This Wednesday, executives of six oil companies testified in front of the U.S. House of Representatives. Amid the invasion of Ukraine by Russia, these companies have been accused of taking advantage of the situation to profiteer off of the American public.
In my most recent article, I discussed the nuances of the recent hike in gas prices. Arguing the economic influences in gas and oil, I only briefly mentioned possible solutions in the market notorious for its complexity and difficult navigation.
In particular, the nationalization of oil and gas was mentioned. This would mean that oil and gas, a privately owned and operated resource, would be converted to a public utility. Instead of market forces dictating the direction of oil and gas, this utility would be dictated by the democratic process and government policy. In other words, the private element of oil would be removed and gas and oil would be directed through the state rather than corporations.
Germany has announced its plan to nationalize Russian oil units within Germany after recognizing the overwhelming importance of oil in an economy, and the negative impacts it has during crises.
Many wince at even the thought of government involvement, especially those who align themselves with the far right on the political scale. Guiding principles of free trade and religious reliance on the free market can repel one away from the concept of nationalization. Though this economic philosophy does have precedence, one should be open to the role of the government in the economy. Instead of indulging in platitudes along the lines of “the freer the market the freer the people” or citing George Orwell’s book “1984,” I suggest careful consideration in an economic policy with realistic potential.
The invasion into Ukraine has once again brought energy companies into the spotlight. American consumers are well aware of the convulsions of gas prices. Recently reaching abnormal highs, and during the pandemic reaching record lows, the role of gas and oil is being heavily questioned.
The pandemic saw oil crash to the point where crude oil prices were negative, meaning that sellers had been paying buyers to buy their oil stock. A government buyout had often been suggested during this period, and has been the most recent signifier towards nationalization.
Though legal architecture exists to take control of the oil industry via eminent domain, this may prove too extreme and controversial. Leveraging eminent domain will create large disruptions in oil and gas and will disorganize the system of production. Most likely a nationalization of oil will manifest in a buyout of ownership in oil and gas companies. The government does not need to seek 100% equity, as even a 51% ownership gives it enough power to direct the industry.
Of course, one cannot forget the workers in this industry. An important driving force behind nationalization is the phasing out from fossil fuels to green energy, namely nuclear. It is unclear whether the market can successfully guide us into a future without environmental catastrophe.
Oil companies currently plan to seek investment security rather than growth. I will invoke the same question again that I had last time: why should oil production rely on the confidence of investors? Regarding the recent market movements of oil and gas, and especially the continuous threat of environmental destruction, much doubt is sowed into free market theory in relation to oil. Consumers are only making their purchasing decisions based on their daily needs without considering the large scale effects of not only fossil fuel consumption but environmental impacts in all spending habits.
To suggest simple government regulation does not suffice. Oil must be produced in national interests and must be emancipated from the business model. It is time to consider promoting oil into the collective interests of American citizens.
To beat the Big Oil gasoline price rip-off, buy an EV.
Why not, it worked out well for Venezuela right?
If we want the government to reduce our dependency on oil and move us towards a more sustainable future, causing the government to run the oil companies would eventually have the opposite effect. I could easily see a future where a large part of the U.S. government’s budget is dependent on oil revenues if this were to occur. Holding oil companies to account for their actions would suddenly become immensely more complicated. I worry that this decision would have negative consequences for everyone, especially for the environment in which we all live.