Do you wonder if a state owned oil corporation might be cheaper for everyone?

[Scouzer]

This thought occured to me today. While it's beyond question that the private sector is nearly always more efficient (with noted exceptions such as insurance), would public oil companies be cheaper for the consumer?

With the insane profits in this sector (Exxon Mobil made $39.5 billion profit in 2006) I believe the inefficiencies of the public sector would still be cheaper than the profit cut the private sector is taking.

The distribution network would remain private. The only thing that would change is domestic oil exploration and drilling would be state-owned. They'd be a non profit, but with a mandate to take a significant amount of their revenue towards new domestic oil exploration.

The case in point here would be Venezuela's state owned oil. They pay some of the lowest prices in the world for domestic gasoline. While it struggles, one has to remember the political and economic realities of the country. In a first world country without political strife it'd have less output difficulties.

Unfortunately, even though it would be cheaper and more efficient, the net change would probably not be massive due to the percentage of foreign oil.

 

[Vic]

The Venezuelan people do not pay low gas prices because the PDVSA has been nationalized. They pay low gas prices because they are an oil exporting country.

 

[Albatross]

could you give me a reason why profits are insane without some arbitrary justification?

 

[Colt45]

Originally posted by: Vic
The Venezuelan people do not pay low gas prices because the PDVSA has been nationalized. They pay low gas prices because they are an oil exporting country.

Canada is an oil exporting country too, and we get raped out the ass.


Nationalize, bump the price of exports down south, roll that and all the profit into the coffers and drop the fuel tax. Fix the price domestically. Sounds good to me.

 

[HombrePequeno]

Well we import a hell of a lot of oil so I don't think nationalizing it would make a big difference. Also, making oil cheaper means people are going to use a lot more of it. I'm not too sure environmentalists would like that.

 

[Scouzer]

Originally posted by: HombrePequeno
Well we import a hell of a lot of oil so I don't think nationalizing it would make a big difference. Also, making oil cheaper means people are going to use a lot more of it. I'm not too sure environmentalists would like that.

Well, I'm from Canada, so use Canada as an example. As I said in my OP, applying this in the US may not be effective as it imports too much oil.

However, Canada is an oil exporter yet we pay much higher prices than even the United States. We also have experience in running effective public corporations with minimal overhead.

albatross: How is $39.5 billion in profit not insane?

 

[Genx87]

Originally posted by: Colt45

Originally posted by: Vic
The Venezuelan people do not pay low gas prices because the PDVSA has been nationalized. They pay low gas prices because they are an oil exporting country.

Canada is an oil exporting country too, and we get raped out the ass.


Nationalize, bump the price of exports down south, roll that and all the profit into the coffers and drop the fuel tax. Fix the price domestically. Sounds good to me.

Price fixing only leads to shortages. Unless the price is fixed too high.

albatross: How is $39.5 billion in profit not insane?

Consider the volume sold to get that 40 billion. The profit margin isnt insane at ~8-10%. Look around other industries and you will see much higher margins. Meanign if they had the volume of oil, 40 billion in profit would be much lower than other industries.

 

[rchiu]

Well, if you look at Exxon Mobile's financial statement carefully, you'd see that 80% of their upstream (oil exploration, extraction, shipping, and wholesale operations) profit comes from non-us operations and their upstream operations accounts for 2/3 of their total profit.

So first you cannot t really nationalize a multi-national company like Exxon Mobile and most of the oil companies in the US are multi-national and second you won't gain much since much of the profit comes from non-US operations. And US has one of the lowest gas price in the world anyway, so why bother with what's not broke.

 

[nageov3t]

Originally posted by: albatross
could you give me a reason why profits are insane without some arbitrary justification?

speculation on wall street and the various world stock markets drives prices up, and people are obviously willing to pay +$4/gallon.

if the prices were completely arbitrary, the oil companies would be charging a penny under the absolute max people were willing to pay.

 

[EagleKeeper]

Originally posted by: Scouzer

Originally posted by: HombrePequeno
Well we import a hell of a lot of oil so I don't think nationalizing it would make a big difference. Also, making oil cheaper means people are going to use a lot more of it. I'm not too sure environmentalists would like that.

Well, I'm from Canada, so use Canada as an example. As I said in my OP, applying this in the US may not be effective as it imports too much oil.

However, Canada is an oil exporter yet we pay much higher prices than even the United States. We also have experience in running effective public corporations with minimal overhead.

albatross: How is $39.5 billion in profit not insane?

As stated by Genx87 - you need to look at the percentage, not the amount.

If you were to receive a 6-8% pay increase, would that be insane.
And remember, that the profits are used for futher investment of payback to the stareholders.

 

[blackangst1]

Originally posted by: albatross
could you give me a reason why profits are insane without some arbitrary justification?

Ever heard of volume? Its been linked time and time again. Oil companies dont make that much per gallon. They just sell a ton of it. Whats wrong with that?

 

[Scouzer]

OK, so even if it's not terribly outrageous given their size, eliminating it with public corporations would result in much cheaper gasoline.

 

[Genx87]

Originally posted by: Scouzer
OK, so even if it's not terribly outrageous given their size, eliminating it with public corporations would result in much cheaper gasoline.

Doubtful. I cant find many instances of govt run entities being more efficient than their private counterparts. Main reason of course is profit. Public entities dont care about profits. If they run short of money they tap the taxpayer to make up the difference or borrow using public debt. A private entity doesnt have this luxury. It also has owners who demand a return on investment.

What you would see in a public corp is what you see in all public entities. Slow response, high overhead, and lower satisfaction of service while doing it at a higher cost.

 

[LegendKiller]

Originally posted by: Scouzer
OK, so even if it's not terribly outrageous given their size, eliminating it with public corporations would result in much cheaper gasoline.

No it wouldn't. If state-owned enterprises in other countries have shown anything, they limit invention, creation, efficiencies, and low prices.

Loki: Speculation plays a part in it, but the price of oil currently has almost nothing to do with speculation. It's not that people are "willing" to pay 4+ per gallon, it's that demand is so inelastic that they *have* to.

Good point rchiu, one that is lost on a lot of people.

 

[bamacre]

Yeah, and public schools are sooooo much better than private schools.

I cannot believe there are so many people who don't understand how or why our government was created as it was.

 

[palehorse]

two words: smaller government.

you're idea would have us headed in the wrong direction...

 

[K1052]

The government is perfectly happy to tax fuel sales and let private industry do the heavy lifting. To nationalize along those lines would kill off a very substantial tax revenue source.

 

[LegendKiller]

Originally posted by: bamacre
Yeah, and public schools are sooooo much better than private schools.

I cannot believe there are so many people who don't understand how or why our government was created as it was.

There are some public schools that are excellent, most are good, some that are sub-standard. In some cases, such as public works, it is important to provide a standard level of education for the whole country.

As far as people not understanding our country, you should look at Franklin, Jefferson, Madison, and Adam's POV on public education. Jefferson advocated public schooling for all with progressively higher education going to gifted students, free. All of them advocated some public schooling because they knew a non-educated people were easily subjected to subjugation and abrogation of rights and liberty.

Overall, industry, is best left marginally regulated to stop egregious errors, but free to pursue profits for the benefit of shareholders. It promotes progress, since money is to be made and that "invisible hand" is what helps people innovate.

 

[heyheybooboo]

^^^^^ What LK said.

However, I think the 'public' should be able to compete - specificly on public lands because I fear Uncle Sam has been ""royalty-screwed"" as of late.

Yall fight over the details . . . .

 

[Genx87]

But has Uncle Sam been screwed? Compare the amount of taxes collected at the pump compared to the profits generated by big oil. The number I have seen is about 600 billion in profits over the past 30 years for big oil. Some ungodly amount like 2-3 trillion in gas taxes over the same time period.

 

[heyheybooboo]

Originally posted by: Genx87
But has Uncle Sam been screwed? Compare the amount of taxes collected at the pump compared to the profits generated by big oil. The number I have seen is about 600 billion in profits over the past 30 years for big oil. Some ungodly amount like 2-3 trillion in gas taxes over the same time period.

Lookee Here

In 1995 Congress passed the Deep Water Royalty Relief Act, which granted a royalty "holiday" to oil and gas companies drilling in deep waters for leases sold between 1996 and 2000. The act reduced the amount of royalties that companies had to pay for drilling in American waters in the Gulf of Mexico. At the time when gas prices were fairly low, the move was seen by many as an incentive to get petroleum companies to drill for oil and natural gas and keep energy production inside the United States.

The Government Accountability Office (GAO) has estimated that, depending on the outcome of a lawsuit by the Kerr-McGee Corporation, the government could lose a total of $80 billion over the next 25 years.

Part of the reason why the number is so high is because of a major clerical mistake made on about 1,000 leases that the Clinton administration signed with oil and gas companies in 1998 and 1999. The Interior Department omitted the restriction that incentives were supposed to stop when prices for oil reached $34 a barrel and prices for natural gas climbed above $4 per thousand cubic feet.

WTG, Bill . . . .

 

[Genx87]

Profit vs Taxes

Total oil profit between 1977 and 2004 = 643 billion
Total gas taxes collected at the pump between state and feds =1.34 trillion

Govt is making out like a bandit on gas taxes. Doubling up the profits of the private enterprises.

 

[Albatross]

Originally posted by: blackangst1

Originally posted by: albatross
could you give me a reason why profits are insane without some arbitrary justification?

Ever heard of volume? Its been linked time and time again. Oil companies dont make that much per gallon. They just sell a ton of it. Whats wrong with that?

i agree with you. i was just asking the Op why he thinks profits are "insane".

 

[heyheybooboo]

Originally posted by: Genx87
Profit vs Taxes

Total oil profit between 1977 and 2004 = 643 billion
Total gas taxes collected at the pump between state and feds =1.34 trillion

Govt is making out like a bandit on gas taxes. Doubling up the profits of the private enterprises.

Uhhh, no.

Of any method of taxation, the gas tax (or 'user fee') is probably the most equitable.

Unless, of course, Gen, you don't drive on Federal highways or state-maintained roads.

 

[blackangst1]

Originally posted by: albatross

Originally posted by: blackangst1

Originally posted by: albatross
could you give me a reason why profits are insane without some arbitrary justification?

Ever heard of volume? Its been linked time and time again. Oil companies dont make that much per gallon. They just sell a ton of it. Whats wrong with that?

i agree with you. i was just asking the Op why he thinks profits are "insane".

Gotcha