Bleacher Bums Forum

What I recommended was that at the end of a period of time, the lease ends, and the land, now with proven oil reserves, is put up for bid.  This gives the company a very strong immediate incentive to drill quickly, and to produce massive amounts of oil from that land before they either lose it or have to pay a much increased lease cost for the land.

Yes, and it was as misguided an idea then as now.

companies always have to balance the desire for immediate profits with the need for long term benefits.  In a time of rising oil prices, there is a strong incentive to restrict production in order to be able to produce in the future at a higher price.  Why produce more than necessary today, merely reducing prices without increasing profits.

This is what illustrates that it is misguided.

In a properly functioning economy, where profits are not the result of theft, or slave labor, or government regulation which distorts decision making or grants a monopoly, or the failure of an economic activity to internalize all of its costs, profit is a measure of how valuable a particular activity or good or service is to society.  Forcing business (or even pressuring business) to make decisions which reduce the total profit, even when that is by reducing the price (at the moment) which consumers pay for the activity or good or service, reduces the total benefit to society.

Wen an oil company delays production because it anticipates greater profit in the future, it is assuring that future demands are going to be met.  Creating pressures to coerce oil companies, or ANY company providing any good or service, to bring a product to market now, when society does not value it as much as society will value it later, is misguided.