Why does the government buy oil/gasoline/fuel? They do not seem to buy it at cost, so would it not be cheaper to form a national oil company with its own wells that catered specifically to government agencies that could buy it at cost, rather than the market rate?
Many government agencies have contracts that specify cost-plus pricing, i.e. production cost plus a specified profit margin markup, but that does not seem to be the case for oil/fuel, etc.
Do other countries do this? I suspect that oil producing states provide at cost, or free (which I admit is worse) oil to their governments.
Consumers may arguably be tied to market prices, but why should government agencies? I would think the savings from inflated prices would be rather substantial, but I cannot find any data that addresses this issue.
Wouldn’t setting aside part of the country’s production “for government use only” be rather unpopular with the people who do have to suffer through the rising price of gasoline?
That’s one reason I am curious if other nations use this policy, but I don’t think so. As it stands, the people are suffering twice - once for their own use, and again through their tax dollars for public/governmental use. I have not encountered many people upset over the fact that the government buys other items for less than the public, and I think many expect that the government should pay less, at the very least through volume discounts.
Since oil and other natural resources are ‘owned’ by the government, it seems odd that they should not reserve a part of those resources for their own use, instead of leasing or selling the extraction rights to commercial enterprises then buying back the finished product. Why should they not cut out the middleman? I am essentially recommending that the government needs a bit of vertical integration. It has certainly been successful at horizontal integration (in creating programs, not necessarily in running them). Public utilities are fairly common, but not public oil wells and refineries.
So this is a bigger issue than just oil, but oil is one of the major expenses of government at the moment (after oil, government-owned paper mills would be next on the agenda.)
But most oil consumed in the US is not produced in the US. A national oil company would only be able to provide oil for government uses if it monopolized domestic oil production, and forced consumers to buy foreign oil.
And the notion that a government run oil company would be cheaper than simply buying gas is kind of naive. Seriously. Lots of countries have national oil companies, but these aren’t to provide gasoline to the government, but rather to sell oil overseas. This is a revenue stream for oil producing states rather than a means of saving money. Of course, these states also typically provide below-cost gasoline to the public, so people in Iran pay only a few cents a gallon for gas. Now imagine the incentives for consumption this creates.
The government buys lots of cars, should the government have a auto manufacturing facility to build government cars? They buy lots of airplanes, should they have a government airplane factory? They buy tanks and aircraft carriers and destroyers and rifles, and none of these are produced at government owned factories, but rather purchased from private companies.
It is cheaper in almost all cases to buy goods produced by private enterprise than to set up a government run bureacracy to manufacture those goods. And private companies operate the same way. Microsoft consumes reams of paper and purchases innumerable computers, but they don’t own a paper plant or a computer manufacturing plant. They build new office buildings all the time, but they don’t own any dump trucks or cement mixers. They have large lawns and gardens but they don’t own any lawnmowers or employ any landscapers, they hire landscaping firms to do that for them. And so on.
Russia and Venezuela have national oil giants. They’re woefully inefficient, to the point that government protection is the only thing keeping them from being eaten alive by private companies. We don’t want that in the US.
I don’t think people think that the government should pay less for things. I can only think of one area in which the government pays substantially less for commercial items, and that is prison made goods, like furniture and stuff. Even that is very controversial, because furniture manufacturers are upset at the uneven playing field. I’m pretty confident in saying that more people would rather have a shot at selling stuff to the government in a role like a big consumer, rather than expecting a reduction in taxes due to government having some special purchasing powers through state owned enterprises.
And, as others have said, state owned enterprises tend not to be very efficient animals. Competition does a great job of making things more efficient.
While the government might be able to explore and drill, there is no way they could effectively manage the entire distribution network to reach all government vehicles. Duplicating all of the steps is not for the faint of heart.
They already get a special rate when they use their government fleet cards at retail gas stations. They get a little money from leasing oil & gas exploration rights. They get a LOT of money from the taxes paid by the oil & gas industry.
I don’t see the need for a Federal gas station business.
Why shouldn’t they? Market prices aren’t some conspiracy by big business to screw you. They are generally the best price of a given resource, given its availability.
When government justs prints money which is essentially what you are suggesting, it increases inflation for the rest of us. Sometimes significantly.