well, I’m not actually proposing the national government take over the drilling, refining and distribution of oil. What I’m proposing is that the government control the price.
With a projected profit of $44 billion for Exxon-Mobil alone in 2008, there is room to do this without dusting off Lenin’s Tomb.
And I’ll remind you that it’s done all the time. The government pays farmers NOT to grow, to protect the price of certain farm products, and energy companies and other essential commodities are regulated by the government. For example, in New York state the New York Public Service Commission regulates the state’s utility companies. If National Grid wants to raise its rates by proposing some smokescreen policy to encourage us to purchase energy-efficient appliances and windows, they have to present a proposal to this commission to get clearance to do so. The delivery of energy is a monopoly and the state has a right to regulate it to protect us.
So, the oil companies would appear before a congressional commission, plus a few long-haul truck drivers, and document their costs for new exploration, purchasing, drilling, refining, distribution and development of new technologies. A profit for the stockholders would be factored in (see, I’m not a bad guy) and a fair-market price would be set. All price increases thereafter would be subject to Congressional approval.
While this wouldn’t solve the problems of America’s dependence on oil and our over-use of it, at least the days of price gouging and profiteering would be over.
Anthony Frank lives in Schenectady and is a regular contributor to the Sunday Opinion section.