A peek into the past : No bailouts for the oil and gas industry

On December 14, 2008 — No comments

With the proposed bailouts for the American automobile industry making headlines, I can’t help but think about the times when the oil and gas industry faced similar dire straits. The 1980s oil glut was a surplus of crude oil caused by falling demand following the 1973 and 1979 energy crises. The world price of oil, which had peaked in 1979 at more than $35 per barrel, collapsed in 1986 from $27 to below $10. Tens of thousands of employees lost their jobs due to the drop in demand yet in spite of the six-year dramatic decline, oil and gas companies never received government assistance to bail them out.

So what will the “bail out” really do for the automobile industry in the long run? Is a Band-Aid really the proper remedy when it would take a tourniquet to stop the bleeding? The energy industry overcame its malady without a handout and it might be the proper medicine for the automobile industry to do the same. Think about the airline industry for a moment. I don’t want to single any one company out, but I bet we can all list a few who have filed for Chapter 11. The consequences didn’t mean consumers couldn’t grab a flight to Boston or Mexico, but forced the airlines to reorganize their operations.

And let me add that while the United States and the rest of the world is extremely dependent on oil and natural gas production, we could all live without the next Hummer H2.

Now I’m not an investment banker, economist or Nostradamus, but taking a lesson from our history leads me to believe that companies have been able to come out on top without Washington stepping in. And on a macro level, what does this teach us as an American people? I know too many who have lost their jobs through no fault of their own and I don’t see the government stepping in with severance packages.

Isn’t America based on the foundation that if you work hard you will succeed? What ever happened to “teach a man to fish?” I have yet to hear of the wise adage that states “grant GM multi-billions when they cry Uncle.”