Jayden D'Onofrio - May 1st, 2022
Highest rate of inflation since 1981. Gas prices surpassing a staggering $4 per gallon. Finger pointing at oil executives by American politicians for ‘price gouging’. All-time high geo-political tensions resulting from the full-fledged Russian invasion of Ukraine. The creation of a pending recession according to Deutsche Bank, one of the major banks in the global financial system. In cooperation, the aforementioned factors have created one of the biggest predicaments to face the United States government in recent decades. The United States faces a crisis both politically and economically as the Organization of Oil Exporting Countries (OPEC) refuses to increase production while western employed sanctions cripple the Russian economy, which produces nearly 8% of global oil export production (International Energy Agency, 2021), and exacerbates the supply problems that currently plague many of the world’s nations. While accusations of ‘price-gouging’ persist, there is no doubt that the basic roles of supply and demand have played a major factor in the increasing costs of oil per barrel. However, both problems are prevalent to one major solution: the nationalization of the United States oil industry. An unprecedented climate crisis, potential corruption by some of the largest United States oil executives, and a looming recession all stand to be mitigated through a move to nationalize the domestic oil industry. As an industry that provides 10.3 million jobs domestically and constitutes for well over 8% of the United States gross domestic product (GDP), it is absolutely vital that the publics best interest both for present times and in the future are accounted for (American Petroleum Institute, 2018).
As we analyze the reasons for why nationalization of the oil industry is in the best interest of the United States, it is important to realize what has driven the pushing of such an idea. The United States, like the rest of the world, held an economy in peril for recent years as a result of the global COVID-19 pandemic, a major factor in the ongoing oil supply crisis. Demand for oil globally cratered amidst the COVID-19 pandemic during 2020 as West Texas Intermediate crude oil fell to an eye-popping -$40.32 per barrel, the first time the crude oil had traded in negative prices since the introduction of its trading in 1983 (Energy Information Administration, 2020). While prices continued to trade at astonishingly low numbers for barrels of oil, some of the United States biggest energy producers faced unparalleled financial losses and simultaneously cut exploration and production of oil to reduce expenses. For example, the combination of oil giants ExxonMobil, BP, Shell, Chevron, and Total accounted for a whopping $76 billion loss in 2020 while also cutting their combined oil and gas output by 5%. The outcome was the eventual rise of global oil prices per barrel to end the 2021 calendar year at $75, higher prices than seen prior to the year before the tragic COVID-19 pandemic. Pressure mounted within the United States to bring down rising energy prices as they began to surpass numbers not endured in recent years. In a widely unforeseen event, 2022 began with the full-fledged Russian invasion of Ukraine just as demand for oil steadily rose as the world moved to complete opening of global economic and societal sectors previously shuttered by the COVID-19 pandemic. Globally, it is predicted that petroleum and liquid fuel consumption will average 99.8mb/d (million barrels per day) during 2022 along with the production of 100.21mb/d (Energy Information Administration, 2022). However, the elimination of Russian crude oil from most global markets will heavily curtail any certainty on global demand and production averages for the year and disrupt an already troubled supply chain even more. In an attempt to alleviate the oil supply needs, the Biden administration announced the release of one million barrels of oil per day from the United States strategic oil reserves much to the praising of various politicians and the general public. Regardless of the reception of the new attempt to mitigate oil prices, it is unlikely to substantially affect the costs for oil per barrel at any given time as one million barrels of oil is just 1% of the aforementioned global barrels of oil demand on any given average day, while also ignoring the ongoing handcuffing of European nations regarding energy supplies from Russia.
Presented in itself is an opportunity for the United States and the Biden administration to capitalize on multiple parts of its agenda through the nationalization of its domestic oil industry. The oil industry itself is unequivocally important to the success of the nation in the short-term but vital to eliminate in the long-term, a perfect example of an industry that should be held publicly rather than privately. Two outcomes are present for the oil industry if it is not nationalized: private owners and investors will work to prevent the industry from dying which will heavily hamper the future of our environment, or they will refuse to hold up the waning industry and cause massive economic upheaval. Both options will lead to the desecration of an efficient and well-functioning economy within the United States as the Biden administration looks to be a net-zero emissions economy by 2050 (White House, 2021). In a world with unchecked growing climate change problems, humanity would likely face issues ranging from acute droughts, deadly wildfires, detrimental sea level increases, destructive storms, and more that would overall combine to provide some of the largest economic and societal consequences yet seen to the globe (United Nations, 2022). Without more influence by the government into the reduction of carbon-emissions, the deadline of 2050 seems extremely hard to reach while scientists across the world simultaneously ring the alarm bells on every second wasted not fighting climate change.
While nationalization would quicken the task of ending reliance on fossil fuels, it would also give the government more power over the supply chain of energy itself and removing the horrific political influence of oil companies on our nation’s politics. For example, in 2021 alone, well over $115 million was pumped into politicians’ pockets as political contributions with more than two-thirds of the sectors donations heading towards the Republican party since the 1990 election cycle (OpenSecrets, 2022). In just the span of 23 years, the oil sector has accounted for a whopping $2.5 billion in lobbying contributions which has greatly influenced the nations politics as the country has tried to implement vast environmental reform (OpenSecrets, 2022). One example is Democrat Joe Manchin, who just infamously voted down the Build Back Better Act, a progressive agenda pushed by President Biden, that was slated to pass the Senate had Manchin voted yes. Unsurprisingly, Joe Manchin is heavily funded by the oil and gas industry (an industry heavily affected by the progressive Build Back Better Act) and raked in $179,450 in contributions through the 2022 election cycle from major oil companies (OpenSecrets, 2022). In addition, the majority of Senator Manchin’s assets are in Enersystem’s stock, a coal brokerage firm he founded that represents 71% of his investment income and a third of his total net worth (SEC, 2021). Illustrated is the massive campaign by the United States oil industry to claw at domestic politics to gain irreversible influence over the nation and its energy policies that would eventually lead down a path of grand turmoil.
As well as present easier environmental transitions and ensure the elimination of large-scale lobbying, nationalization would also allow for the millions employed by the domestic oil industry to be safeguarded in terms of job availability during the phasing out of the dying industry from the United States economy. If the oil industry is not phased out correctly, it is very plausible millions would lose their jobs and create a vast unemployment crisis within the United States, an outcome that would prove destructive for many families societal and economic stability. It would come as a surprise to many to find out that the United States has a long-running rich history of nationalization when the need arises whether for guarantee of jobs, economic development, or times of war. An example to illustrate this history would be the establishment of the Tennessee Valley Authority (TVA), a vital agency constructed by the Franklin D. Roosevelt administration that supplied the necessary electricity to produce raw materials for the construction of munitions, fertilizer, and aluminum (The Living New Deal, 2016). The creation of this agency through a nationalization effort proved so successful that to this day the TVA supplies the necessary power for over 9 million people through the utilization of 29 dams, 22 power plants, and 3 nuclear facilities (Tennessee Valley Authority, 2022). The TVA is just one example of the many alphabet agencies created by Franklin D. Roosevelt as a result of his much-successful New Deal programs and represents the stunning potential of nationalization efforts if exploited correctly. Meanwhile, many in the general public stand to paint nationalization efforts as too radical and dangerous to private sectors across the economy. Unfortunately, it seems many forget one of the most recent United States efforts of nationalizations, the purchasing of 500 million General Motors shares (60.8% of the company’s total market capitalization) by the Obama administration to save the company and prevent the loss of hundreds of thousands of jobs (White House Archives, 2009). Today, General Motors has thrived as result of the nationalization of its company as it employs nearly 155,000 employees worldwide and posted a $10 billion profit in 2021, its highest total ever and a 55% increase from its previous year (General Motors, 2021). Exemplified once more is the necessity to nationalize various companies in the United States in both extreme times and even periods of relative peace as a method to increase overall economic prosperity for the nation. As a result of the many instances of industrial nationalization, the United States has directly saved millions of jobs while concurrently ensuring continued essential consumer spending in the economy necessary to keep the national economic structure afloat.
In the midst of such critical times, inflation has played a major role into the potential economic downturn that could be forthcoming. According to the Bureau of Labor Statistics, the United States has posted a general inflation rate of 7.5% during 2021, the biggest rise seen since 1981 and a tumultuous indicator of the need for swift action (Bureau of Labor Statistics, 2022). Within the general inflation rate of 7.5% is the 27% rise in domestic energy prices, the biggest driver in such a major development of United States inflation rates (Bureau of Labor Statistics, 2022). Any sort of increase in domestic energy prices effects a range of United States businesses as operating costs inevitably rise and cause owners to raise prices as an essential way to contain pre-inflation profits, a move that often proves devastating for the average consumer and the exact spot most disillusioned citizens and politicians point to as potential price gouging. Once more, nationalization of the oil industry propounds itself as the perfect solution for such chaotic events as direct government control of the energy market will allow the current administration to put forth and maintain prices that reflect the need of consumers and ensure a lack of reproduction of runaway inflation. Such a move to nationalize the United States oil industry would cost a fraction of what the government spent to pump Wall Street during the COVID-19 pandemic. For example, controlling interest in ExxonMobil, Chevron, and Conoco would amount to about a $350 billion investment, a representation of under 10% of the more than $4 trillion the Federal Reserve supplied to Wall Street in recent years (Truthout, 2022). If the United States has the availability to stimulate over $4 trillion into Wall Street, an institution that has a market capitalization of $29 trillion, then the current administration certainly has the accessibility to spend the necessary amounts to nationalize the entirety of the domestic oil industry (New York Stock Exchange, 2019).
The navigation of such turbulent times often leads to the conversation and implementation of various types of solutions. With the United States enduring a massive geo-political crisis, sustaining an untamed increase in energy prices coupled with some of the highest inflationary rates seen in decades, it is absolutely imperative the United States nationalizes the domestic oil industry to process the responsible phasing out of fossil fuel dependence within the national economy, eliminate the centuries long corruption perpetuated by politicians influenced by the oil industry, and limit the chances of a forthcoming recession as a way to ensure prosperity for the short-term and long-term future. Until the United States starts taking the necessary actions, citizens are fast heading into a reality where the environment is damaged beyond repair, a vast unemployment crisis begins, and inflation heads into a skyrocketing climb, all factors that if created in any form of combination could prove devastating for the preservation of the world’s largest economy.
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