Monday, September 15, 2008

Between a Rock and a Hard Place

It's time to for the government to regulate oil production and refining. Oil needs to follow the same business model as utilities with quasi government regulations. We must have gasoline. It's not a choice.

When was the last time your electric bill shot up 20% because spring was around the corner and power outages are more likely? Never. No more short term swings in oil prices. We need long term reality. The reality is that long term supply and demand oil has remained roughly the same. We need a price to reflect that. The way to do that is to make oil and gasoline production function the same as our regulated utilities. Get the speculators out of the market. Fill your portfolios with some other commodity PLEASE.

A theme that runs through the long, convoluted history of gas/oil regulation is the seemingly inexorable expansion of government intervention. Regulation has spawned further regulation; soon after one regulatory gap was filled, another appeared. Municipal franchising and price regulation of gas distributors led to state oversight of intrastate gas transmission, which prompted federal regulation of interstate transmission, followed by control of interstate affiliated field prices and later interstate independent field prices.

Finally, the Natural Gas Policy Act of 1978 (NGPA) extended federal jurisdiction to all intrastate field sales. All actions leading up to the 1978 act were directed primarily at ensuring that the price of gas to consumers would not include any sizable excess charge reflecting either a monopoly position in transportation or distribution, or a gap between the actual cost of producing and transporting the commodity and its value to consumers. Since price was not given the freedom to balance supply and demand, it was only a matter of time before the imbalance would become manifest. When it appeared, it brought with it another government imperative: the need to regulate consumption.

So in conclusion, either way we go we're screwed.


meleah rebeccah said...

"So in conclusion, either way we go we're screwed."


Scott H said...

Time to invest in other modes of transportation and fuels, BIOmass I have a ton of it across the street from my home. The corn will be coming out of the field here soon and all of the waste stocks just lay on the ground a roat. I say collect it along with grass clipping and other farm product and use it for fuel.