I had to shake my head and refocus my eyes when I read the following words from a news story: “House Democrats responded to President Bush’s call for Congress to lift the moratorium on offshore drilling…. Among other things, the Democrats called for government to own refineries so it could better control the flow of the oil supply.”
I know there are some “loopy” folks in Washington, but even for the Potomac elite, that is an amazing proposal.
America is long past the time when John D. Rockefeller owned Standard Oil and Commodore Vanderbilt owned railroads. Today, multinational corporations—including the ones that operate refineries—are owned by millions of investors. Some of those investors are individuals with small holdings and others are pension funds owned by the workers and retirees whose futures depend on growth in those holdings. I wonder if the members of Congress who are contemplating government ownership of refineries (and I am sure that some Democrats are not in that number) understand that those companies are owned by American investors and not some “robber baron” tycoons? If not, they are economic illiterates.
It is intriguing that those in Congress who aspire to nationalize the refineries want to do so in order to “…better control the flow of the oil supply.” How do they think that government ownership of refineries would “better control” that supply? Refiners buy crude oil from brokers who purchase the oil from the companies who produce and transport it. Would government have some startling new system for improving upon that segment of the process? If so, what amazing reform would they employ? Refiners then take the crude oil and process it to make fuel oil, gasoline, jet fuel, kerosene and other products in demand by the public. Those products are sold to bulk dealers who in turn sell to retailers or directly to other businesses such as airlines and utilities. Are the geniuses in Congress also contemplating nationalizing some of those industries in order to “better control the flow of the oil supply”?
The primary problem with the “flow of the oil supply” is that there isn’t enough of it flowing to meet worldwide demand. Another major problem has to do with the fact that no new refinery has been constructed in the United States since 1976. The reason why this is true is not because the refineries are trying to restrict supply in order to drive up prices. It is because environmental laws and regulations make it nearly impossible to get the permits needed to construct a refinery.
Perhaps the “wise” members of Congress who want to nationalize refineries think the refiners are playing games with prices at a time when crude oil prices stand at record levels. If Congress did succeed in federalizing the refining industry, they would soon discover when crude oil prices are high, refiners often lose their shirts. Competition makes it tough for them to raise prices fast enough to offset the increased cost of crude oil they are hit with daily.
There are many things that Congress could do to improve the energy situation in America. Alternative fuels, more nuclear energy, clean coal technology, and fuel efficiency are all things that would help. Even with progress in those areas, the U.S. is going to be dependent on crude oil for decades to come. Increasing more of the domestic supply of oil would help significantly. Turning refineries into something like the Post Office is a recipe for disaster.
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