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#1 sroberson

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Posted 09 June 2012 - 12:04 AM

Purely conceptual discussion...
Idea:
I was driving by a gas station the other day when this idea struck me. Government owned gas stations. Now hear me out! These gas stations would be owned and operated by the state governments (or federal government if people seem to think its more plausible). They purchase the gas just as any other privately owned company would and distribute the gas the same way. The difference between the two would be the government would sell the gasoline at near face value plus the operation cost of the station and including taxes (increased business to the station would theoretically drive the cost down further if it was done by an individual basis). In this way the government gets to take their cut of the taxes from selling the gas as they usually do, and it would also drive down the cost of gas due to the fact that all gas stations/companies are in business to turn a profit and as a result sell the gas at face value plus 'X' amount of money they feel they should make them add taxes. If it seemed like a better idea to be in direct competition price-wise with other gas stations, then the theoretical tax or profiteering that would be done by the gas station would generate a larger influx of taxes. Either way I see a win/win situation for citizens of said theoretical government. One way they get cheaper and more competitive gas price, the other way the government is able to provide better for citizens or reduce taxes elsewhere.


Alright, so some ground rules and explanations...
1) This is a hypothetical situation - as such, we are disregarding the fact that it would never really work due to the fact that people would scream "COMMUNISM!!!" so fast it would make McCarthy's poor head spin in the grave.

2) I would prefer to see this thread be a constructive discussion on the possibility of this happening and the implications it would have on society, government, and corporations.

Just figured I would throw out there a fun idea I came up with and see if anyone else was interested in poking at it for fun and seeing what it would do! Have Fun!

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#2 Peter

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Posted 09 June 2012 - 01:10 AM

Quite an interesting idea you've got there. But...

It wouldn't be a good idea. My reasoning being, the government has already strangled so many businesses because of regulations. This would just put more companies out of business, because it's guaranteed that the gov. would find a way to get all the money they can get their hands on. Now, an even better solution to the gas prices in this country. The reason gas prices are so high is because of... more regulations. There's different grades of oil produced for each state, county, city, because of their rules. If the federal government decreed two grades of oil across the board, then costs would be reduced on private sector companies, and prices would go down.
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#3 sroberson

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Posted 09 June 2012 - 01:53 AM

Peter! I haven't seen you around here in a while. I was actually imagining what your response would have been when i was writing the original post.

I was considering the issue that cheaper gas would hurt other companies, which is why i thought of the scenario where government gas stations are cost competitive with privately owned stations. That way the gas companies are still relatively driven to keep costs down and the extra profit that is turned by the ...we'll call it "civic" gas stations... Would result in higher tax income to the government (which I admit, their spending habits with said money should be under scrutiny if it could happen).

I suppose the creation of government gas stations would result in losses on the private sector, but would it be all that bad? The stations are self sustaining, employ people, might weaken oil company control and speculation on the market and maybe reduce lobbying power, keep prices lower and due to lowered gas prices it frees up money on the side of the consumer side to spend on other things that would drive the market and taxes. Just my thoughts, I honestly know there are some further reaching implications if this were implemented but I can't think of them. You do have me on the fact it would damage the private sector and there are many other ways of lowering prices, among them being some deregulation.

It's good to see you around here again!

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#4 I am That is

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Posted 09 June 2012 - 04:38 AM

Gas is real cheap were i live. I don't care to lower the price. Also goverment owned Gas satations scare me a little....not sure why

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#5 Fana McCloud

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Posted 09 June 2012 - 05:20 AM

But gas IS cheap here, at least compared to Europe. The reason? We subsidize the same gas companies who then later shaft us ALL with higher gas prices due to oil speculation. I honestly think letting the REAL free market take its course by not subsidizing them would be far better - we just might transition away from fossil fuels a lot faster if our gas prices were twice as much as they are now. XD So yes, I think we already do a fair bit to lower prices methinks.

The prices have nothing to do with lack of competition, they're far more influenced by speculation, in short.
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#6 sroberson

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Posted 09 June 2012 - 05:29 AM

Fana, I am completely with you on developing green technology. I guess for my developing of a theoretical environment, I should have just gone the whole 9 yards and just posed the question of how best to market green energy and keep the oil companies out of it (Yeah...thanks Romney for trying to attack green energy in one of your speeches, good thing nobody was listening to you, except maybe Peter XD). I am actually strongly considering going the route of installing solar panels on my house. It just costs a lot more than I can manage right now and 30kwatts per month is a meager return when a typical home uses 1,000kwatts.

I really do have to wonder what causes the price difference between gas here and over in Europe. I honestly don't know if its just subsidies or lack of regulation or what it is. Higher taxes is a definite, but that can't be the only reason. I wasn't trying to suggest that gas prices were extraordinarily high, especially now with the American economy suffering, this was really just an idea that came to my mind when I looked over on the side of the road and though, "huh..."

On the topic of free market...its really funny how not free it really is if you consider the subsidies products get 'just because' (i'm looking at you Apple...). I feel almost like de-regulation in a way promotes re-regulation...just on the side of the corporations putting others down and crushing competition.

Ajc, I can sympathize with the lack of trust with government operated 'insert the blank'. I guess I should also note in the original post that in this theoretical situation one can trust the government.

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#7 I am That is

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Posted 09 June 2012 - 07:24 AM

Ajc, I can sympathize with the lack of trust with government operated 'insert the blank'. I guess I should also note in the original post that in this theoretical situation one can trust the government.

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#8 Sarita

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Posted 09 June 2012 - 09:27 AM

Yeeeah, I don't think this would work. The way you have it proposed, the government gas stations only make enough to pay their bills and employees, while collecting their taxes, and that's cool for the government, but not so cool for the private sector. To keep their prices competitive, and also turn a profit for the gas station, the privately owned gas stations would have to have consistently higher gas prices across the board.

If you were to open up government owned gas stations, you could probably make it less problematic by having a government run program, kinda like foodstamps, that allows you to apply for a gas card that only works in the government stations pumps. Except then that limits you to only being able to get gas where the government decides to put a gas station.

For all I know, though, this post doesn't make sense. Let's give it a try, it's only 4AM after all.

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#9 Fana McCloud

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Posted 09 June 2012 - 09:54 AM

As far as I'm aware it is mostly taxes that drive up the gas prices in Europe; in France I think something like 70% of the price of gas is due to taxes, whereas the States take the opposite extreme and give oil companies special tax breaks unique to them. The irony is that at the time these subdidies were enacted they made sense - they helped support oil exploration back when it was far riskier and not supported by multi-national corporations, but now they take away so much profit that continuing to support them is such a joke. These guys effectively pay ZERO in taxes and we continue to support them.

In the extremely unlikley scenario that we made government run gas stations I'd have to pose this question - where do they get the gasoline from? Do they do oil exploration themselves or buy it from companies likely to jack up the price because they dislike "big brother" government? I think no matter what we do we'd get screwed on that.
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#10 sroberson

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Posted 09 June 2012 - 10:08 PM

Yeeeah, I don't think this would work. The way you have it proposed, the government gas stations only make enough to pay their bills and employees, while collecting their taxes, and that's cool for the government, but not so cool for the private sector. To keep their prices competitive, and also turn a profit for the gas station, the privately owned gas stations would have to have consistently higher gas prices across the board.

If you were to open up government owned gas stations, you could probably make it less problematic by having a government run program, kinda like foodstamps, that allows you to apply for a gas card that only works in the government stations pumps. Except then that limits you to only being able to get gas where the government decides to put a gas station.

For all I know, though, this post doesn't make sense. Let's give it a try, it's only 4AM after all.

Nah it all made sense :)
The reason I proposed two ideas on pricing was because I know the civic gas stations running at a lower cost would either crush the private sector or at least cause more damage overall. But what if the prices on the civic stations were the same price as other gas stations? No real incentive to go to these stations on than the fact that the government gets to pocket more tax money overall and you still get to pay the same amount of money for gas. Still I image it would hurt business since people could argue that if they go to the civic gas station then they could get lowered taxes elsewhere...but as I said, wouldn't that actually drive business more since lowered taxes gives consumers an idea that they can purchase more?

I also considered the idea of allowing these stations to operate as a sort of aid program...much like welfare - but with that being such a tough topic to approach I felt it might be a bit out of scope overall. The idea did come to mind though, I just have no idea how one would manage it correctly to give help to those who need it and not cause waste.

As far as I'm aware it is mostly taxes that drive up the gas prices in Europe; in France I think something like 70% of the price of gas is due to taxes, whereas the States take the opposite extreme and give oil companies special tax breaks unique to them. The irony is that at the time these subdidies were enacted they made sense - they helped support oil exploration back when it was far riskier and not supported by multi-national corporations, but now they take away so much profit that continuing to support them is such a joke. These guys effectively pay ZERO in taxes and we continue to support them.

In the extremely unlikley scenario that we made government run gas stations I'd have to pose this question - where do they get the gasoline from? Do they do oil exploration themselves or buy it from companies likely to jack up the price because they dislike "big brother" government? I think no matter what we do we'd get screwed on that.

I think we still put a tax on the purchasing of gasoline at the gas pump, but you are correct that the oil companies get to enjoy very large breaks overall. Too bad any suggestion of closing these loops are quickly smothered by wealthy and powerful lobbyists.

I actually didn't come up with a very well thought out plan on how the gas stations got their gas. For the original post I suggested that they purchase gas from the oil companies that drill it up and refine it just like the other stations not already owned by said oil companies...but obviously this is a narrow-sighted proposal as this could clearly cause issues if private owned gas stations decided to shut down and let the government take over while oil companies simply jack up prices to make up their losses, and thus we are back at ground-zero. I still don't have much of an idea on that issue. Even if private stations weren't to suffer much, the inclusion of the government buying gasoline must have some effect on the market and economy, I just can't picture it.

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#11 Peter

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Posted 10 June 2012 - 06:16 AM

Thanks for the re-welcome! :) I do agree with most of your points there, but, creating jobs wouldn't be really beneficial. Those employees would be public employees. What we need right now is people to be employed in the private sector, because that has taken so much damage in the past five years... Thanks for the input!
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#12 I am That is

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Posted 12 June 2012 - 03:44 AM

How about we let the market try an do its own thing, and the goverment do its own thing.
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#13 Faisul

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Posted 12 June 2012 - 07:46 PM

Where I live, the major gas company responsible for most of our gas stations are at least partly owned by the state. It's also responsible for over half of our oil and gas extraction operations overseas. I have next to no knowledge of economics but it has struck me that while prices have been steadily increasing over the past few years (duh) they have never been astronomically high, as I've heard them being in other countries. As for the US, free market economics and especially the finance industry has proven itself to be dangerously open to crooks and shysters who've basically smashed the USA into a proverbial ice berg over the past decade with much of the global markets following suit. As oil and gas is basically on the forefront of these issues (alongside with finance) it really does strike me that the ventures these companies go into ought to be made with at least a minimum of government oversight so, I dunno, greed doesn't lead them into making yet more stupid mistakes.

As for individual gas stations in the US, why not? Government ventures usually aren't too profit-oriented (being big into public services and all), so the average buyer might even get fuel for less if it was a state-owned deal. Prices may go up drastically if there is a shortage or an import crisis and the govt wants to stockpile the stuff for whatever reason, but I see that as a far more sensible way to deal with it than making the prices smash through the roof until there's nothing left to sell. It would also offer an opportunity for more people to get into public services - and governments are typically not as choosy about who they employ contrasted with the average manager. You guys have a massive homeless and jobless population and it wouldn't hurt to get these people into the system. Whether or not it would create more jobs I have no idea, but it would at least cut out a bunch of middlemen if the people responsible for hiring were federal, contrasted with being inside a huge incestuous corporate hierarchy, more offices might be created, and stimulus incentives by the govt might see a bunch more gas stations opening up in places previously ignored due to profit concerns just for the sake of putting someone at work.

#14 I am That is

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Posted 12 June 2012 - 11:01 PM

I belive we have more then a few gas companies over here, and while most point a dirty fingure to the crooks and corruption as the source of inflimation it's deffintatly not why prices are high. Gas prices are dictated by the cost of crude oil, lol duh, and then both state and federal tax just add to the price increase. Also, most of our oil is brought from foreign nations, whom obviously do not pay their workers in americans dollars. Combined with the dollar's loss of value it cost more money to get more oil. Goverment oversight? Well there a several laws that apply to a wide array of industries that limit price manipulation and what not, but weather or no that the oversight you had in mind i can't be sure.

But if history has shown me anything, it's that goverment ventrues should be avoided. I don't want to get into an argument about socialism, and comunism, and free market and all that. BUT while its true these Gov-gas stations wouldn't be profit oriented, they would either sell gas at a price lower then the market competetors and hurt them, while also relying on tax money to fill up any holes. So gas is cheaper, but other companies are forced to either increase price to try to stay in buisness on the little customers they have, or lower price below their profit level which doesn't do them any good at all. And in having the goverment sell gas in a non-profit way you create a problem. Gas may be cheaper, but taxes increase to fill the gap. IDK but that seems little redundent. Working for the govement is not somthing i want to discourage, but if the goverment is going to higher people the need to pay them. The goverment gets that cash from tax payers, who in turn take a hurt. Our goverment can't afford to get larger, not being in debt like it is :/

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#15 Faisul

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Posted 13 June 2012 - 10:59 AM

If anything your government should get larger, as of now it's basically torn between its obligations to the big lobbying wing of the private sector on one side and its obligations to the average joe on the other, and they don't have the political will or financial clout to break out of that gridlock. The way my government sees it, is that gas is a crucial part of making our country work and leaving it entirely up to private individuals to distribute and determine pricing is too risky to allow to happen. It still has a significant percentage of private ownership but the government makes sure it owns over half of the shares etc. Hasn't stopped the company going over to Canada and doing horrible crap on first nation land and whatnot. While the free market is self-regulating and all that it isn't self-regulating enough for the difficult times we're in. Leaving it up to neoliberal economics to straighten things out won't provide a solution as far as I can see it, and one of the staple goods we're absolutely addicted to it's fuel. And while a government takeover, even a partial one, would rankle a lot of people and put quite a few people out of a job (unless they're not already heavily invested into politics) it may be the necessary first step to even out the playing field. But not to worry, it'll never happen.

#16 I am That is

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Posted 13 June 2012 - 05:16 PM

There is no shortage of gas in the United States, and while getting gas is expensive to US, in the world wide market we have an average gas price. However, and lol yes i know your from Norway, belive it or not your gas prices are higher! we complain about our gas prices all the time, mostly due to being use to the 2 dollar or 3 dollars gas. However, The US can't even manage getting a city into the top ten most expensives places to buy gas, while gases prices in Oslo are almost twice as high, at a whooping 9 american dollars! The taxes required to run govemrent owned gas stations cost more then the money that would be saved on gas.

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Posted 13 June 2012 - 08:09 PM

There's a lot of things that I could talk about here but most of my points have already been made (and their respective counter-points.) So in short, I'm not in favor of an idea like this. It would solve nothing and the government needs to leaves this free market sector alone.

I mean, look what happened when the government utilized the SPR outside of it's intended purpose? I believe it had an initial impact on the markets for what...maybe a day or two?

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#18 sroberson

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Posted 14 June 2012 - 03:02 AM

@AJC,
You have made some pretty strong arguments, but not without their flaws I think.

I belive we have more then a few gas companies over here, and while most point a dirty fingure to the crooks and corruption as the source of inflimation it's deffintatly not why prices are high. Gas prices are dictated by the cost of crude oil, lol duh, and then both state and federal tax just add to the price increase. Also, most of our oil is brought from foreign nations, whom obviously do not pay their workers in americans dollars. Combined with the dollar's loss of value it cost more money to get more oil. Goverment oversight? Well there a several laws that apply to a wide array of industries that limit price manipulation and what not, but weather or no that the oversight you had in mind i can't be sure.

But if history has shown me anything, it's that goverment ventrues should be avoided. I don't want to get into an argument about socialism, and comunism, and free market and all that. BUT while its true these Gov-gas stations wouldn't be profit oriented, they would either sell gas at a price lower then the market competetors and hurt them, while also relying on tax money to fill up any holes. So gas is cheaper, but other companies are forced to either increase price to try to stay in buisness on the little customers they have, or lower price below their profit level which doesn't do them any good at all.

Too late! You started the McCarthyism! Just kidding.
I recognized the issue with having the lower price of gas when I first posted the thread which is why I suggested that we have an option where the civic gas stations allow for gas to be sold at the same price as local stations. This way the civic stations would be able to return a greater share of tax revenue from selling the gas - it would be able to return far more to the government as opposed to just the standard tax on top of face value. So yeah, you're right, if we were to try and keep a hybrid of government and private owned gas stations with the government stations being able to enjoy far lower prices it would invariably damage the private sector and cause some other far reaching issues that could be catastrophic.

Working for the govement is not somthing i want to discourage, but if the goverment is going to higher people the need to pay them. The goverment gets that cash from tax payers, who in turn take a hurt. Our goverment can't afford to get larger, not being in debt like it is :/

In the original proposal of allowing gas to be sold at face value + operational cost + taxes, it included the ability to pay gas station attendants out of the money made from operational cost. Also, while you make a good point that the United States government is in incredible debt, the only costs that the government would initially accrue would be towards purchasing the stations in the first place. After that, its a profit compared to simply taxing private stations. It would in the end return more money than simple privately owned station. I feel like the damage that it would cause to the private sector is something I can't estimate, but I feel like it would be relatively negligible. Now, in my perfect situation I would like to see the government use tax revenue from said stations to fund green technology and photovoltaic so we can curb the nasty addiction to oil that runs up incredible amounts of red ink in the budget department because of the US's insatiable appetite for foreign oil (not to mention the wars that have to be fought to secure such commodities). Trade deficits are a driving force behind the economic failure of the US.

On the note of gas being more expensive in other countries, I feel the need to note the progressive urban and automotive designs in other countries that make the United States look like cavemen with sticks. Many European countries, China, and Japan have incredible amount of work done to their infrastructure to support mass transit, urban sprawl is looked down upon, and automotive ventures away form the US tend to make the Prius look pretty stupid. We probably look rather dumb still selling vehicles that only get 15-20mpg.

@Faisul,
I was wondering what country you were referring to that had government owned stations! I have always considered Norway to be among the countries I would strongly consider living in. I'm not completely sure how to answer the responses you gave since they seemed very spot on and covered just about everything - despite your supposed lack of knowledge in economics ;) . I feel like if gas were controlled moreso by the government the financial stability of the US at least would stabilize significantly. I can't help but get the feeling that greedy vultures looking to squeeze another penny out of the consumer is what keeps tanking economic recovery. Every time the market starts to take a swing up, gas prices soar sky high and cripple the growth that was being enjoyed - yet somehow people still seem confused over this matter even though it has happened twice now since the 2008 crash. If oil was controlled with less greed and prices were set at a level that allowed sustainable growth, kudos. You are right though, there is no worry about any "serious" government take overs occurring where it actually matters. It seems the military and politicians are too busy trying to pitch the same old "American Dream" that is becoming more and more unattainable while trying to monitor us with the scrutiny and capability of Big Brother in 1984 (yeah, read an article about drones supposedly being used to find criminals in the country...)

Something is very broken in American society and politics as the average lifestyle had plummeted over the past decade...yet all I hear on the news is how there is so much money wandering around there - in the hands of hedge fund managers, crooked bankers like Jamie Dimon and the many politicians who enjoy extraordinary wealth for being supposed "public servants". Makes me want to support more socialistic society.

(Note: if I started rambling and not making way too much sense in where I was going, I apologize, I was kind of tired when I typed this up)

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#19 I am That is

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Posted 14 June 2012 - 03:17 PM

@AJC,
You have made some pretty strong arguments, but not without their flaws I think.

Too late! You started the McCarthyism! Just kidding.
I recognized the issue with having the lower price of gas when I first posted the thread which is why I suggested that we have an option where the civic gas stations allow for gas to be sold at the same price as local stations. This way the civic stations would be able to return a greater share of tax revenue from selling the gas - it would be able to return far more to the government as opposed to just the standard tax on top of face value. So yeah, you're right, if we were to try and keep a hybrid of government and private owned gas stations with the government stations being able to enjoy far lower prices it would invariably damage the private sector and cause some other far reaching issues that could be catastrophic.


In the original proposal of allowing gas to be sold at face value + operational cost + taxes, it included the ability to pay gas station attendants out of the money made from operational cost. Also, while you make a good point that the United States government is in incredible debt, the only costs that the government would initially accrue would be towards purchasing the stations in the first place. After that, its a profit compared to simply taxing private stations. It would in the end return more money than simple privately owned station. I feel like the damage that it would cause to the private sector is something I can't estimate, but I feel like it would be relatively negligible. Now, in my perfect situation I would like to see the government use tax revenue from said stations to fund green technology and photovoltaic so we can curb the nasty addiction to oil that runs up incredible amounts of red ink in the budget department because of the US's insatiable appetite for foreign oil (not to mention the wars that have to be fought to secure such commodities). Trade deficits are a driving force behind the economic failure of the US.

On the note of gas being more expensive in other countries, I feel the need to note the progressive urban and automotive designs in other countries that make the United States look like cavemen with sticks. Many European countries, China, and Japan have incredible amount of work done to their infrastructure to support mass transit, urban sprawl is looked down upon, and automotive ventures away form the US tend to make the Prius look pretty stupid. We probably look rather dumb still selling vehicles that only get 15-20mpg.

@Faisul,
I was wondering what country you were referring to that had government owned stations! I have always considered Norway to be among the countries I would strongly consider living in. I'm not completely sure how to answer the responses you gave since they seemed very spot on and covered just about everything - despite your supposed lack of knowledge in economics ;) . I feel like if gas were controlled moreso by the government the financial stability of the US at least would stabilize significantly. I can't help but get the feeling that greedy vultures looking to squeeze another penny out of the consumer is what keeps tanking economic recovery. Every time the market starts to take a swing up, gas prices soar sky high and cripple the growth that was being enjoyed - yet somehow people still seem confused over this matter even though it has happened twice now since the 2008 crash. If oil was controlled with less greed and prices were set at a level that allowed sustainable growth, kudos. You are right though, there is no worry about any "serious" government take overs occurring where it actually matters. It seems the military and politicians are too busy trying to pitch the same old "American Dream" that is becoming more and more unattainable while trying to monitor us with the scrutiny and capability of Big Brother in 1984 (yeah, read an article about drones supposedly being used to find criminals in the country...)

Something is very broken in American society and politics as the average lifestyle had plummeted over the past decade...yet all I hear on the news is how there is so much money wandering around there - in the hands of hedge fund managers, crooked bankers like Jamie Dimon and the many politicians who enjoy extraordinary wealth for being supposed "public servants". Makes me want to support more socialistic society.

(Note: if I started rambling and not making way too much sense in where I was going, I apologize, I was kind of tired when I typed this up)

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This first paragraph confuses me a little. But from what pick up your now saying the goverment would run these gas stations at market price in order to make profit. This has no immediate effect to the consumer. But that might be the issue. it seems the orginal idea of cheaper gas is no more. Instead this goverment gas is no diffrent in price then standered privatly owned gas station. If i'm understanding what your saying this is a found raiser for the govemrent. But there is a minnor problem. Private sector is now competing with the goverment. if the goverment is going to make any profit, it will be at the private sectors expense. There are few possiblities for what might happen at this point, prices in the private sector increase in response to loss of buisness or decreas in hopes of competing with the govemrnet. In the first situation if the govemrent follows price increase gas has now become more expensive for the consumer and you have created the very problem you set out to fix. To be honest though i'm not completely sure what would happen. I think what we have going on right now is fine, it you want cheaper gas your best bet in in lowering the taxes on it. But if we started drilling here more that'd help alot too. Its funny though that you feel the prices are dictated by the "greedy vultures". while companies are trying to make top buck they are competing with each other which is really what keep the price down. If gas prices can be blamed on any companies it the ones who drill out in the middle east, considering they meet together to dictate cude oil price. Our best bet in keeping oil prices low is keeping the goverment smaller and out of the market. The reason Norway's prices are so high is mostly goverment tax :/

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#20 DZComposer

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Posted 16 June 2012 - 05:24 PM

Gas stations are not where the problem lies. It lies on Wall Street. Gas stations make very little profit on gasoline, so nationalizing them will not have any real effect on the price of gasoline.

The problem is that the commodity markets have been deregulated to the point where you can buy and sell large amounts of a commodity, without having to take delivery, and do it quickly. This causes artificial price increases. Back in the day, if you bought a futures contract, you had to take delivery. These things were designed to give commodity producers some certainty so they could budget their operations accordingly. This is because many commodities take time to produce, and the price may significantly change in the middle of the process, leaving the producer holding nothing but debt. A futures contract is an agreement to buy the commodity later at a set price. This way the producer already know what he is selling the commodity for and can budget appropriately.

When you let people by futures solely for investment purposes, you skew this relationship to the point where the futures price fluctuates as much as the raw commodity price, destroying the purpose of futures contracts.

The real answer is if you buy a futures contract for 500,000 barrels of oil (or any other commodity), you need to take delivery of that 500,000 barrels of oil before you can sell it. This will stop commodity speculation quick, fast, and in a hurry as billionaire investors are not going to want a bunch of oil tankers parked on the lawns of their mansions. Then the only people buying futures contracts will be people who actually need the commodity. A billionaire investor may not want 500,000 barrels of oil, but a jet fuel refiner would love to have 500,000 barrels of oil because he can turn it into jet fuel and sell it to airlines and make some money for himself in the process.
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#21 I am That is

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Posted 17 June 2012 - 05:21 PM

Gas stations are not where the problem lies. It lies on Wall Street. Gas stations make very little profit on gasoline, so nationalizing them will not have any real effect on the price of gasoline.

The problem is that the commodity markets have been deregulated to the point where you can buy and sell large amounts of a commodity, without having to take delivery, and do it quickly. This causes artificial price increases. Back in the day, if you bought a futures contract, you had to take delivery. These things were designed to give commodity producers some certainty so they could budget their operations accordingly. This is because many commodities take time to produce, and the price may significantly change in the middle of the process, leaving the producer holding nothing but debt. A futures contract is an agreement to buy the commodity later at a set price. This way the producer already know what he is selling the commodity for and can budget appropriately.

When you let people by futures solely for investment purposes, you skew this relationship to the point where the futures price fluctuates as much as the raw commodity price, destroying the purpose of futures contracts.

The real answer is if you buy a futures contract for 500,000 barrels of oil (or any other commodity), you need to take delivery of that 500,000 barrels of oil before you can sell it. This will stop commodity speculation quick, fast, and in a hurry as billionaire investors are not going to want a bunch of oil tankers parked on the lawns of their mansions. Then the only people buying futures contracts will be people who actually need the commodity. A billionaire investor may not want 500,000 barrels of oil, but a jet fuel refiner would love to have 500,000 barrels of oil because he can turn it into jet fuel and sell it to airlines and make some money for himself in the process.

And so the uncertinenty of prices causes need for price increase to ensure profit?

That all makes sense, and I have to agree completely. But location is yet another large facotor in gas pricing. In some middle eastern countries, oil is cheaper then dirt.

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#22 thunderflare

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Posted 18 June 2012 - 04:34 AM

I honastly don't really like the idea of the government owning the gas station, but you do make a good point sroberson.

If the government was able to regulate the gas prices around the country more easily then gas may not be high in one place and low in another place. I just got back from a trip and I saw gas prices from 3.09 a gallion to 3.49 a gallion that a big difference in my opinion. I was also thinking that we sould take oil out of the stock market, because you have people betting on weather the price goes up or down. That doesn't look possible though. I'd like to see more green fuels, because oil isn't going to be around forever, and if we start now the technology will be a lot better sooner.

One more thing what about the government using tax money to give oil companys subsidies.

#23 sroberson

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Posted 18 June 2012 - 05:31 AM

It seems the orginal idea of cheaper gas is no more. Instead this goverment gas is no diffrent in price then standered privatly owned gas station. If i'm understanding what your saying this is a found raiser for the govemrent. But there is a minnor problem. Private sector is now competing with the goverment.

Well, it was an idea when I originally posted that there are a couple of options. One included having the gas sold at a lower cost, or to have it sold at market value. After a few posts into this thread it started to become a bit obvious that if the government were to sell gas at the lower cost it would hurt private sector businesses more. Operating under an assumption, if the government were to sell gas at the market value it wouldn't have as drastic of an effect on private sector business and thus would be a healthier option overall. Perhaps another thing to try would be for the government to hold prices at a reasonable market level instead of letting it rise and fall with the economy (which I credit the rising prices with choking of a recovering economy). You are correct again, that lowering taxes would lower taxes, but frankly as President Clinton said "We cannot afford tax cuts". Cutting taxes doesn't necessarily mean a good thing nor does it mean maximizing income to the government. Having the government gas sold at "market value" allows the tax revenue from the gas sold here to return very large sums comparatively and would have no immediate effect on citizens buying. I hear the argument quite often that if we drilled more in the country prices would drop. This is simply not true. The demand of gasoline (at least in the United States) has stagnated for the past couple decades if the source I listened to is correct while the supply of local oil has never been higher. The Republicans who fought for the Keystone oil line from Canada like to use the argument that it makes gas cheaper, but the problem is in the proposal to get the pipeline installed was a line that said that the oil would not be sold within the United States but instead sold to China...It wouldn't do anything for our gas prices (albeit, it would create jobs for the construction of the pipe, maintenance, and the oil spill cleanup crews)


And so the uncertinenty of prices causes need for price increase to ensure profit?

That all makes sense, and I have to agree completely. But location is yet another large facotor in gas pricing. In some middle eastern countries, oil is cheaper then dirt.

I think uncertainty in national security has been used to spike prices unnecessarily. Profit for the oil companies are guaranteed in the United States because of their lobbying power and because they can use scare tactics to coerce citizen behavior to maximize their profits (white flight/urban sprawl, fear mongering, national security threats, etc)



@DZ
I am in 100% agreement with you. I guess I should have realized the issue with developing a theoretical situation when we could simply theorize that private sector commodity speculation should be regulated heavily. I would have probably mentioned something about commodity regulation before, but i'll be honest, I don't know all that much about it and don't want to shove my foot in my mouth too hard. I guess another reason I didn't bring it up is because it falls on political corruption (in my opinion) and that situation will never be "theoretical" to the proletarians who don't own billions of dollars and supreme lobbying power in the White House.



@Thunderflare
I feel it could help normalize the cost of gas, maybe. I know I saw earlier today that the average cost of gas was $3.50 when I can fill up around town for $3.05...but a lot of the price fluctuation could have something to do with local gas taxes and perhaps the ease of access for oil tankers. I agree that commodities that are essential for economic health in a country shouldn't be allowed to be gambled on as easily as it is now. I would actually love to see a lot more work done for solar energy. I feel like it is the future of renewable energy. Pop a few of those suckers on every house and all of a sudden the demand for burning fossil fuels drops significantly (considering each panel can return about 30kwh to the system these days, not much compared to the typical 1000kwh most homes use but its a great way to start). Allowing easy access to electricity, and the move to electric vehicles would again pull the strings around the oil companies. I am extremely interested in the progress that is being made to harvest fuel from algae too.
I am honestly infuriated by the idea that the government get to bail out and give tax loops to a corporate entity (big oil) that is worth more than many countries' combined wealth. If they can turn profits of billions of dollars and never worry a day of seeing red line, then they don't need government money (errm...I mean tax payer money) to prop them up. Funny how a system that is meant to work for the people seems to work for corporations a lot

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#24 DZComposer

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Posted 19 June 2012 - 04:28 AM

And so the uncertinenty of prices causes need for price increase to ensure profit?


Not necessarily higher prices. It's about budgeting. If I expect corn to be $x per bushel, and I grow a bunch of corn at a cost to me of of $y, I don't want the price of a bushel of corn to be $x-z where x-z < y. If x-z is enough, I could lose my farm. Given market fluctuations, corn COULD be $x-z even if when I planted my fields, indicators showed it as $x+a.

A futures contract is where I make a deal with FakeCo for them to buy d bushels of corn from me for $x/bushel at the end of the corn season. I now know that I can safely spend $y in costs and not lose my farm.

The problem is that wall street types started trading futures contracts as if they were bonds, and then created derivatives on them so they drive the price up and make boo-coos of money.
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#25 AAAA

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Posted 24 August 2012 - 07:42 PM

well... in reality the goverment does already run them, if we could demand our imports be cheaper or raise taxes on exports.. i bet prices would drop. and really as far as the whole omg goverment relationship goes... it might sound a little bit tinfoil oriented, but and yes ive researched this.

1. the epa demands we buy gas with e85 or other blends of ethenal in it. it claims it burns cleaner. the fact is it doesnt and it leaves more unburnt gas to be handled by our cats.

2. by adding ethenal to our gas it allows the supplyer or the station to water it down a bit, because the hotter burning ethenal will let you burn more wattery gas then then normal unleaded wattery gas. yes all gas has some water in it but with the addition of ethenal it has more. and we are paying this higher price for a much higher consintration of gas.

3. the epa seems to be more against the enviroment in this instancem because forcing us to burn ethenal absolutly kills your mpg. dont believe me? find a supplyer of "pure" gas, alot of river towns with marinas sell it there for boats. fill up with ethenal inriched ... check your mpg. fill up with pure" reset your cpm. and check mpg... though i suggest running a can of seafoam in the pure and perhaps then refill the tank and check, why? because. as the vast majority of cars today (nearly all) are fuel injected... ethenal gums up your system it forces you to have less performance and burn alot more gas put out more emissions and spend alot more money, pure" gas and no i dont mean leaded.. just gas without ethenal. allows you a cleaner system better performance and a big differance in mpg....ever hear of hyper mileers?... they dont run ethenal. but alas ive gone slightly off track. my point is it could be viewed as the oil indistry controlls the epa in a way that works out best for the oil company because. you buy more gas get less mpg and polute more.... the epa knows this so why are they for ethenal? thus i conclude the epa is truly in controll of gas stations...and its not for the better...not even for the enviroment XD
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