Yeah, it works great for Saudi Arabia... The public does not benefit from government ownership of industry. Special interests who gain control of government property rakes in all the money and raises prices above market value because they can, since they are funded by the bottomless pit of the Treasury.

Take a Macroeconomics class...

I think you got it all wrong. Maybe it went bad for Saudi Arabia but for other developing countries, it might work. It will definitely work for countries who imports oil and depends in independent oil companies for such products; for the government could lower their prices more because, (1) the coampany will be tax exempted; (2) its main purpose is not exactly to gain more profit but to take control of the prices of petroleum products (If they will lower their price, the independent oil companies like shell, petronas and others will follow their price for they need to compete in the market) and (3) If they will assume the prices of the other oil players, they will definitely earn thus expanding the resources for the government. And the initial investment for the government oil company will not come from the government funds but from retail bonds (bonds that are in small amount) and stocks. And to ensure that it will not be used for corruption, a person is allowed to purchase only one stock. What you think?

Raymond, you have missed the boat. Price controls are not a new concept and have failed in every implementation. The Soviet Union widely implemented price controls on EVERYTHING, that didn't work. New York City placed apartments under rent control. You will find that rent control apartments do not receive any improvements and frequently become unsuitable for human occupation.

Price controls are guaranteed sources of waste, corruption & usually end up as social transfers upward to the rich. Those who can afford a little corruption up-front can benefit from any price controls in the future.

Anyway, that's enough for now. Your idea violates all basic market rules and would require a totalitarian government for implementation, but it is bound for failure either way.

It doesn't have to be a totalitarian government to implement this kind of companies. Here in our country, there are some small scale oil players and they sell a lot cheaper gasoline. The only problem is that they don't have enough resources in order for them to put more gas stations. This idea don't violate any market principles. The oil company spearheaded by the government will only compete with prices, not dictate or regulate oil prices. The current problem is that we are all controlled bylarge oil companies. they dictate prices. Here in the Philippines, we have three big oil player, Shell, Caltex and Petron. But their prices are all the same. For example, if the price of oil in the world market increases, they will increase their price instantly. But what their selling is the oil that they bought for some x months ago. Why they have to increase their price if what they are selling at the moment is the more cheaper oil. And in this idea, if the government company will follow the oil prices in the market, at least we are sure that it will go into the country's funds. And if the prices of oil in the world market rises very high, the government oil company can adjust the prices of their petroleum products so the people can afford it. I think that these companies be supported by a legislature and define clearly its purpose for existence, to sell affordable petroleum products and to earn extra revenue for the government.

Oil has become a fairly well adjusted market and OPEC is losing its market power as world demand begins to approach their current production capacity. You have observed this perfectly. When the world oil price rises, local prices rise. That is perfect. Those businesses expect their prices to rise in the future, so they raise their prices. You may also notice that the prices fall too, when these businesses expect their prices to fall in the future. Gasoline prices are rising because demand is high, not because of some evil collusion. This will be my last comment on the subject. For futher information please visit: Online Economics Textbooks.

It is of common knowledge that demand affects prices. When demand for oil increases, the prices will definitely increase. But my point is not really that related with this concept. I suggest that the government should pursue into this kind of activity for it will definitely help the country and its citizens in terms of finances. I also do not imply that there is an “illegal, evil, or fraudulent” activity in the oil market. I only think that there is a monopolistic competition between the oil companies.

My point is why the government can enter into this kind of business venture when they already doing this in different sectors like in food, health and educational services. It is not that the government will alter oil prices in the world market, but, they can adjust the prices of finished-products of oil for they will be the one who will process it. If the government will enter into the oil scene, the country will surely benefit from it for they can sell gasoline at a lower price so the people can afford it. It is the consumers’ choice if they will buy from government owned gas stations or from the multinationals.

As I keep on reiterating, it is a win-win situation for the country for the people can afford cheaper gasoline and it will boost the country’s finances.

Just curious. Isn't the issue here more political than economic? Then again perhaps any side of the discussion can be better understood through the respective mental spectacles of the writer. For what that is worth. All points are well taken.