More Calls for Nationalization

As I have been saying, expect more of this:

That’s pretty scary, but not unexpected. As oil prices continue to rise, governments will make desperate moves that will probably worsen the situation. Can you imagine the U.S. government running the refinery system?

Thanks to The Oil Drum for highlighting this, as well as the previous O’Reilly clip in Peak Oil Media: Hirsch, Simmons, House Dem(s?) on Nationalizing Refineries, Klare, O’Reilly, and Gas is F*-ing Expensive.

22 thoughts on “More Calls for Nationalization”

  1. Hey Robert,
    Any thoughts on these?

    One thing that gets me is that the OCS/ANWR drilling really wouldn’t change prices. And that one of the very major reasons the price of oil is shifting is due to the value of the dollar falling. And since Oil is being traded in dollars, then the value of the oil goes up proportionately.

  2. I saw this on cspan yesterday. There were about 4 or 5 Dems there talking about there ideas. They were all clueless. The ideas from the republicans aren’t much better. Here’s something I received from one of my state’s republican congressmen:

    Oil Plan

    The numbers in that image are complete bunk, but people actually believe it. I’m not sure that we’ll ever get any useful solutions from our government.

  3. Who exactly is our government? not us? This attitude of individuals relying upon, while separating themselves, responsibilities, from the government, the man, etc is…kind of pathetic. IF you are civilized, you are a critical part of the ugliness…deal…your poop does stink…your mom won’t clean it up anymore! News media usually consists of non-creative reactionary babble, it is uninspiring, for me. We need more brave souls to contribute editorials, as in this comments section, and we also need to read them, respond, “vote”, don’t just choose.

  4. Long ago my economics teacher opened up my late-adolescent-anti-establishment-idealistic mind by demonstrating that environmentalism is regulated by economics. Human civilization has always been a messy topic in science, but generally, I believe it is true. If we don’t like oil products, we will avoid consuming them, search out alternatives. If oil suppliers don’t like the effects of our oil consumption, they will charge more for it, we should respect that, Europe does, right? Does Europe pay more for fuel as a positive externality?(economics term) (Europeans also move more with bicycles, and are less obiese)

  5. In Canada, there are a lot more “essential” services operated by Crown Corporations, which are separate companies owned by the province or country. The local refinery is owned by Federated Cooperatives.

    I have worked for 3 crowns (telco, land titles and NG/pipeline). It’s not a perfect system, but because the corporate profit goes back to the government, even with competition with private industry (i.e. cellular and gas pipeline), there is a lot more concentration on providing the service to all of the citizens than hard-nosed all-out capitalizm.

    It’s not a perfect system by any means, but it beats the hell out of Enron rolling brown-outs to drive up electrical spot price.

    As far as refineries, like anything else they have to operate on a profitable margin if they are private. I think things that are small enough (i.e. farming, cabinet making, garages) work very well as private industry and competition keeps the market fair.

    In “essential” services like electricity, gas, telco and petroleum, the infrastructure investment and environmental hoops are too large to really have competition. If crude price is high and the refining margin is low, there is no motivation for a refinery to max production or invest in expansion. There is also good money to be made if someone else’s refinery goes down. When Katrina hit, our retail gas prices shot up even though we are totally out of that supply chain and have whacks of local crude and refinery capacity. It would be the same with a refinery in Billings when a hurricane hits the Gulf. Margins go through the roof.

    Nationalization probably wouldn’t work very well in the USA, but government investment in refinery infrastructure and maybe a mandated cap on refinery margin might make sense. If we are truly in a “Peak” situation with a constantly escalating crude price, there isn’t going to be refinery margin to max capacity or invest in infrastructure.

  6. “When the government can set prices, it can set prices!”

    Wow, that’s so awesomely easy.. why didn’t I think of that?


  7. The lack of energy leadership is breathtaking. But, we do have market elements in our economy, so I think we will squeek through okay. It is sad to watch German decrease oil demand by 10 percent in one year, while we inch downward, but we are gathering steam now in the downward direction.
    Still, of all entities, farty, fatso GM may save the day. GM keeps saying they will get the Volt out, late 2010. The doomsters still don’t get it; The Volt shifts energy demand from liquid fuel to the grid. And we can power our grid by many methods, wind, solar, nukes, geothermal, clean coal, natural gas. Additionally, buildings in the USA will use less, not more, energy going forward, due to improved design, HVAC systems and much less consumptive lighting.

    Morgan put out a study predicting Pead Demand this year for crude oil; it will decline 0.6 percent thy say:

    SAN FRANCISCO (MarketWatch) — Global oil demand is likely to contract 0.6% in 2008 for the first time in 15 years, said J.P. Morgan Chase late Friday. Analysts led by Joseph Lupton forecast global oil demand will fall another 0.2% in 2009 as demand dampens in emerging markets, whose appetite offset declines in developed markets’ oil consumption in 2006 and 2007. Higher prices and weaker global economic growth are likely to temper demand growth in the emerging countries while developed countries’ consumption continues to fall. “As impressive as [emerging markets] demand has been, the tide of global oil demand is set to turn,” said the J.P. Morgan analysts in a note.

    So, we have hit Peak Demand, even before we see Peak Oil, and we have GM and soon Toyota introducing cars that will radically reduce our demand for crude.

    Aside from weak and dunderheaded U.S. leadership,. I see no reason to worry.

  8. Robert,

    You need to create a fact sheet of the history of oil nationalization. More and more people like this are popping up on the left and Bill O’reilly’s scapegoat game is making things worse on the right. With Obama likely to be the president, democrats controlling both houses and a desperate populace the pump will be primed for a socialist takeover of the private oil companies.

    In the short term would you mind responding to her Norway comment?

  9. Another thought,

    Once oil companies are nationalized what will stop the government from doing the same to the food industry? An industry that is getting hit hard with costs and prices are skyrocketing.

  10. She’s simply wrong about Norway. They use a lot of oil revenue to fund social services (as does the U.S. for that matter), but the industry is certainly private.

  11. @Bob Rohatensky

    In “essential” services like electricity, gas, telco and petroleum, the infrastructure investment and environmental hoops are too large to really have competition.

    that is called a natural monopoly and usually refers to the conduit (powerlines, wire, rf, tubes). an economist’s definition of a natural monopoly is a market where increasing competition results in increasing per subscriber costs.

  12. What factors could have caused the dramatically steep drop in oil prices in 2006, right before the 2006 US Election season?

    I can remember the conspiracy theories quite well. The funny thing was, the price kept falling past the election, and then took off and went up and up and up – even though we are again in an election season.

    I can go back and pull up essays from then in which I predicted the price would fall, because crude inventories were very full all over the world. As soon as summer driving season was over in 2006, that’s exactly what happened. This was also during the same time that Saudi was cutting production and citing their concerns that full inventories would crash the price as people stopped buying crude. So they took the decision to take oil off the market, and the price finally recovered.

    Now, having said that, I think it is likely that the price will fall between now and the election. I just think this run-up needs a pause to gauge how the world economy is responding. It is not clear that $130 oil is sustainable in the short term (long term is a different story), as people are starting to cut back.


  13. Obama is against coastal drilling,because the payoff won’t be immediate. Isn’t that the same reason we’re told ANWR drilling would be fruitless? Because it wouldn’t produce oil this minute? I happen to think we’ve hit peak oil. If so,production starts declining precipitously almost immediately. And we’re gonna really,REALLY wish we’d allowed drilling in ANWR and off the coasts. It ain’t gonna be a very Merry Christmas.

  14. Benny,

    So, lets just say you’re right, and that this is the year of peak demand (or last year). The reason it’s the year of peak demand is because we’re close enough to peak oil that the whole supply demand thing is too tight and there’s no more room for (significant?) supply growth. If demand goes down but supply continues to grow (ie, NOT peak oil), then prices will crash and demand will quickly recover to new highs (ie, also not peak demand). If demand goes down but supply also goes down (ie, peak oil), then prices will not crash and demand will go down in tandem with supply.

    I guess what I’m really asking is how is your “peak demand” any different from “peak lite” or “peak oil”? Most importantly, how are the effects different? Peak demand can’t happen without a peak oil, and peak oil can’t happen without a peak demand.

    Sorry to everyone else for taking the bait. :p

  15. Here is a little background on Malia Lazu . And here .

    Why is it that these people who don’t know anything about anything can manage to get on TV? Hey maybe we should push Robert in front of the camera. He at least sort of looks like Tom Cruise – from a distance . . . maybe.

    Anyway Malia looks like a professional organizer/board member of some pretty kooky leftist groups. Obviously she is so involved in all this organizing that she doesn’t have any time to research what she is talking about. I don’t know how anyone can take her seriously, especially when she doesn’t even know about Norway. She is deeply wrong about “it’s our oil”. Maybe on public property . . . but the US, unlike many other countries, has always privatized mineral rights. That policy has greatly benefited our economy and development, leading to the settlement of our frontiers in the 19th century.

  16. Peak demand can’t happen without a peak oil,

    Sure it can. If high oil prices spur us to transition to a better fuel (e.g. wind) we could see enviornmental regulation which restrict oil production.

  17. Here is how oil demand is shaping up: 2005 1.4%, 2006 0.7%, 2007 1.1%, and 2008 -0.6%, 2009 -0.2%.

    Figs from BP or JP Morgan. At these prices, I think we have hit Peak Demand. Anon’s comment is right: If supply keeps growing, we will get a glut, and prices will crack.
    I can see excess capacity of 8 mbd in two years. If global demand falls by 10 percent, (it fell by 11percent in early 1980s) we get excess capacity of nearly 9 mbd.
    Our national energy policy should be to tax imported oil to keep prices high, and transfer wealth to the US Treasury and not Oil Thug States. Buyers of the GM Volt should get a check for 10k. A lot, lot cheaper than occupying Iraq forever.

  18. ==Now, having said that, I think it is likely that the price will fall between now and the election.==

    Well then why didn’t the price fall during the 2007 summer driving season?

  19. Well then why didn’t the price fall during the 2007 summer driving season?

    Because OPEC cut too much for too long. The inventory picture at the end of 2007 was much different than at the end of 2006. I kept saying during early 2007 that I expected OPEC to soon raise production because inventories were getting low. They waited longer than I expected, which led to a lot of speculation that they couldn’t raise production, which helped fuel the other kind of speculation.

    Cheers, RR

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