Oil and Gas, Boom and Bust

Friday, February 26th, 2016, the price of gasoline was $4.96 in Germany and higher in many other countries. On the same day the average price in the USA is about $2.00 and we're off to the races purchasing SUVs. What we pay for fuel is nowhere near its true cost that includes the roads and environmental impact. Even though decreased cost of filling up at the pump seems like it would help the economy, it does NOT because of the laid off workers, idle assets and the effect on the stock market. The economy prefers stability and slow change.

Over 200,000 oil and gas workers have been laid off and their lives upended. This looks like we are sacrificing the oil and gas industry to favor the automotive industry. We bail out banks and Detroit, yet we can't keep a steady market for the oil and gas industry. I believe we are fighting a form of dumping by foreign oil producers who want to limit our domestic production by idling thousands of rigs afterwhich they will trottle output and raise prices.

We now have a rare opportunity to use this very wide gap between what fuel costs and what it is worth. We should:

  • Insulate the oil and gas industry from boom and bust cycles.
  • Pay for infrastructure (roads, bridges, mass transit), creating jobs.
  • Encourage wiser use of fossil fuels.
  • Ensure a steady supply fuel at a reasonable price.

We rely on government regulation (Ohio's PUCO) to keep the cost of electricity fair for both the consumer, distributor and producers. A similar Federal system would protect the both the consumer and the oil and gas industry to stabilize the future against foreign oil influence.

What would that system look like? First there would be a slow, measured rise in the cost of fuel at the pump for the consumers. The extra cost would provide a realistic price to the industry and the remainder would be a tax designated for infrastructure. Perhaps some of the tax could go to reducing the nation's debt or as a rebate to the poor.

I am surprised that the oil and gas industry has not been the subject of recent political debate. Can you imagine the popularity of a candidate in Texas, if he or she would take a stand on helping with the boom and bust cycles?