Representative Maxine Waters (D-CA) suggested that unless oil execs promised to lower gas prices in exchange for drilling wherever they want - she would make it the duty of “this liberal” (her) for “basically taking over and the government running all of your companies.” She said “socializing” - she meant “nationalizing.” Neither are good. Please click here to watch the video. Unlike the other Congress members laughing in the background of that video, I don’t find it funny. Unlike many Americans who increasingly want a socialist country, I find Representative Waters and her concepts on solving the energy crisis to be extremely dangerous.

Venezuela nationalized its oil industry over the last few years - they have more oil reserves than we do. Click here for summary of global reserves and look where the US sits. Many countries with the most reserves have nationalized oil industries. Some of those countries are actually drilling wherever they want. And some countries are actually finding some new oil every once in a while. With all that, you might think that oil would be free. And yet, somehow it escapes Rep. Waters and anyone like her to understand that nationalizing oil has not lowered global oil prices. Doing so in the US with our relatively low level of oil reserves is ridiculous - we are a “drop in the bucket” or if you prefer, a “bucket in the barrel” when it comes to affecting world oil supplies.

But let’s just play along with her concept for a while. Let’s say she and her socialist friends in government would take over. Wouldn’t that be fun? First of all, let’s look at the financial consequences. Let’s say that the taxpayers would pay market prices for the top oil companies and pay off their debts - for XOM, CVX, and COP - that would be about $900 billion to $1 trillion to nationalize. If this means that oil prices and those pesky “excessive windfall profits” would decline, then the US taxpayer would be overpaying for assets and cash flows at their peak for an industry that the socialists want to put entirely out of business. HMMM? What a waste of money not to mention what would happen to the loss of our entire ability to have confidence in ever investing in any US business. And let’s remember that the US oil industry is just a part of the global energy industry. That means we’d have to renege on commitments to foreign companies who have drilling rights in US territory or compensate them for taking those as well. Please remember that much of the “obscene windfall profits” of the 5 oil companies interrogated by Congress came from outside the US. So does much of the exploration and production of those companies. If their businesses were nationalized, the new US national oil company would be restricted to current US production and revenues and we’d have to get rid of the non-US operations just as we would have to kick out the non-US companies operating here. As a result, we would almost certainly end up in a serious shortage situation. That should do a number on foreign investment in the US. And what about all the other companies. I know the Congress only wants to blame the biggest 3 US oil companies. But how about the drillers and other oil service companies or the independent refiners or the pipelines? What would we do to nationalize the retail network which also includes a bunch of small businesses that operate the local gas station? Financially, we are now in the trillions for this nationalizing program. And if you say, we shouldn’t pay fair market prices then our entire financial system is screwed more than it already is.

In the end, the US dollar - it would be worth less than worthless. Oh and never mind the inflation that would result. Yep inflation - sadly making gas is not free and even if you price it at nationalized prices - we will have shortages and inflation in other products. Just check examples like Venezuela. I know socialist dream worlds suggest that there are no negative consequences for nationalizing industries, but you might want to read this article.

A few more ridiculous points about this ridiculous idea - if the socialist US government would run the oil industry, where would they allow themselves to drill? Do they know precisely where the oil lies? If so, would they just tell us now? If there is no way to drill in an environmentally responsible manner in ANWR or the continental shelf or Florida or wherever else, then what would the socialists do to increase supply? Do Rep. Waters and the other socialists know how to explore, drill, transport, refine, and distribute oil in a sterile manner? If so, could they save the planet and just tell us now? Finally, by what mechanism do they plan to do all the work of the industry without having to raise taxes to pay for it, with or without 10% profit margins they call “obscene” and “excessive”?

Maybe you can watch Rep. Waters and feel comforted that she cares about the effects of high gas prices on her voters and Americans in general. I do not doubt that her feelings are genuine and well intentioned. They just happen to be wrong and dangerous. Like many socialist ideals - these good intentions are ignorant of all the complexities and interdependent relationships that would result.