Articles

Why We Need To Nationalize Oil and Gas

Editorial | January 3rd 2006 | 10

As most experts agree, the production of natural gas and oil is nearing its peak. At the same time, the demand for both commodities is rising — and rising rapidly — as both China and India begin to experience their industrial revolutions.

The first thing that this unprecedented new situation of approaching peak oil and gas has meant is that prices have gone through the roof. What’s more, it’s very likely that these prices are going to stay sky-high for the foreseeable future and beyond.

Price Regulations?

Some people are now arguing for price regulations. This is an understandable reaction, but it ignores what is actually causing the problem: the law of supply and demand.

But if past experience is any guide, the law of supply and demand will eventually have its way. The situation of higher prices won’t be noticeably changed — even by the attempt to regulate prices.

It has been pointed out that from an ecological point of view there are potentially beneficial effects to higher energy prices: they force consumers to search for alternatives. But it’s a very mixed benefit, particularly for the majority, who depend upon the fossil-fuel-driven infrastructure to get food and clothing into the stores and oil and gas to our homes. Rising consumer goods and household energy bills bite the working and middle classes harder than they do the wealthy.

Moreover, currently understood energy alternatives are not without their own problems. Hydroelectric and coal power take terrible environmental tolls. And, as they currently exist, solar and wind power rely upon industrialized, high-energy-input hardware. For many leaders, too, “alternative energy sources” is simply code language for more nuclear power.

In any event, it’s not true that the law of supply and demand brings about ecological benefits. The truth is that the free play of market forces sends entirely the wrong signal to oil and gas producers. After all, it’s only financial barriers that discourage rapacious exploration and development. When prices fall, so too do speculative ambitions. When they rise together with sales, producers accelerate exploration, production and export. Alberta is a good example. These conditions also push producers into environmentally harmful projects.

What’s the Solution, Then?

To achieve a genuinely workable, long-term solution to the issue of rising oil and gas prices, we need two things:

The first is a massive and immediate shift into transportation systems that save on energy consumption. We need big and multiple injections of funds into public transit systems and railway infrastructure.

The second is big and multiple injections of funds into the development of alternative energy sources. We cannot continue our drug-like dependence on fossil fuels indefinitely.

Of course, all this will involve hundreds of billions of dollars of investment.

To raise this kind of money, there is only one conceivable funding source: the oil and gas producers themselves. We will have to draw upon the huge profits being extracted from consumers every day from the sale of petroleum and natural gas. And the only way we are going to do this — the only way we can take control of the mega-profits needed to fund this energy revolution — is by nationalizing the oil and gas industries. We will have to ensure that their huge surpluses are held in the public sphere.

How will this massive takeover be financed? By exchanging long-term government bonds equivalent in value to the worth of the industry.

Where There’s A Will…

Some might say that the political will to undertake this giant inroad on what is at the moment private property does not exist. However, recent public-opinion polls suggest otherwise.

An August public-opinion poll by Léger Marketing, for example, reveals that almost half of Canadians favour nationalizing oil firms. More precisely, 49 per cent of respondents wanted petroleum resources nationalized, while 43 per cent said they would like to see the gas companies in public hands. This support varied from province to province, of course. But while typically progressive Quebec led the way with 61 per cent, even in oil-rich Alberta, 36 per cent came out in favour of nationalization.

Of course, besides taking these companies and their resources into public hands, Canada will need to cut back its current exports to the U.S. At the moment, over half of Canada’s production is going south, and the proportion is rising. Conserving production for mostly domestic use will provide a longer lead time to bring about wiser alternatives, offering us some breathing room before the energy situation reaches crisis proportions.

Naturally, in order to cut back drastically on U.S.-bound exports, let alone nationalize the industry, it will in turn be necessary to abrogate NAFTA. In our November/December Dimension editorial, we set out some more reasons for giving notice.

All very fine and well, you might say — but just how would a nationalized oil-and-gas industry deal with the current crisis differently?

In the first place, in a nationalized scheme, unexpected price fluctuations can be more easily buffered by the state. The beneficiaries will be those whose livelihoods depend upon the availability of oil and gas, rather than the big energy companies.

A nationalized industry can also be both mandated to conserve energy and ordered to divert money into R&D for sustainable alternatives. It will have no fears about competing with its own new energy-saving products. Moreover, a state-run industry can weigh the benefits and costs of exploration against the interests of citizens, instead of merely return on investment.

Granted, this is a made-in-Canada solution for what is in reality a world-wide energy crisis. But we hasten to add that other countries — Venezuela, for example — are offering their own solutions. Clearly Canada must stand with other nations against the U.S. solution — an endless series of wars in the Middle East and other oil-producing regions to maintain an iron grip on the world’s increasingly scarce supply of oil.

10 comments

• I concur with this analysis.  Ultimately the resources of a nation should belong to that nation, meaning the citizens of that nation, not any particular individual or corportation.  And the citizens of that nation should have first dibs on the resource at affordable prices since it is theirs in the first place.  The fact that Canada has handed over so much of its natural resources to private interests is next to treasonous in my opinion. 

  We should all take a long hard look at how Venezula has ensured that it’s own people - as well as many of its neighbours - are assured access to affordable oil despite the OPEC combine’s gouging. 

  However, another way to make the exploiter of a national resource pay through the nose is to tax the ass off of them or simply raise the cost of access to the resource accordingly.  And that ‘payment’ could take the form of provding us, the supplier of the resource, with below market products.  In essence a kickback, a practice that has long been accepted within the corporate and business communities. 

  We forget that corporations and businesses that profess the ‘bottom line’ are not that much different from the street corner junkie.  They need their fix [in this case a resource they can profit from] and they will do anything, including sell their executives into slavery, to get their fix.  Of course they will whine, pout and scream about the injustice.  But, ultimately, their addiction to their own bottom line will win out in the end and they will pay whatever the toll may be.  And, if they decide to go elsewhere for the resource, that simply leaves the door open to the long iine of replacement interests we know who are waiting their turn at the ‘wheel of fortune’.

  #1. Posted by william clegg on January 30th 2006 at 7:54am

• The cost of purchasing these companies, combined with the diversion of profits suggested would exponentially increase our nations debt, force a raising of interest rates and devaluation of our currency.  All of which would harm the poorest and middle class more than the wealthy and increase our already high dependance on exports to the U.S.

  The suggestion above would:  not meet the objectives (decreased consumption); create a new massive government beurocracy; and increase our dependance on the United States.

  I agree, as most reasonable people do, that our planets energy consumption is unsustainable and is causing terrific harm to our shared environment.  I suggest heavy government investment in far-sighted infrastructure, tax breaks and direct investment into entrepeneurial initiatives to create alternative sources of power, including increased reliance on nuclear power.

  #2. Posted by sma lik on April 6th 2006 at 11:58am

• This is a brilliant idea that needs to really enter the national discourse.

  The oil sands is a national treasure that will provide for many Canadians far into the future, and will give Canadians control over their own countries most valuable resource. It does not belong to corrupt transnationals.

  The arguments about wasteful bureaucracy is a powerful myth that must be ignored. There is not another more inefficient industry than oil and energy. Yet they reap disgusting fortunes, and manipulate markets worse than any publicly transparent government organization could.

  #3. Posted by lslelel on April 13th 2006 at 2:57pm

• This article speaks to me as well. However I must state my disagreement on one part of the article…

  “exchanging long-term government bonds equivalent in value to the worth of the industry.”

  The oil industry was built on the backs of wage workers (my father being one of them) How can we honestly justify paying this value to share holders who’ve enriched themselves from the sweat of the work force? Not to mention this enormous drain of public funds that could go towards the stated objectives.

  lslelel: I do agree, it’s a great myth indeed. Consider the public health care system in which Harvard has done a studay that shows as a whole, Canadians spend less than half towards health services compared to the American for profit system (this is really incredible)

  I say nationalize the oil industry, have the workers and general public elect a “public” board of directors with a mandate given to them by the people of Canada. No compenstion to the rich, only to those in genuine need.

  #4. Posted by Jim on June 21st 2006 at 1:33pm

• It is true that all natural resources within Canada must be Nationalized. These are not the property of any one individual or other entity but are the property of the Nation. There must be no privatization of any kind permitted of any Natural Resources within Canada.

  #5. Posted by Viamund on February 7th 2008 at 9:37am

• The oil industry needs to be nationalized.  It is time for a political party to step up and do the right thing.

  #6. Posted by laughlin on February 22nd 2008 at 10:16am

• If you throw out history, economics, and all logical reasoning, your suggestion would make sense.  However, since all of the above factors apply to the real world you’re idea won’t work.  Since I have a physics and M.B.A degree let me educate you.  When you steal/nationalize an industry all you will do is cause production to go down because there is no incentive for success.  There is not one nationalized industry/country in the world more productive than a privatized counterpart.  If you want better energy than you should provide tax breaks/incentives for companies to invest in.

  #7. Posted by drlabon on May 5th 2008 at 1:02am

• “There is not one nationalized industry/country in the world more productive than a privatized counterpart.”

  Drlabon: The point of private industry is to be productive, which means creating profits.  Profit is essentially a surplus, which goes to just a few, therefore for most Canadians, corporate profit is waste.

  The point of nationalizing oil industries is not to make profit, rather to provide good jobs, and keep Canadian oil for Canadians.

  #8. Posted by john on June 14th 2008 at 7:06am

• With great sorrow I write that Canada will never nationalize our oil industry.Oil’s mega corps are too big and they grease too many political palms so that they can stay in business.The cash cow is much to sweet to fuss with. Same reason why there will never be effective insurance or banking reform in this country. But I digress. Mostly I believe there is a prevailing backroom whispered fear that if Canada moves to control any of her precious natural resources our “cousins” to the south will move to protect the “US national intrest” and would seek to readjust our atitude with all the finesse of what they did in Iran. I say vote me King and I’ll change things

  #9. Posted by S Wilkinson on June 15th 2008 at 11:05pm

• Hey folks, I don’t beleive that this “project” would be impossible. Difficult? very. But nevertheless, it has been proven that nationalising private industries has work and work to be very helpfull to Canadians ( Quebecois ). Im talking about Hydro-Quebec. I now live in Calgary and I am stunned at the heating bills compared to the hydro-powered electricity in Montreal. But then again, Hydro-electricity is a renewable ressource, and does not need as much exploration as oil would.

  Theres also the ishue of getting the private industries out of alberta, and soon newfoundland. My answer to that is do the same that quebec did with hydro-Quebec. Tax them so much that they no longer have a choice but to accepte the price that we would offer for their raffineries.

  I beleive that this is essential to reduce gaz prices in Canada… aswell as heating bills. It will create more Canadian jobs avaible, and will garanty a stable price and economie.

  I have more to say but I want to see how you disagree.

  This is OUR ressource, and should be controled and should be able to benefit ALL Canadians.

  #10. Posted by Seth on September 25th 2008 at 2:11am

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