Friday, March 23, 2012

"Our" can be a very dangerous word....

Collectivism is a condition that creeps up on an unsuspecting society...

My client, in a recent friendly debate, agreed in concept with my defending of oil companies' rights to sell anywhere on the planet they choose. But he disagreed in practice; "We're talking about something the citizen has to have" he explained. And for that reason, he suggested that government should impose an export tax on oil companies, in essence disincentivizing the shipping of "our" oil outside our borders and, in theory, bringing our prices down.

But here’s the problem. If, by some government act to discourage exports, domestic prices initially come down—oil companies, with less incentive to produce, will in fact cut production—at a time when, due to cheaper gas, domestic demand would pick up.  And what happens when supply shrinks relative to demand? That’s right, prices rise. Net result; consumer saves nothing on a gallon of gas and the producer—whose global competitiveness has been zapped by the politician—takes the hit. The hit that eventually gets passed on to the consumer.

And what about this notion that it's "our" oil to begin with? I don't know about you, but, other than what cycles through my car, I don't own any. No mineral rights, no grasshopper in Coalinga, no nothing. Although shares in Chevron, Exxon Mobile, etc., are prominent positions in some of the mutual funds I invest in. So I guess I do own oil companies —as do you and every other gas-guzzling American with a 401(k) or an IRA. Thus, in this context,you could say indeed that the oil drilled out of America's bedrock is "ours", but based solely on our stock certificates, not (think capitalism now) our birth certificates.

However the "our", in the context of my conversation with my client, speaks to "our" rights, "our" entitlement (by virtue of our birth certificates) to oil. And that my friends is where the politician steps in and where the trouble begins.

1 comment:

  1. Your Comments

    Why do we export oil and tap the country's reserve (which I heard will last a little more than a month ?)