Re: The irony about the prices...


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Posted by D. Sherman on Friday, February 29, 2008 at 22:44:35 :

In Reply to: The irony about the prices... posted by Steve on Friday, February 29, 2008 at 14:44:12 :

They don't need to be regulated, but they do need to have real competition restored. Utilities are regulated because it's not feasibly to have multiple sets of electric wires or water pipes running to everybody's houses. Oil isn't that way. I agree that oil company profits are excessive and that their control of such a vital product is damaging to our national security. If the oil companies were putting most of their profits back into exploration, there'd be some national good coming out of it, but they're not doing that (possibly because they don't believe there's any new oil left to find).

But did you notice that most jump in fuel prices happened during the same years as all the mergers in the oil industry? The problem is that there isn't serious competition any more. With no competition, the few that are left can just rake in the profits and invest nothing in increasing capacity. Nobody's even applied for permits to build a new refinery, for example. Direct government regulation will only make our oil industry more like that of all the countries that have nationalized their oil industry. When oil is nationalized, political patronage determines who the bosses are, money gets siphoned off to cronies, and oil fields get prematurely ruined due to unscientific production methods. A whole lot of the oil left in the ground today is permanently unavailable simply because government-owned oil companies damaged the fields. I don't think we want to go down that road. What we do need to do is return to some real competition by breaking up the companies that own too big a share of the market, seriously investigating collusion and price-fixing, and changing the tax code so that they have more incentive to invest their profits into increased production.



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