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View Diary: Countdown to $100 oil (40) - Oil production plateauing (198 comments)

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  •  Oligopoly (0+ / 0-)

    With a limited number of companies controlling the majority of energy distrobution it's extremely difficult for outside companies to enter the market.  Market forces rely on competition to take effect.  Subsidies encourage companies that would rather make an increasing profit off of a dwindeling resource, to consider investing in other resources.

    If there were 30 to 50 oil companies, then it wouldn't be an issue.  They would be fighting to get a leg up in the emerging market.  As it is, the oil companies have incentive not to let a new market emerge.  Even if an oil company discovered a way to turn sunshine into carbon free fuel at 99% efficiency, there's no reason for them to make a product using it.  It would destroy the existing market, and give them no garuntee of a leading place in the new market.  The best they could hope for is a boost in name recognition due to the discovery.  Unfortunately, warm fuzzy feelings don't translate into cash.

    Though I have to admit I hate subsidies as much as the next guy. There's not a lot else that can be done.  Existing corporations intentionally do everything they can to increase the costs of entering their market.  Want to compete with Fed Ex?  Fine go get a few thousand trucks, planes and drivers.  You can pay for that up front right?  Want to compete with circuit city?  Fine, buy a half million units from each of their suppliers to match the bulk pricing they get and then open up a few hundred mega stores.  A second mortgage will cover that right?

    The end message is that yes, you can compete with the big boys.  If you already have enough money to compete with them.  If you want to change what they're doing then the only options are regulation, boycott or subsidies.  Since regulations and boycotts are both destructive methods of control, that leaves subsidies as the constructive method.

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