[Plantagenet]

Nationalizing the US oil industry won't make gasoline one penny cheaper or add even one barrel to US oil reserves.

All it would do is take a major industry in which the US has led the world for 150 years and in which the US is currently the world leader in exploration and development and production technology and turn the US oil sector into a politicized and sluggish government bureaucracy like the post office or the IRS.

[Oily Stuff]

Matt, I often cannot imagine how American's could become more distrustful and even angrier at the oil and gas industry than they already are (to me its already pretty scary) but you have made an excellent point.

I will not challenge you on the possibility of nationalizing remaining energy resources someday in the future, not after some of the incredible revelations coming out of Washington the past 3 months. Anything seems possible now. As much of the country's oil production comes from stripper wells that I do not believe the government could manage in any circumstance, "nationalization" might very well manifest itself in the form of a government call on all domestic production, of complete and total control of the downstream industry whereby producers like myself would have only one market and one set price to receive, take it or leave it; the US government. Nationalization infers control and there are a number of ways government can control enterprise, for the sake of society, other than simply taking it completely over. Geez...that's a thought provoker.

[ROCKMAN]

Yep…price controls. They do a wonderful job of increasing any commodity especially ones that require a significant amount of capex and a degree of risk to produce.

As far as a national gas or carbon tax achieving the goal it goes back to what the goals are. It seems the original proposal was for nationalization to decreases prices and more “fairly” distribute resources. How would a tax accomplish that? That gets back to my original question: what is “nationalization"? Even these few responses seem to indicate no consensous.

[Oily Stuff]

I did not suggest a tax. I suggested that nationalizing a portion of the crude oil production to retail gasoline system in this country, for instance downstream refining, could in essence be nationalization of the entire oil industry. The government controls the market , sets the price, even allocates the finished petroleum product to the benefit of the community. To answer your tax question, food stamps come to mind; in the case of a carbon tax I am reminded of the gasoline voucher, or coupon system that was used during WW2.

Nobody (Gawd knows this 'ol hand ain't) is advocating nationalizing the oil industry. I believe Matt brought the n word up in the context of a possible outcry from an angry, desperate public who is someday facing petroleum shortages. Of course it would not work, it makes no sense whatsoever, it would fail immediately. That is precisely why it is a distinct possibility someday.

[Oily Stuff]

In an effort to keep it cool and fun, to not take ourselves so seriously all the time, we're gonna get back on thread here:

Daniel Yergin I am sure commands 6 figures for speaking engagements, travels to and fro in first class or in G-5's with tigers painted on the tail, gets picked up in limos and stays in 4 Season Hotels where the air conditioner is on 24/7. He likely is on permanent retainer with the API. His mission is one of energy abundance and don't worry, be happy.

This little dude drives a 67 MPG car when he goes to speak to people about tight oil decline rates. His only professional affiliations are with the MMC.

Now I ask you, who ya gonna believe when it comes to the energy future of America?

[Matt979]

I don't hope for nationalization it would be bad, the reason to bring it up was that if you mislead people and the people one day find a different reality there will be enormous social upheaval and then anything goes, a small example is how fast people mobilized and radicalized on left and right was during the last crisis remember the mass meetings for Obama (I am not for or against him personally by the way), the oil production decline and high prices will be so much worse and no amount of printing money will keep a lid on the social problems that will arise from really expensive energy, you only need a charismatic leader that gets the peoples attention and that leader will look for ways to rally his supporters why not use something very unpopular like oil companies.

[Pops]

Pardon me for being serious for just a moment longer OS.

I've said in the past that capitalism or more more specifically, the "free market" may be good on the way up but maybe not so much on the way down – but what does that mean?

Price controls won't work, we saw that in the 70s with wholesale prices that kept tankers anchored just offshore and we saw it with California and Enron that if you cap the sales price and not the wholesale price the only thing that happens is bankruptcy.

There is no way the US could actually nationalize mineral rights or even downstream companies, that would be a "taking" too big to swallow even for DFHs like me and it would not change a thing even if successful. I read once how many thousand mom & pop outfits there are out there working a few wells, there is no way any bureaucracy can compete with that - I'm sure the setup here is the reason we have half a million producing wells, probably half of the world total or so I've read somewhere.

The problem is squandering the remaining resource so the answer isn't making it cheaper or pumping it faster. The answer is sending a consistent, high price signal to encourage transition and simultaneously preventing the remaining supply from being exported for the profit of a few - or even for many if the result is a shorter window for transition.

So even thought the US won't nationalize reserves or producers it isn't necessarily 'free market' to mandate a minimum MPG or a "summer blend" or even a SEER rating on A/C units. Or take what the good King said a couple of years ago, 'we must keep some in the ground for future generations' - not necessarily good for next quarter's profit and certainly not something that would be welcome to stake holders but isn't that what the Texas Railroad Commission did for years? Then it was keep the price up, I think the same process now to keep the price up would achieve the big goal, which is get off oil before it offs us.

Come on, we already prohibit exporting oil and only allow exporting products from "Free Trade Zones" - quite a few FTZs happen to fall within the fence line of refineries but you get the drift. Every administration since who knows when has declared in the ongoing "Emergency Powers Act" signing statement the ability to stop even that.

The new energy secretary is dragging his feet on more LNG exports:
$this->bbcode_second_pass_quote('', 'T')he newly confirmed Energy Secretary Ernest Moniz has announced he will delay the final approval of 20 applications to export liquefied natural gas until he reviews studies on the impact exports would have on domestic natural gas prices.

[Oily Stuff]

Rats. I can't seem to get any traction on the Mickey Mouse thing, can I?

Pops, I agree with you, I believe I said as much in my previous post; the government cannot manage 2 1/2 million barrels per day of stripper well production, it will never be able to strip mineral ownership from the hands of 5th generation land owners; all those things are correct. Matt's inference to nationalizing the oil and gas industry raised the question of a period of catastrophic change in this country, in the entire world, where we are just about out of the nasty stuff altogether. I attempted to imagine what government intervention might look like in this country.

So everybody has a strong, serious opinion what government intervention won't look like, what WILL it look like? How will we preserve the last remaining oil resources we have? If we are relying on corporate America to do the right thing, for cash strapped states needing every penny of tax revenue they can get to regulate, to conserve our country's energy resources, it ain't gonna happen. Are we just going to ride this horse into the dirt and then walk away with saddle in hand?

Truth be known if you visit with young people today in colleges, speak to them about energy peril, they bring up the n word all the time to me. They are going to run this country soon enough, make no mistake about it. Social reform is already under way, big time. Like it or not. And I don't.

So let's don't even use the n word anymore (damn, how'd I get mixed up in this?)...what is resource preservation for the sake of the "community" going to actually look like someday?

[ROCKMAN]

OS – “So everybody has a strong, serious opinion what government intervention won't look like, what WILL it look like?” Excellent! That’s the point I was trying to make but perhaps too subtle. It wasn’t about what could/should/couldn’t/shouldn’t be done. It was that the “n” has various different meanings to different folks. And thus relegating “n” too a meaningless term IMHO. Just my small effort to get folks to spell out specifics of the possible visions they have, just as you good folks just did. For me hearing the n word, EI phrase (energy independence), etc is like finger nails on the chalk board: they only mean what that person using them thinks they mean…and probably something different to most hearing it.

The POD is a complex beast that IMHO will take an equally complex response. A one, two or three word solution, especially when not fleshed out, won’t move the discussion forward. Not a big thing…just my little pet peeve.

[Oily Stuff]

Gotcha Rockman; I threw out the idea of government intervention, government control of the downstream sector of our domestic energy system (much easier and doable than upstream production) to control prices and to re-distribute product to the community like food stamps. What do you think nationalizing our domestic energy industry might look like?

Because someday it is inevitable the government will step in and control it, for resource preservation and most importantly for resource protection. We cannot count on corporate America to forsake money for the sake of national security and social benefit. No way. The *Chinese are gobbling up oil resources like that little Pacman dude; what's to someday keep Bakken production from going north then *east, our neighbors to the *south from charging and overrunning *CHK EF production, whats left of it, in Dimmit County, LOL?

Some form of government control will exist someday, what's it going to look like, folks?

This is good research material for Mickey's new book, SurPRIZE, Our Oil is All Gone!

[ROCKMAN]

OS – “What do you think nationalizing our domestic energy industry might look like?” Nothing like what many folks might think “nationalization” would look like. Whatever they call it folks will want the govt to lower prices and/or increase oil/product supplies and/or punish oil companies for making “obscene profits”. That has been their demands in the past and see no reason to expect different in the future. They really won’t care how it’s done. At least many won’t think they’ll care.

First, other than temporary infusion from the SPR, there’s little the govt can do to significantly increase oil supplies. They might try to prohibit product exports but that’s tricky given this may involve international contracts. But if supplies are tight in the US then prices will be a great motivation to sell domestically anyway.

Second, they can try to limit prices of oil and product prices. The complication: we can’t restrict the price refiners have to pay for imported oil. So if the govt restricts the price of products it would likely cause refiners to suspend buying imported oil. Obviously not a method to increase supplies so that won’t happen IMHO. So now refiners have two price levels: one for domestic crude and another for imported crude. And those refining imported crude will have to be allowed to sell products at a higher price. So how would that look: two gas stations across the street from each other with a $.50+/gallon price differential? Regions of the country supplied more by refineries using mostly domestic crude will be paying a lot less then areas, like the NE, that have more foreign sourced oil?

Third, “windfall” profit tax. That would be easy for the govt to institute. Unfortunately it doesn’t reduce costs to consumers by one penny. But it does increase govt revenue while reducing oil company revenue. Of course, since the owners of the domestic oil industry include millions of citizens it reduces their income and the value of their assets. It also reduces the capex available to companies to develop more resources while also reducing the profit motivation. Can’t see how that will increase our resource base.

Fourth, restrict the production of domestic oil production as the Texas Rail Road Commission did 50+ years ago with their allowable regulations and thus save resources for future generations. And thus reduce energy supplies to the US economy at a time of an energy crisis. Yep…that’s going to happen. LOL.

So there’s some options. Folks can design their own future vision of a "nationalized" oil industry... pick your poison.

[Pops]

$this->bbcode_second_pass_quote('Oily Stuff', 'S')o everybody has a strong, serious opinion what government intervention won't look like, what WILL it look like?

[Pops]

Pretty good range of opinion between us ROCK, lol.

[Pops]

Here was a poll from 08

$this->bbcode_second_pass_quote('', 'F')or what it's worth, a Quinnipiac poll released today again shows that Americans aren't buying into the Clinton-McCain gas tax "holiday" gimmick.

By a 49 - 41 percent margin, American voters say eliminating the federal gas tax for the summer is a bad idea... Republicans split 45 - 46 percent on the gas tax 'holiday,' while Democrats say 49 - 42 percent it's a bad idea and independent voter turn thumbs down 56 -38 percent.

The proposed gas tax cut is a loser in red states, 48 - 42 percent, blue states, 49 - 43 percent and purple - or swing - states, 51 - 39 percent, the independent Quinnipiac (KWIN-uh- pe-ack) University poll finds.

[ROCKMAN]

Pops – Reminds me of that old George Carlin line: Americans have a habit of taking a good idea and running it into the ground. They also have a habit of taking a bad idea and running it into the ground.

And then the line from MASH regarding the rules of war: Rule #1: men die. Rule #2: doctors can’t change Rule #1.

Rule #1: the POD will bring pain to the American people.
Rule #2: the govt can’t change Rule #1

[Pops]

As I was out throwing feed buckets it dawned on me that I'm a supply sider. Most economists we hear about are demand-siders, they say demand influences supply, a one way street, so we hear only that demand will create either more oil or a replacement for oil - the ever popular "the stone age didn't end for a lack of stones"

My thought is more supply side: supply influences demand, the stone age ended due to the supply of iron. So we have Hallmark Holidays, we have Steve Jobs who said you need to tell the customer what they want because they don't know, we now have cheap beef and poultry at every meal when once they were merely seasoning.

I mentioned that I grew up in the hometown of American Graffiti, cars and motors of all kinds were my boyhood addiction. My oldest daughter likewise could not wait to get a fast food job to get her license but to her generation I think the car was a means to an end rather than an end in itself (who can blame them, by the 80's & 90's "Rice Burners" were the "hotrods" LOL) But her daughter, who is 19, is not in the least interested in a car or even a drivers license, she gets around on the bus, or riding with friends or on her bike.

Merely an isolated anecdote but my overall point is that things change, habits and needs and life adjust to reality. Of course there will be pain and displacement and maybe even worse as our generation's demand is creatively destructed but as always politics will eventually follow opinion.

[ROCKMAN]

Pops - Good point. I don't tend to think of myself as a supply sided. I really don't ever thing about supplying anybody with anything per se. I just think about three things: what price I'll get, how much I find and where do I drill the next well. What I get paid is just partially determined by demand but also a function of supply availabity. The biggest critical factor is where do I drill next. It's a great and never ending struggle to find the next conventional prospect. Thus I spend almost no time worrying about demand or prices. If me and my two cohorts don't find the prospects to drill we'll be run off Judy like our other two former cohorts. And if it weren't for the shales (which doesn't meet my owner's economic requirements) there would been hundreds of thousands of other oil patch hands run off years ago.

[Matt979]

Saturday morning. A good day to speculate. Its going to be very interesting to see governments response as I agree there is nothing in the short run that the government can do, when POD affects on the poor and middle class people become unbearable for those classes then its likely that the government will do everything they can to increase production, lower taxes on oil investments opening up anything that can be drilled, this will of course be futile in the long run, then the OIL companies will make so much money that government have to impose windfall taxes, that wont help either. The question is what happens next, will people accept that energy is expensive or will it cause social unrest. My point is if people start to change their mind now, which a lot of Europeans have started to do mainly due to high taxes on energy, the social unrest from energy prices will be limited, there will be other social unrest due to energy prices but that's another topic.

I believe that shale oil is a curse for the US as much as a blessing. US have lots of production first that offset declines and stops people from really changing their attitude on energy use but once you cant increase production the overall decline will be faster. The drawback with our free market capitalism is that fast changes gives dramatic economical result (pricing/Investment) and social upheaval (Winner takes all).