Wealth and Want
... because democracy alone is not enough to produce widely shared prosperity.
Home Essential Documents Themes All Documents Authors Glossary Links Contact Us

 

Oil

“Free to Choose: A Conversation with Milton Friedman” — July 2006: http://www.hillsdale.edu/imprimis/ The following is an edited transcript of a conversation between Hillsdale College President Larry Arnn and Milton Friedman, which took place on May 22, 2006, at the Ritz-Carlton Hotel in San Francisco, California, during a two-day Hillsdale College National Leadership Seminar celebrating the 25th anniversary of Milton and Rose Friedman's book, Free to Choose: A Personal Statement. excerpt:

LA: Let me ask you about demographic trends. Columnist Mark Steyn writes that in ten years, 40 percent of young men in the world are going to be living in oppressed Muslim countries. What do you think the effect of that is going to be?

MF: What happens will depend on whether we succeed in bringing some element of greater economic freedom to those Muslim countries. Just as India in 1955 had great but unrealized potential, I think the Middle East is in a similar situation today. In part this is because of the curse of oil. Oil has been a blessing from one point of view, but a curse from another. Almost every country in the Middle East that is rich in oil is a despotism.

LA: Why do you think that is so?

MF: One reason, and one reason only — the oil is owned by the governments in question. If that oil were privately owned and thus someone's private property, the political outcome would be freedom rather than tyranny. This is why I believe the first step following the 2003 invasion of Iraq should have been the privatization of the oil fields. If the government had given every individual over 21 years of age equal shares in a corporation that had the right and responsibility to make appropriate arrangements with foreign oil companies for the purpose of discovering and developing Iraq's oil reserves, the oil income would have flowed in the form of dividends to the people — the shareholders — rather than into government coffers. This would have provided an income to the whole people of Iraq and thereby prevented the current disputes over oil between the Sunnis, Shiites and Kurds, because oil income would have been distributed on an individual rather than a group basis.

LA: Many Middle Eastern societies have a kind of tribal or theocratic basis and long-held habits of despotic rule that make it difficult to establish a system of contract between strangers. Is it your view that the introduction of free markets in such places could overcome those obstacles?

MF: Eventually, yes. I think that nothing is so important for freedom as recognizing in the law each individual's natural right to property, and giving individuals a sense that they own something that they're responsible for, that they have control over, and that they can dispose of.

Reprinted by permission from IMPRIMIS, the national speech digest of Hillsdale College, www.hillsdale.edu.

Bill Batt: The Nexus of Transportation, Economic Rent, and Land Use

This relationship has been demonstrated more empirically in a recent study by the Urban Land Institute. The author concluded that, for Portland Oregon,

each additional mile [traveled] translated into slightly more than $5,000 in housing costs; closer-in locations command a premium, those farther out save money. A ten-mile difference, all other things being equal, would amount to about $56,000 in new home value.

For a household in which one worker drives downtown (or at least to a more central location) to work, that ten-mile difference may amount to 4,600 miles annually, assuming 230 days of commuting and a round-trip of 20 miles each day. Moreover, if non-work trips to the central area and elsewhere doubled that amount, the tradeoff would be about 9,000 miles annually, which could mean a higher/lower driving cost of $3,000 annually, not counting the time saved/spent.(7)

That's the savings for living closer to the urban center by ten miles. If the urban resident has to rely upon a car nonetheless, subtracting some $3,000 annual travel expenses will still leave him paying again that much, and likely more, to own a car. Seven years ago James Kunstler put the true costs along with other experts at about $6,100 annually.(8) The American Automobile Association calculated that a car driven 15,000 miles in 2001 cost 51¢ per mile or $7,650.(9) Even that figure reflects only direct costs to the driver, not those passed on to society. One study calculated that the total costs of motor vehicle transportation to our society equal approximately one-fourth of our Gross Domestic Product (GDP).(10)(11) put another way, drivers paid only 10% of the true costs of their motor vehicle use.(12) In 1991 road user fees totaled only about $33 billion whereas the true costs to society were ten times that;

The latter figures include externalities like pollution and the costs of highway crashes. Hortatory public pleas for people to tune up their engines so they pollute less, inflate their tires properly, and drive more safely are not likely to change the reality that people are forgetful and fallible. Regardless, pollution-free cars are not available; people must drive to participate in this society. The consequences of SO2, CO2, and ozone are no longer a matter of debate; they are scientific fact. Despite frequent headlines about replacing the internal combustion engine, all the realistic substitutes also rely upon fossil fuel power directly or indirectly; solar powered cars are far in the future, if at all, and also fail to deal with any transition.  ...  However, if the direct pecuniary costs of driving increase in any substantial way, such as for an increase in motor fuel as many experts forecast, there will surely be significant changes in the tradeoffs involved in housing/transportation choices.(14) And indeed a radical shift in the use of petroleum looms closely on the horizon. The consensus view of most oil geologists is that worldwide oil extraction will peak sometime in about 2009 or shortly thereafter, then to fall off rather quickly. That graphic record and projection of oil mining is shown in Figure 3.(15) Making costs visible and linked to private personal behavior is one way to ensure that transportation pays its own way -- if it isn't already too late to save us.... read the whole article

Alanna Hartzok: CITIZEN DIVIDENDS AND OIL RESOURCE RENTS

Abstract: Citizens of Alaska have been receiving individual dividend checks from an oil rent trust fund since 1982. Norway's citizens receive substantial social services and invest oil rents in a permanent fund for the future. Nigeria has yet to establish a similar fund for its oil revenue stream. This paper explores the oil rent institutions of Alaska, Norway and Nigeria with a focus on these questions:

  • Are citizen dividends from oil rent funds currently or potentially a source of substantial basic income?
  • Are oil rent funds the best source for citizen dividends or should CDs be based on other types of resource rents?

The paper recommends full use of information and communication technologies for transparency in extractive resource industries, that resource rent from non-renewable resources should be invested in socially and environmentally responsible ways and primarily in the needed transition to renewable energy based economies, and that oil and other non-renewable resource rent funds should transition towards capturing substantial resource rents from surface land site values (ground rent) and other permanent and sustainable sources of rent for possible distribution of citizen dividends. ... Read the whole article

Bill Batt: Stemming Sprawl: The Fiscal Approach

Sooner than Americans are likely to bear the real burden of global warming's environmental consequences, they are likely to experience the onset of price rises for petroleum. Experts are divided, but among those best insulated from the pressures of bias, there is increasing consensus that the peak of oil extraction worldwide will come sometime around 2010 if not sooner.[11] Rising prices will not induce greater supply; it will not change the fact that the world will have passed the point of most easily extracted oil and will enter a long and increasingly steep period of declining availability. It is rather a matter of physics: When it costs more in energy to bring oil from deep in the earth than what can be extracted, it is not worth the investment. Even the greater wealth of American society will not insulate it from world competition over what is a limited and fungible commodity. How this alters the calculations Americans make about where to live and work will increasingly depend on the price they are willing to pay for transportation service. ... read the whole article

 

Mason Gaffney: Who Owns Southern California?

Major oil companies loom large in California land. Their chains of gas stations on "hot" corners are their essential means for dominating the retail market. Exxon, Shell, Mobil and Chevron are the dominant sellers. Of these, only Chevron is a California Company, and that only means its headquarters are here. Directors and major stockholders may live anywhere.

All oil firms overbought retail outlets in the gas station land rush of the 1960s, but closed stations are now profitably converted to other uses like mini-malls, drive-ins, etc. More important, these closed sites are preempted from competing sellers of gasoline. With such market power it has been possible for the majors to reduce the number of stations and convert to the now-standard non-service "service" station. For a look at what "service" really meant until about 1970, see the service station episode in Back to the Future with Michael J. Fox: it is of course exaggerated, but not as much as one might assume.

Acreages held or leased for oil and gas exploration and drilling are in the millions of acres per company. No attempt is made here to list the California holdings, but in oil-prone areas like Kern County some major holders are Texaco, Shell, Arco, Chevron, and Tenneco. Often other valuable assets like water and farmland and townsites are acquired as incidents. Thus Tenneco, in acquiring Kern County Land Company, also gained nearly total control of the Kern River, including Isabella Dam and Reservoir, wholly financed by U.S. taxpayers. read the whole article

To share this page with a friend: right click, choose "send," and add your comments.

Red links have not been visited; .
Green links are pages you've seen

Essential Documents pertinent to this theme:

essential_documents
Home
Top of page
Essential Documents
Themes
to email this page to a friend: right click, choose "send"
   
Wealth and Want
www.wealthandwant.com
   
... because democracy alone hasn't yet led to a society in which all can prosper