A really big oil proposal

For years, when there was a spike in energy prices, industry spokesmen were trotted out to claim that, after adjusting for inflation, it wasn’t really all that bad.

Well, you can toss that talking point into the circular file. Inflation-adjusted gasoline prices are blowing past the 1981 record.

Allow me to suggest that we dispense with the usual Kabuki theater, with news interviews of angry drivers at the pump, members of Congress vowing to outlaw price gouging and the White House asking the Federal Trade Commission to do yet another study.

Instead, I lay on the table a modest proposal: Put the government into the oil business.

This is not as radical as it might sound — in fact, just about every other major oil-producing country is organized around state ownership. In our case, however, the government-owned company would not have a monopoly, but would operate within a vibrant, private-sector dominated market.

The first step would be for the government to charter this company which, for purposes of historical irony, we’ll call Standard Oil. The charter would require the company to operate at only a modest profit, while doing everything in its power to expand supply, smooth prices and expose collusive behavior.

Although government-owned, Standard Oil would be exempt from all civil service and government contracting requirements, free to hire the best people in the industry, with generous incentives, to operate in the public interest. While it would follow all federal environmental regulations, Standard Oil would receive expedited review for its projects. Its federal tax rate would be set annually, based on the effective worldwide tax rate of its five largest competitors. It would be exempt from state and local regulation.

To capitalize Standard Oil, I propose raising the federal gasoline tax by a penny or two. The burden of this tax would fall mostly on refiners.

Of course, Standard Oil can’t be a serious oil company if it doesn’t have proven reserves. No problem there. The government owns plenty of oil and gas, and its charter could give Standard the right of first refusal on any it chooses to sell.

Standard’s first order of business would be to expand refining capacity.

Standard could help consumers by building a small number of efficient new refineries to expand capacity in the regions with the highest prices. Standard could also build terminals to facilitate importation of natural gas and finance construction of new gas pipelines.

Another target would be Standard’s trading desk, which could be used to keep a careful watch on market manipulation.

The industry, of course, will vigorously oppose this plan, arguing that it would be unfair to force it to compete against a government-sponsored enterprise. But how should we respond to complaints about market fairness from an industry that has earned windfall profits for three decades by free-riding on the activities of an international price-fixing cartel? And if the government is really as stupid and inept as industry executives have always claimed, why should they worry?

Source : www.kansascity.com