Proposal To Reduce Reliance Upon Foreign Oil And Force A Reduction In Gas Prices By Forming A Public Oil Company

Introduction

The following is largely the result of a discussion thread that I have been hosting for several years on the 3rdparty.org web site. What began as an attempt to figure out whether it was better to encourage higher fuel economy standards through government regulation or high fuel taxes evolved into a broader exploration of options to decrease our reliance upon foreign oil. Ultimately, there is no singular solution to our nation's energy problems; what I offer here is a beginning, or one vital step that may be taken. I believe very strongly in conservation and alternatives to fossil fuels, but I also recognize that we have a huge infrastructure that relies on oil and we must be able to supply that oil at a reasonable cost for the forseable future.

Position

When I mention the need for a Public Oil Company, there is an immediate assumption that I am pushing for Socialism or the government control of the entire oil industry. I am not, and therefore I find it helpful to clarify at the outset that this proposal hinges in part upon the continued market competition of private oil companies.

Additionally, I am not advocating that we begin drilling in protected areas. I am a staunch environmentalist and I believe that we must do all we can to preserve the integrity of our resources, wildlife habitats and the planet in general. This proposal does not call for, nor does it require, that we open up sanctuaries or national parks to domestic drilling.

While we may have huge oil reserves within our national control, by no means do we have an unlimited supply. What we do have is enough to bridge the gap until oil is no longer needed as our main source of fuel. While this transition could take up to twenty years, there is little reason that reliance upon oil as fuel should not be ended sooner. Still, we must also remember that "gas" as it is found at the pump is often considered a "byproduct" of crude oil and is not the only profitable aspect of oil production. Therefore, even after solving our current energy crisis, there may well continue to be a market for crude which our Public Oil Company could continue to exploit to the public advantage.

The Plan

Let us consider a basic fact: oil companies currently have leases on domestic land with proven untapped oil reserves that remain untapped supposedly because of a shortage of equipment and qualified labor AND MORE IMPORTANTLY there are leases on land WITH EXISTING OIL WELLS that have been capped even though they are still viable. So, lifting this so-called ban on drilling will not do anything to affect the backlog of available resources, but will only result in being a giveaway to oil companies for future profits when fuel prices will be higher. This is a situation of politics as usual, rhetoric being used to scare people into demonizing those who stand for reason and common sense. WE HAVE THE RESOURCES TO BE ENERGY INDEPENDENT for, by the most modest guesstimates, at least 20 years...

So what is standing in our way? It has been proven that higher fuel costs are not the stand-alone solution (that they in fact cause immediate harm to the majority of the population).

Consider this possibility: The Federal Government could FORCE fuel prices to drop dramatically by forming a fully regulated drilling concern to COMPETE with the private sector, drilling on its own land and flooding the market with domestic oil that would ONLY be sold domestically at a "no profit" cost. The big oil companies would have to lower their own costs to be competitive, which would mean increasing domestic production for the domestic market. The end result could very well be a strengthened dollar and higher standard of living for every citizen. Money saved on fuel would go back into the economy. And, ironically, higher taxes on gas could still be implemented to fund necessary programs and increase overall government resources. This is not a pipe dream, but it is the sort of plan that lobbyists will fight tooth and nail to prevent.

At the end of the day, however, it is regulation that has been proven to work when it comes to stimulating innovation. Auto makers have fought regulation consistently only to rise to the challenge when it is put into place. We now have actual hydrogen fuel cell cars commercially available and on the road, but without critical mass it will still be a long time before we can see any great change. That critical mass needs to be prodded into existence, and regulation is a huge part of that process. Certainly, high fuel costs are a stimulus for the wealthier consumers who can afford to buy into the next new technology, but until such technologies are regulated into existence they are unlikely to find their way into truly affordable vehicles. With numerous competing technologies proven to work, getting some of them into wide production so that they can be affordable options is essential.

Moving past the political rhetoric is essential as well. There are real solutions to our fuel crisis and there are real solutions to our ecological issues. We no more need to further desecrate the environment to be energy independent than we need to push costs high enough that we turn our backs on fossil fuels.

Clarifications

How do you guarantee that the tax payers do not end up subsidizing the industry? Would that mean any more than they currently subsidize the big oil companies (which they do, extensively)? Of course the tax payers would subsidize part of it, the question is whether it would be directly or indirectly. Tax payers subsidize EVERYTHING the government does, so let's all be honest about that. Talking about the tax payers subsidizing public projects merely throws up a smokescreen. The plan for public oil, however, would be that it becomes entirely self-sustaining and does not require any additional government funding once it is operating at an efficient pace. This could take a few years, of course, and perhaps the costs incurred in starting it up could be reverse pro-rated in the cost of oil for a limited time in order to pay the government back for initial expenses. Once this has happened, prices should drop a bit further. And there would be no need for additional subsidies or taxes on the fuel because all would be built into the sales cost.

The reasons that the big oil companies are not drilling on all of their present leases has nothing to do with it not being economical for the lease owners to exploit. It is really important to note that big oil has been hoarding leases for future exploitation and that they are doing this because they are able to get these leases for next to nothing now. The fear is that in the future the leases will be expensive, once our government stops "giving them away" to their friends. Additionally, private oil companies have been on record stating that they do not have the resources to exploit all their leases and have no plans to suddenly make that possible. The government would find it economical simply because it would be exploiting land and oil it already owns and selling it directly at a cost that would ensure all product is sold. The start-up costs would be steep but the "profit" would come quickly, benefiting all of us.

My plan would NOT call for drilling in protected national parks. This is simply not necessary considering the absolute wealth of national land and off-shore properties that have known oil reserves.

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Comments 4 comments

Sammy Spade 8 years ago

This is one of the most interesting ideas on energy policy I have seen in a long time.


frank 8 years ago

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Beth Barany profile image

Beth Barany 7 years ago from USA

Jeffrey, Thank you for your insightful and well-written piece. I drove my car share, a Prius, back to its spot, then walked a mile home. i had to walk past noxious combustion cars and a gas station. Now, I love to drive, and understand that the Prius is a hybrid. What I don't understand is why we thing gas-powered engines are okay for our human health and for our environment's helath. So, I searched out information on alternatives and found your post. What a well-reasoned idea you propose? What public policy action have you taken with it?


Jeffrey Poehlmann profile image

Jeffrey Poehlmann 7 years ago from Los Angeles, CA Author

This proposal has not yet been taken forward as a public policy option. I have posted it here in the hopes of fostering more debate on the subject and perhaps garnering suggestions on where it might be improved. Your comments are appreciated, however, and if enough interest is shown in this idea I do hope that it may be brought forward in the political arena. Unfortunately, it is a little too late for either of the current major Presidential candidates to approach this idea before the elections — and I am convinced that they would not champion it merely because it sounds on the surface to be too radical an idea for an election season. On the other hand, it may be something that can find a place for introduction after the political rhetoric has calmed down after November.

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