Student Post: Private Ownership of Oil & Gas Rights

At the beginning of the section titled “The Oil and Gas Lease”, it was mentioned that “[t]he United States is unique in that private landowners can own oil and gas and other minerals in the ground as real property.”   I found this piece of information quite interesting, and wondered whether the private or governmental ownership of mineral rights would be more advantageous.

First, let’s look at the benefits of privatization.  The main argument here is that by privatizing an industry the competitive market will naturally force companies to strive to be more efficient as to lower costs and still meet demand.  In doing so, companies will be encourage to develop new technologies to aid in their production of oil and gas, while still maintaining low costs.  Although this advancement in technology is necessary for the industry’s growth, the value placed on developing certain technologies, such as in safety, may not be as high as developing the new ways to find oil, which is where having government owned minerals may be preferred.

Since the government doesn’t have a bottom line of making profit, they can focus on other aspects of oil drilling that may be more important to the general public, for example the safety and security on oil rigs.  One could argue that the same level of safety and security could be met by placing government regulations on oil companies without taking total governmental control. Although just having governmental regulations does help encourage private companies to meet important social needs, the temptation to make a profit may still be too much for them to resist. This was evident in the company British Petroleum, who are now famous for the Gulf of Mexico oil disaster.  For several years leading up to the accident BP had been continuously paying fines for breaking both environmental and safety regulations.  This occurrence had happen so often that it leads one to believe that it just became cheaper for BP to pay the fines as oppose to investing money into meeting standards.  On the other side of this argument BP could be considered an outlier and that for the most part the majority of the oil companies are meeting the required governmental standards.  But if this is true one would still have to wonder whether those standards are high enough to protect other important needs for a healthy society, such as a clean environment, or whether the need to meet the bottom line is too high priority for the United States’ oil industry.