Nationalization of oil leads towards energy independence

The government doesn’t place any production limits on oil and gas companies, and there’s no such thing as an immediate production increase.

“Typically the price spike would occur and rather than pay dividends as robustly as they are paying now, they would buy up other assets and maybe increase production,” he said. “What’s happening now is not typical. They’re not buying up other assets, and they’re not drilling. What does that mean for the future? It’s hard to say. It’s possible they’re just biding their time, building confidence amongst investors and will increase production next year, but this is definitely not the typical response to a price spike.”

Instead, they’re banking that money, using it to make up for profits lost in the pandemic and mostly to conduct massive stock buybacks that keep their shareholders happy and might just bring investors back to fossil fuel for one more round.

Which brings us to the elephant in the room: the United States’s supposed energy independence. As a net exporter of oil and gas, that’s what the country was promised by industry. But you can’t have independence if you are ruled entirely by global commodity markets. The other big oil-exporting countries are able to use their production capabilities to protect themselves from sudden price changes because their fossil fuel industries are nationalized. Because the U.S. energy sector is entirely private, we have no such luck. For all the industry’s squawking about federal leases, only 10 percent of U.S. drilling happens on public land, the rest is on private land that the government has zero control over. And, again, there is no government entity overseeing production; it’s left entirely up to companies to produce as much or as little oil as they think will be profitable. The closest we have to a regulatory body on production is the Texas Railroad Commission, but even when oil prices went negative during the pandemic, the commission opted not to impose production limits.

Although Biden floated the idea of reinstating the export ban when he campaigned for president, his Energy Secretary Jennifer Granholm took that off the table almost immediately. It hasn’t reemerged in the Russia-Ukraine debates, and U.S. exports helped Europe absorb the sudden cutoff of Russian fuel supplies. But an export ban is not a terrible long-term plan. And since the industry is accusing the government of meddling with production anyway, why not call its bluff and start a real conversation about nationalizing the industry and marching it toward a transition to renewable energy? What we’re seeing now is an entirely unmanaged transition, unfolding in real time. It’s painful, and the future is completely unclear, but none of that has to be true.