FE and the Nationalization of US Oil

Firewall Economics and the nationalization of oil.

I am going to use what is going on in the Ukraine as an illustrative example of why Firewall Economics calls for the nationalization of US energy companies. Natural Gas is used to heat homes and make electricity. That is a desperate necessity. The private oil companies can price gouge it’s customers at will.

Most oil companies around the world are nationalized. The government owns most of the shares in Russia’s supposedly privatized oil company. Saudi Arabia, Iran, Iraq (Before we invaded them), Venezuela, Libya (Before the recent war), all either had or have nationalized, government owned, oil. Private US oil companies try and break up nationalized oil companies because it’s hard for a company to compete with an entire nation. Notice that all the countries that we seem to be shoving around with the US military have nationalized oil.

These wars are not about free markets, or socialism, or human rights, or dictator removal. These wars are about oil. They are NOT wars to grab more oil for the US consumer. They are NOT wars to increase the supply of oil, and thereby drive the price DOWN. They are wars to keep the price of oil UP. US oil companies can stir up a war in these places to cause a disruption in the supply of oil coming out of there. That lowers the world supply and raises the price. Higher prices equal higher profits per barrel to the oil companies.

Most people assume that oil wars are to get more oil. It is the opposite. They are to get more oil profits, which is not the same thing as getting more oil, in fact, it’s the opposite. Supply and demand determine price. Now ask yourself, would a private, for profit, oil company, push us into a war if the war caused them to lose money. Oil companies are not social welfare programs. There IS an adversarial relationship between the American consumer and private US oil companies. When private oil companies increase profits, consumers pay higher prices. No oil company is going to go racing into war with an oil producing country and grab the oil for the American people. If they took over all of a country’s oil overnight without firing a shot, and dumped all that oil on the market the price would fall, the US consumer would get dollar a gallon gas, and the oil companies would lose a bundle.

Private companies should not control US oil. Oil is a desperate necessity. In nationalized oil countries the government owns the oil. In privatized oil countries the oil owns the government. You pick. Right now there is a game going on in the Ukraine. It’s not about all the usual things they say it’s about, like freedom and democracy. The US backed the overthrow of the democratically elected government. I fear that the objective is to raise the price of natural gas in the US.

There is a natural gas pipeline there that feeds Russian gas to Europe. Russia has cut it off in the past. They have Europe at a disadvantage. US oil companies got permission to fracture underground rock formations (fracking) by claiming we needed the gas to aid US energy independence. They lied. They just wanted the gas. They got it, and just what the consumer wanted happened. They found so much gas (higher supply) that the price dropped way down. Now part of the bargain to allow fracking was that we would keep the gas here. That would keep the supply up and the price down. We have so much gas now that a unit of gas in Europe sells for twice the US price and it’s three times the US price in Asia. Surprise….the oil companies now want to export the gas. They would get higher profits on both ends. The US price would go up, AND they would make more per unit at the overseas price. Exporting the gas means higher prices for US consumers and higher profits US oil companies. This proves that there is an adversarial relationship between private oil and US consumers.

So they need an excuse to export the gas. Why not start a war in Ukraine. The Russians would get angry and cut off the gas to Europe. The US could come to the rescue and save Europe from the commies by selling natural gas to Europe. Sure, the price would go up in the US, but it’s worth it to fight the Russian atheist communist dictator Putin, who controls most of the nationalized oil. We could make it look like Putin started it.

I lost all doubt about this theory tonight on when I heard about the recent oil meeting in Houston where the oil people called for the export of US national gas for the reason that it would increase US diplomatic pressure around the world. It had nothing to do with the oversupply of gas or the price. It was all about patriotism.

When we invaded Iraq, they had been unable to pump and sell their oil for about ten years because of the sanctions put on them by Bush 1. That was ten years of higher profits for the oil companies because of the lowered world supply. The sanctions were about to come off when Bush 2 invaded and caused another interruption in production.

Iraq was a nationalized oil country until the war. After we spent another ten years in there the nationalized oil got privatized and divided up between other private oil companies. There is a push right now in Venezuela to privatize the nationalized oil. Am I saying that US oil companies control the US government to the degree that they can and do send our troops to fight wars to keep the price of oil HIGH.

Why wouldn’t they fear that the people would follow the money and connect the dots. Because they know that the average American 1. Does not understand the law of supply and demand. 2. Does not believe that there is an adversarial relationship between the oil companies and consumers. (Doesn’t a rising tide raise all boats) They go on TV to say that the wars are not about oil, and they know that nobody believes that. Everybody knows that the wars are about oil, but everybody assumes the objective is to get us more oil to keep the price DOWN. People look away because they think we need the oil wars to protect “The Economy.” The oil wars actually crash “The Economy” and increase profits to the private oil companies.

This is a fine example of why Firewall Economics would restrict the private sector from certain areas. If US oil was nationalized, we would not start a war in the Ukraine, we would keep all the gas here, the price would stay low due to the big supply, home heating oil would say cheap, we would need to import less oil, the general price of oil would go down causing a boost to jobs by making our factories cheaper to run, we would spend less on military hardware by not making war…. on and on in a positive spiral instead of the negative spiral that we are in now.

Nationalization of national desperate necessities goes on the left. Privatization of everything goes on the right.