During the financial crisis in 2008, the federal government protected the economy by bailing out companies it considered “too big to fail.” Normally, the government protects the economy from companies that are too big to exist. Companies that prevent competition by dominating an industry are called monopolies. The Justice Department or Federal Trade Commission use federal anti-trust laws to break them up.
But what should the government do about companies that use deception to dominate a market to the detriment of the economy and the long-term welfare of the American people? What should it do when an industry repeatedly violates the public trust?
In other words, what shall we do about the oil industry? By covering up its knowledge that its products are destabilizing the climate, funding a denial campaign and pressuring Congress not to address global warming, big oil should have lost its social license to operate long ago.
Instead, it has used its influence and cash to sustain billions of dollars in annual taxpayer subsidies (nearly $6 trillion for fossil fuels in 2020) and cut-rate permits to extract oil and gas from public lands. For years, these practices suppressed the ability of clean substitutes like solar and wind energy to compete. More recently, the industry has opposed carbon pricing, which would correct market signals by better reflecting the actual social and environmental costs of carbon fuels.
The American people also underwrite the industry by sacrificing their health to air pollution, suffering through economic recessions triggered by spikes in oil prices and losing the services of degraded or destroyed ecosystems. Those “subsidies” cost more than $635 billion annually, according to the International Monetary Fund (IMF).
To discourage Congress from supporting President Biden’s climate-action agenda, the six biggest oil and gas companies spent nearly $120 million on 746 lobbyists last year, according to Taxpayers for Common Sense. As of April, they spent almost $50 million on campaign contributions to candidates in this year’s elections. To burnish their image despite, oil companies spent $10 million on Facebook ads in 2020. The five largest companies spent $36 billion to promote themselves from 1986 to 2015, peaking when Congress nearly passed a carbon-pricing bill in 2010.
The International Energy Agency says the world’s path to net-zero carbon by 2050 includes no new oil and gas fields or coal mines beyond those already committed last year. Nevertheless, the industry reportedly plans scores of new oil and gas projects that would push global carbon emissions beyond the limits of the Paris climate accord.
Clear and present damage
The U.S. Energy Information Administration says if current energy policies continue, fossil fuels will still dominate America’s energy mix in 2050, crude oil production will set records, and natural gas exports will drive the production of that fuel. The nation’s cost would be $2 trillion a year by 2100, according to the White House Office of Management and Budget (OMB). Climate-related weather disasters in the U.S. have already cost $765 billion in the last five years, including $145 billion last year.
Big Oil has made a show of concern. In 2021, 12 of the world’s biggest oil and gas companies pledged to achieve “net-zero emissions” in their operations. However, research soon found “the industry’s magnitude of investments and actions does not match discourse” and “accusations of greenwashing appear well-founded.”
What should the federal government do? First, it should acknowledge that the quickest and most effective way to stabilize the climate is not to waste more time trying to decarbonize carbon fuels; instead, it should facilitate a shift to genuinely clean and renewable energy.
Second, it should fix America’s energy market by eliminating policies that distort price signals. With prices that accurately reflect full lifecycle benefits and costs, renewable resources would advance more quickly because they are free, inexhaustible, ubiquitous and naturally clean.
Third and most important, the government should nationalize Big Oil. That would allow the government to manage the industry’s drawdown, a process the private sector is ignoring. A coalition of climate-action groups showed the world’s 60 largest banks financed nearly $4 trillion in fossil energy projects over the last five years, investments that could be stranded and lead to more requested taxpayer bailouts when the carbon bubble pops.
“If ever there was an industry that merited nationalization, the fossil fuel industry is it,” columnist and podcaster Thom Harman writes. A significant number of analysts agree.
What is nationalization?
A government nationalizes an industry when it takes control and manages it. The U.S. government has done this many times, including in 1989 to rescue the savings and loan industry and in 2008 when it bailed out banks, investment houses and insurers.
“The United States has a long and rich tradition of nationalizing private enterprise, especially during times of economy and social crisis,” researcher Thomas Hanna notes. Since World War I, the federal government has nationalized railroads, telegraph and telephone networks, arms manufacturing, gold markets, military aircraft production, coal mining, steel mills, airport security, mortgage companies, automakers, the production of other raw materials, and even more than a dozen foreign-owned companies.
“We will likely need to take over and decommission the large fossil fuel extraction corporations that are both one of the leading causes of climate change and one of the primary institutional impediments to addressing,” Hanna concludes.
In one scenario, the federal government could buy a controlling interest in the three most dominant oil companies, ExxonMobil, Chevron and Conoco. The cost would be around $350 billion, a trivial amount compared with unmitigated climate change or the $5 trillion the government spent on COVID-19 relief, the nation’s defense budget this year ($778 billion), or fossil fuels’ $630.5 billion annual damages to public health and the environment.
The federal government typically nationalizes companies to save them. In this case, it must nationalize Big Oil to save us all from a future we don’t want.
William S. Becker is a former U.S. Department of Energy central regional director who administered energy efficiency and renewable energy technologies programs, and he also served as special assistant to the department’s assistant secretary of energy efficiency and renewable energy. Becker is also executive director of the Presidential Climate Action Project, a nonpartisan initiative founded in 2007 that works with national thought leaders to develop recommendations for the White House as well as House and Senate committees on climate and energy policies. The project is not affiliated with the White House.