Crazy Idea

So today I was talking to one of my friends. Lets just call him Philosophy Major Dan.

Now when having a conversation with PMD (Philosophy Major Dan) topics can (and do) vary greatly. And when I say "vary greatly" I mean that sometimes things turn into a topic willy-nilly.

For whatever reason, the topic for the day turned to energy policy and oil companies. We all know the deal here - record high fuel prices for us consumers, yet record breaking profits for them. This means that not only are the costs being passed on to us, a whole lot more is also being passed to us.

I think the rub for the public is the whole record profits thing. Our purchasing power is declining, while the oil companies are raking the cash in. Ill bet that along with those record profits are record bonuses for executives.

Now I do not know about you, but my pay is not increasing. Not yet anyway. I just started the new job very recently, so I have not had a performance review yet. But for many millions of people, there are not any performance reviews. There is not any annual cost of living increase. And even my annual cost of living increase might not keep up with the pace if fuel prices keep climbing, because my base pay is not very high right now.

But even so, about a year ago fuel prices were pushing $2 per gallon - now prices are pushing $3 a gallon (these are national average figures, numbers for your region could differ). According to my lazy math, this is a 50% increase.

Now this does NOT mean that the cost of everything will increase by the same 50%. One unit of fuel represents X amount of energy. So if a product requires X/10 units of energy to produce, the price increase due to energy costs will only work out to 5%. Something like that. My lazy math might be a little bit too lazy here. If you feel like looking up the actual formulas and working it out for yourself - go right on and do that. This is a free country.

But I get a cost of living increase! Why should I complain here? Well last year's increase was 3%. Far short of 50%. Even short of 5%. The cost of living adjustment calculation is based on a "basket of goods" that some egghead makes up. If you buy EXACTLY the stuff in that basket, in EXACTLY the same proportions, then your cost of living EXACTLY matches your rate increase (if you get one).

But nobody buys only the stuff in the basket. Well some people might, but they are not normal. So even if you get a cost of living increase, chances are it does not match your actual increase.

Given all this evidence, a crazy idea popped into my head!

Electric companies are regulated monopolies. They operate as private companies, but their price per kilowatt hour is regulated by the state. They ARE allowed a profit, but they are not premitted to charge whatever they please. For prices to increase, they have to demonstrate a need (other than "the president of the company wants a new yacht") to the state. Florida operates this way.

What are acceptible reasons for raising the cost? Well, building a new power plant would be one, but the most common reason cited is "oil costs".

This got me thinking. Why not fold the oil companies into a regulated monopoly system? As it is now, federal subsidies are floating the industry. Why should all this tax money, and more money from our pockets, go to make some oil barron richer than they are now? Yea, there are stockholders who invest in these companies - and not all investors are already rich. I know that there are working people who invest, and retired people who hold stocks. However, for the most part, the BILLIONS in profits every quarter do not go to the little people. Thats right, BILLIONS per quarter in profit. And there are 4 quarters in a year.

I work at the airport. It is said that 1 on 4 jobs in Dade County are related to the airport. There are people like me who work for the county, there are airline employees in the terminal, there are airline employees on the ramp, there are federal government employees (CBP and TSA), there are resturants, there are shops, you name it and it is there.

Fuel increases are hurting the airlines. Think about this senario for a minute. American Airlines folds. Miami is a hub for AA. Instantly, THOUSANDS of people who work for AA would be jobless. And with close to 1/2 the flights into the airport gone, entire concourses could close. This means that TSA and CBP would have to get rid of positions. Less people in the airport means that not as many places to get food would be needed. And so on.

And where could all these jobless people go? It would be a mess.

So what would be worse for the economy? Having the public take over all the oil companies, or allowing the oil companies and their hunger for record profits to cause the cost of EVERYTHING to increase on a whim? Would you loose any sleep over some executive having to downsize his $50 million yacht to a $25 million yacht? I think I could still sleep at night.

Going to a regulated monopoly system would mean an end to their record profits, but it would also mean an end to the subsidies. They would still get some profits, so it is not like being the CEO of Exxon would suddenly be a crappy job. He would still be able to afford health insurance and a ski vacation to Aspen.

The energy sector can make or break the entire system. I do not trust the greed of oil executives with this much power. The public regulates power companies, and I do not see any electricity shortages. FPL can not make as much as they want, but the CEO still has a pretty sweet pad. FPL offers many good paying jobs. There is no evidence at all that public regulation of FPL has hurt the company.

But it will never happen. The oil barrons are too happy raking in our money on both ends (subsidies from the federal government, and profits from the people who pay the taxes to the federal government so that they can give to to the oil industry). And they pretty much own the government at this point.

Stability VS profits. You decide.