Monopolies

I saw a topic on the UWN with the oil drilling where Pro stated that if the government would get out and let the private sector take care of the market it would be better. Someone responded that they think that would make the prices go up. So that got me thinking about commodities that we are dependent on. I understand if Coca-Cola was to start raising their prices to high they would lose business, but this is also because there are many other options. Now look at natural gas in Utah. About your only option is Questar Gas, so if there wasn't a governing agent, couldn't they essentially jack the price up knowing there aren't many other options. I feel the same could be said for oil, we all need it in our cars, in the form or oil and gas and for many other process's. We depend on it and are at their mercy and they know this, so I tend to agree with the other gentlemen, I believe that they may take advantage of the situation. Also the private sector is famous for cutting corners to save a buck, so if there was no government committee overseeing the deep water drilling, wouldn't the situation be worse than it already is?

Why is Questar the only option? Is it because that is what the market allows, or is it because of government intrusion? Would we have cheaper fuel today under a free market or more expensive fuel? I ask, did you read the link I provided on the UWN about unintended consequences? It lays out the history of the rise of oil prices very neatly and easy to follow writing. This all started with government intrusion under JFK/LBJ, big time progressives, and was further worsened by Nixon/Ford/Carter, more big time progressives, with the CAFE standards. There was no OPEC until we forced the hands of foreign nations. Not only did this lead to higher fuel prices and gas lines in the 70's, but also to less safe autos on the roads.

As for natural gas to our homes being regulated and thus a monopoly. Back in the day telecommunications was under a government sanctioned monopoly and there was little progress being made in the services and the service itself until 1983 when Ma Bell was broken up into five 'baby Bells'. This lead to this thing progressives, and apparently "hockey" dislike, competition. This competition lead to LOWER phone bills, more services to choose from, better service to the customer, and major technological advancements in this field that have benefited the consumer. During the 'reign' of Ma Bell, they owned the phone(s) in your house, so they would come into your home to repo them if you were behind on your payments, you were told where in your house you could have a phone, and you were not allowed to even do basic wiring in your own home. Now, switch back to natural gas to your home. With competition why would the price go up instead of down? In truth, it wouldn't! If competing companies were allowed to vie for your business they would offer a better product at a lower price. In truth, monopolies are the cause of prices being higher, and the ONLY way to have/maintain ANY monopoly is through the assistance of the government. Monopolies can NOT exist in a free market. The ONLY reason there is only one option for natural gas and power is because of the government, not because it isn't possible under a free market climate.

jahan wrote:

Now look at natural gas in Utah. About your only option is Questar Gas, so if there wasn't a governing agent, couldn't they essentially jack the price up knowing there aren't many other options.

At the risk of repeating what Pro said...

You've brought up a good example that makes a point that's rather different from what you intended. The reason why natural gas from one company is the only reasonable alternative to heat your house is because of the long-term unintended consequences of regulation-caused market distortions.

There really are other alternatives to heat a house: electricity, coal, oil, propane, etc. You could even throw in solar, wind and various other passive sorts of heating and energy loss mitigation technologies. The main reason why gas from one company has a near-monopoly status for home heating is because the price and distribution has been kept artificially low and limited by regulations mistakenly designed to protect the consumer.

The country's natural gas companies benefit from this arrangement because they still make money. If, however, there were fewer regulations over the past 50 years, the gas companies would have raised their rates to just beneath the point at which competitors from, say, electricity or heating oil could compete. This would have created incentives for these disadvantaged competitors to innovate, be more efficient and, consequently, lower their prices to better compete with natural gas. A floating balance of prices and heating options would have resulted from this competition.

In other words, if natural gas prices hadn't been regulated, the entire situation of Questar having a de facto monopoly on home heating in Utah would likely not have occurred. The landscape would be vastly different, and we would likely have an innovative mixture of various choices and services. Gas likely would still be the dominant source of home heating because natural gas is relatively cheap to extract and distribute, but there would be multiple distributors and important niche markets for alternate technologies.

Instead, however, we're stuck with one company with no particular reason to innovate or become more efficient because the unintended effects of regulation has resulted in a stagnant lack of competition. Quite possibly, we have missed out on some amazing and innovative home heating technologies that might have been invented in this country over the past 50 years if only there had been a competitive atmosphere driving their development.