Sunday, February 26, 2012

A Silver Bullet for Gas Prices?

There may be a way to lower gas prices almost immediately. The question is, can you live with it?

Ken O’Brien

Do you really want lower gas prices?

Just how far are you willing to let the government go to deliver them?

As I pointed out in an earlier article, the demagoguery of Republican Presidential candidates that are attempting to blame President Obama is simply irrational.

While they attempt to blame rising gas prices on the failure of the Obama Administration to approve the Keystone XL pipeline and its delay in approving a variety of offshore drilling permits U. S. oil production has actually increased under the current President.

The reality is that there are four factors that dominate the increase in gas prices in the U.S.

1.      Uncertainty in the Middle East as a consequence of the Iran situation.
2.      The fact that the U.S., while the world’s largest importer of oil, has made the export of refined products such as gasoline, diesel and aviation fuel its number one export for the first time in 60 years.
3.      The closing of a number of east coast refineries because they were money losers.
4.      The premium that is added to the cost of oil by financial speculators.

There may be a potential solution to this problem.

 The question is how far are the American people willing to go to accept government intervention in the private economy and do any politicians have the courage to do what is necessary to serve the people rather than their corporate paymasters?

The solution would be twofold.

1.      Implement the provisions of the Dodd-Frank Bill to control CFTC futures trading in oil.
2.      Nationalize the domestic oil and gas industry.

The first, and least controversial, would be to implement the provisions of the Dodd-Frank Bill that would limit trading on oil futures that would reduce the casino element that is now, as it  has in the past, raising the price of oil beyond anything that the fundamental laws of supply and demand would justify.

The second component, however, is what will make some people apoplectic.

We are allowing private companies to export gasoline and related products overseas because they can make more money that way.

If that export was kept in the American market prices would, of necessity, go down.

Further, if the government took over the closing refineries, they would produce even more fuel. Even if it was at a loss the cost would be far outweighed by the benefit to the economy as a whole.

Two key issues remain.

1.      Can the President actually do this?

2.      Will the American public accept it?

The U. S. actually has a long history of nationalizing private property in the national interest.

The following list is directly copied from Wikipedia

  • 1862: The Legal Tender Act nationalized the monetary system under fiat currency.
  • 1863: The National Bank Act nationalized the banking system and further monopolized the money supply.
  • 1917: All U.S. railroads were nationalized as the Railroad Administration during World War I as a wartime measure. The United States Railroad Administration was returned to private ownership in 1920.
  • 1939: Organization of the Tennessee Valley Authority entailed the nationalization of the facilities of the former Tennessee Electric Power Company.
  • 1971: The National Railroad Passenger Corporation (Amtrak) is a government-owned corporation created in 1971 for the express purpose of relieving American railroads of their legal obligation to provide inter-city passenger rail service. The (primarily) freight railroads had petitioned to abandon passenger service repeatedly in the decades leading up to Amtrak's formation.
  • 1976: The Consolidated Rail Corporation (Conrail), another government corporation, was created to take over the operations of six bankrupt rail lines operating primarily in the Northeast; Conrail was privatized in 1987. Initial plans for Conrail would have made it a truly nationalized system like that during World War I, but an alternate proposal by the Association of American Railroads won out.
  • 1980sResolution Trust Corporation seized control of hundreds of failed Savings & Loans.
  • 2001: In response to the September 11 attacks, the then-private airport security industry was nationalized and put under the authority of the Transportation Security Administration.
  • 2008: Some economists consider the U.S. government's takeover of the Federal Home Loan Mortgage Corporation and Federal National Mortgage Association to have been nationalization (or renationalization).[26][27] The conservatorship model used with Fannie Mae and Freddie Mac is looser and more temporary than nationalization.[28]
  • 2009: Some economists consider the U.S. government's actions with regards to Citigroup to have been a partial nationalization.[29] Proposal was made that banks like Citigroup be brought under aconservatorship model similar to Fannie Mae and Freddie Mac, that some of their "good assets" be dropped into newly created "good bank" subsidiaries (presumably under new management), and the remaining "bad assets" be left to be managed under the supervision of a conservatorship structure.[28] The U.S. government's actions with regard to General Motors in replacing the CEO with a government approved CEO is likewise being considered as nationalization.[30][31] On June 1, 2009, General Motors filed for bankruptcy, with the United States investing up to $50 billion and taking 60% ownership in the company. President Obama stated that the nationalization was temporary, saying, "We are acting as reluctant shareholders because that is the only way to help GM succeed"[32]

Ultimately, however, the most recent case of an analogous nature was President Truman’s nationalization of the steel industry in 1952.

The Supreme Court decided in Youngstown Sheet & Tube Co. v. Sawyer that this act was unconstitutional. The key component of that decision was, “…the President had no power to act except in those cases expressly or implicitly authorized by the Constitution or an act of Congress.”

Since 1952, however, things have changed.

 The International Emergency Economic Powers Act (Title II of Pub.L. 95-223, 91 Stat. 1626) enacted October 28, 1977, is a United States federal law authorizing the President to regulate commerce after declaring a national emergency in response to any unusual and extraordinary threat to the United States which has a foreign source.

If, in fact, the IEEP can be invoked in this case, then it would meet the conditions that defeated President Truman’s actions in 1952, because it is an act of Congress.

The core issue, assuming lawyers smarter than I can make this case, is “Are the American people willing to allow the government to put their welfare ahead of multinational oil companies and do politicians have the courage to make it happen”?

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