Obama doesn't understand economics - part I

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At the last presidential debate, Barack Obama said a few things that made my skin crawl. First, he proposed forcing oil companies to either drill on their U.S. reserves, or he would nationalize those oil reserves. The phrase he used was 'Use it or lose it.' I'm astounded that this hasn't gotten more press play as it shows a clear disregard for property rights in an economy based on the inviolate provision of private ownership.

Dictating the usage of oil assets to an oil company is akin to Obama telling a family with two cars that if they don't use their second one more often, he's going to confiscate the second car... even if (to extend the analogy) the second car is an S.U.V. and gas is $4/gallon.

Similarly, if it costs $100/barrel to extract oil from the ground and it would take a certain number of dollars and years to develop that oil field, the oil company is going to look at their other opportunities to decide if they should develop the oil patch. They'll make an economic decision (just like the family garaging the S.U.V.) whether to employ that asset.

Back to the debate, Obama claims that if he or congress does not like that decision, they're going to simply repossess the oil fields. Now that is socialism!

Yes, I'm aware that Oil companies are the current 'Big Bad,' but if he doesn't understand the principal of property rights for oil companies, what's to stop him from dictating crop decisions to farmers, programming decisions to media companies, or employment decisions to citizens?

1 Comment

The problem with your logic here is that the oil reserves are not "owned" in they way a family owns a car. These companies have purchased mineral usage rights, which give a private entity the provisional rights to make use of certain minerals in a certain, nationally owned area, during a certain period of time. There is an history of hundreds of years of "use-it-or-lose-it" provisions that have been attached to these and similar rights. That has been the deal between the government and private enterprise since back when land and mineral use came at the grant of the monarch. (And, yes, that includes government telling farmers what and how to farm if they want to keep the land -- a policy that was still in place on homesteaded land well into the 20th Century, and one could argue, is now enforced in the form of specific-crop subsidies) What is being proposed is that the traditional standards which have governed the use of nationally-owned common territory be restored to the way they were before former oilmen and their still-oilmen cronies were writing those provisions out of the applicable laws.

Now, that said...What exactly are we going to do with the mineral rights if we do repossess them? Give a new lease to some start-up oil company who's willing to chance it? If they're successful, Exxon-Mobil will just buy them up within the decade, and if they aren't, then we just removed that sore spot from their balance sheet for them.

Damned if ya do, damned if ya don't. The whole thing makes me want to drink until it makes sense that Boone Pickens and Al Gore are somehow now on the same side about energy.

Sheesh. Go Cubbies, huh?