Oil prices entered a stunning free-fall this week as the industry ran low on places to store the petroleum it can’t sell but keeps pumping amid the coronavirus pandemic.

The value of oil slated for delivery next month is at $30 below zero per barrel ― the first time in history the price of crude dipped into negative territory. The downturn has wiped billions from the balance sheets of industry titans like Exxon Mobil Corp. and Chevron Corp. The “financial bloodbath” analysts predicted last month overflowed as hundreds of U.S. oil producers limped toward bankruptcy and the industry laid off more than 6,000 workers in a single day.

Yet the chaos made a bullish investor out of a mortal enemy: climate activists. The world’s rapidly destabilizing climate, made worse by the industry’s decadeslong propaganda war, has made the oil companies prime targets for hostile takeovers, as they struggle to provide the good-paying jobs and economic stability they insisted was the necessary trade-off for trashing the atmosphere.

While history is littered with dozens of examples of governments taking command of oil production, particularly during times of turmoil, none have attempted what environmentalists now propose in the United States: Take over the oil industry to euthanize it.

The Sunrise Movement, the youth campaigners behind the Green New Deal movement, declared the price drop “our chance to publicly own oil & gas companies.” Genevieve Guenther, director of the project End Climate Silence and a ubiquitous Twitter gadfly, heralded a “once in a lifetime opportunity to nationalize the oil companies and administer their transformation and decline,” adding that it “literally feels like a nightmare that this opportunity is going to waste.” New York City’s chapter of the Democratic Socialists of America joked that naysayers could no longer question whether the federal government had the budget for a fire-sale buyout.

Putting the government in charge of oil production is hardly the domain of tin-pot despots. State-owned oil companies control the majority of the world’s known oil reserves. And the U.S. has a rich history of nationalizing industries during times of global upheaval, particularly in the lead-up to the world wars.

But of the nearly five-dozen examples of government takeovers of oil production in the past century, none were carried out with the explicit goal of permanently sunsetting the industry. Skeptics warn that even if a nationalization effort were to survive legal challenges, federal watchdogs are unprepared to guard against the high risk of abuse and corruption in a state-run oil company, and that the incentives to curtail oil production are not as clear-cut as advocates imagine.

Why To Nationalize

Calls to nationalize the fossil fuel industry started mounting soon after President Donald Trump took office and began rolling back the emissions regulations enacted during Barack Obama’s two terms in the White House. At first, it came across as a provocative thought exercise, meant to illustrate the length to which the government ought to go to stave off climate disaster ― and how relatively conservative the Obama administration’s market-tweaking regulatory approach was in comparison.

Barcroft Media via Getty Images Nationalize it?

Then United Nations scientists published a 2018 report that projected the only hope of keeping warming within 1.5 degrees Celsius above pre-industrial levels, roughly half a degree hotter than average temperatures today, was in slashing global emissions in half by 2030. The finding jolted the global debate over climate policy and put in plain terms the unprecedented economic changes required to avert catastrophic warming, including reducing the percentage of global energy coming from oil by 37% by the end of this decade, and 87% by 2050.

The U.S. oil industry went the opposite direction. In 2019, production increased 11% to a record 12.2 million barrels per day, according to U.S. Energy Information Agency data. Analysts at the oil giant BP pegged the number even higher, at a record 15.3 million barrels per day, in its yearly review of global energy statistics, published last November. By that measure, the U.S. accounted for 98% of all global growth in oil production between 2018 and 2019, analyst Robert Rapier wrote in Forbes.

Oil companies, meanwhile, battled nearly every major state or federal effort to gradually scale back demand for petroleum. In 2018, the industry spent a record $31 million on an ad blitz opposing a carbon tax proposal in Washington state. Even as the pandemic raged, the industry’s backdoor lobbying bore fruit as the Trump administration advanced a plan to gut fuel-mileage standards for new cars, ensuring a future for gas guzzlers.

All that makes the concept of nationalizing oil producers “a very useful and constructive idea to put on the table,” said Alexandra Gillies, an adviser at the nonpartisan Natural Resource Governance Institute and author of the new book “Crude Intentions: How Oil Corruption Contaminates the World.”

It’s a time tested strategy. Governments nationalized, or renationalized, oil production nearly 60 times over the past century or so, said Paasha Mahdavi, an assistant professor of political science at the University of California, Santa Barbara and author of the new book “Power Grab,” a political history of public takeovers of the energy industry.

He identified three reasons why a government would normally nationalize the oil companies in its borders. A government might believe that the private company drilling its oil is cheating on its taxes or withholding information, a conflict inflected by the meddling of imperial powers from the West, as in Iran in 1951, Syria in 1968 and Algeria in 1969. A government might want to pillage its country’s oil producers in a bid to stay in power, as Libyan strongman Muammar Gaddafi did in 1973. A government could also just want what Mahdavi calls “production elasticity,” the ability to control oil output at will, as was the case when Saudi Arabia cobbled together the world’s biggest oil company in the mid-1970s or when Argentina renationalized its state energy giant YPF in 2012.

What activists are currently proposing would best fit in the third category, as “we right now just don’t have the tools needed to tell firms what to do because it’s a private market,” Mahdavi said.

The Texas Railroad Commission ― which, despite its name, is the state agency that regulates oil output ― can set maximum levels of production, which it is now considering in response to the price drop. But those regulators “don’t have bite the same way as if you had a nationalized oil company and you could just tell them, ‘Look, this is the level of production for next month and that’s how it’s going to be,’” said Mahdavi.

“The idea is to nationalize to ultimately get production down to zero, but doing it on your own timeline,” he said. “Part of the worry today is the price collapsed, it’s negative, and it’s not clear what the strategy is. What is going to happen to millions of workers?”

No moneymaking industry orchestrates its own obsolescence, and oil is no different. Royal Dutch Shell joined BP and Spanish oil major Repsol earlier this month in announcing goals to produce net-zero emissions by 2050, though the pledges aim to primarily offset emissions and wouldn’t significantly scale back the drilling or burning of oil. Occidental Petroleum, one of the U.S. companies hardest hit by the price plunge, invested heavily in technology to capture carbon emissions, but uses the waste product primarily as a tool to extract hard-to-get oil.

Exxon Mobil, by contrast, has touted its research in algae-based fuels, but has doubled down more than almost any other oil major in new drilling, including an enormous new project off Guyana, a poor country on South America’s northern coast.

Stable employment is a key benefit of national oil companies. In India, for example, the state-run Oil and Natural Gas Corp. serves as a repository for recent graduates who can’t find work elsewhere, going on regular hiring sprees.

Democracy Collaborative A chart from the Democracy Collaborative shows the long history of the U.S. nationalizing private companies in times of crisis.

The industry “was in a lot of trouble before the COVID-19 pandemic had a massive effect on the economy,” said Johanna Bozuwa, a researcher at the Cleveland-based Democracy Collaborative, a left-leaning think tank behind some of the most recent proposals to nationalize U.S. fossil fuel producers. Oil companies, particularly smaller producers, were already dealing with mounting debt and expanding portfolios of assets whose value would virtually evaporate overnight once countries adopt serious policies to curb climate-changing emissions, she said.

If these companies simply go bankrupt, “they’re going to shed their commitments to workers and communities first” and “come back on shorter and thinner margins and with fewer environmental and worker protections,” Bozuwa said.

Nationalizing oil producers, in theory, allows democratically accountable leaders to prioritize societal needs ― from staving off widespread unemployment to dialing back greenhouse gas emissions ― over dividends to investors.

“This is first a way for us to make sure these community protections aren’t given up, but instead, by putting them in public ownership, we can say these are things we’re seeking to save,” Bozuwa said. “In the longer term, we can ensure that an industry that absolutely needs to be wound down can be done in a way that centers workers and centers staying within our climate limits.”

How To Nationalize

Bozuwa outlined five policy levers the federal government could pull to take ownership of oil producers in a white paper published this month as the Trump administration vowed to help companies financially decimated by last month’s fall in crude prices.

The most straightforward pathway to nationalization would be for the Treasury Department to make public ownership a condition of receiving federal bailout money amid the pandemic, the report suggests. But companies would be unlikely to accept the money. If the companies then went bankrupt, the government could seize control, as it did when automaker General Motors filed for Chapter 11 in 2009. But doing so would provide little aid to the workers laid off in the meantime. Another clear, if unlikely, path would be for Congress to pass legislation banning the private ownership of fossil fuel companies and establishing a process to transfer ownership to the government.

The simplest argument is that it’s a one-time buyout of the political capital of the fossil fuel industry. What if we could neutralize that power in one fell swoop? Mark Paul, Roosevelt Institute

But the two remaining ideas could be the most forceful. Citing its authority to regulate systemic risk by buying and selling financial assets, the Federal Reserve could simply purchase controlling stakes in publicly traded oil companies. Then, to net the privately held portion of the industry, federal regulators could use eminent domain, first offering to buy the companies outright and, if rebuffed, letting courts decide what fair compensation would be.

“It’s probably going to take a combination of these strategies,” Bozuwa said.

The legal challenges would be formidable.

The oil and gas industry developed a sprawling influence-peddling network over the past century, funding libertarian think tanks, dark-money political action committees and corporate lobbies with a long record of successfully recasting modest efforts to limit climate pollution as assaults on personal liberty. Some of the groups were behind the protests against lockdown measures to contain the deadly pandemic this month in states like Michigan and Colorado. Demonstrators brandished assault rifles and signs that demanded the re-opening of golf courses and equated social-distancing rules with Stalin-era Soviet tyranny.

It’s easy to envision the backlash against what would likely be cast as federal land grabs. Unlike most countries, owners of surface property in many U.S. states also own the rights to any minerals or fuel below, and it’s common for landowners in oil- or gas-rich rural areas to make money off leases to drilling companies. Lawsuits from both individuals in states that have already shown a willingness to marshal extensive government resources to litigate on behalf of fossil fuel companies would likely pose significant hurdles to carrying out a nationalization scheme.

That’s an argument for taking a piecemeal approach to nationalization, completing a takeover of oil leasing on federal- and state-owned lands and leaving wells on private land as a last step, giving federal officials ample time to “devise a policy that would allow for just compensation before getting into conflict,” Mahdavi siad.

International courts are another murky issue. Investor-state dispute settlement, a system of investor courts set up under international trade agreements, have historically favored companies in disputes over public ownership. In 2013, for example, courts ruled that Argentina owed Repsol $5 billion after the South American country’s Congress voted overwhelmingly to bring YPF back under public control.

Things could play out differently for the U.S., whose military and financial hegemony has historically imbued international institutions with a pro-corporate bent.

“If the U.S. were on the side of nationalizing, playing the dominant role it does in international courts, you could see a norm shift,” Mahdavi said.

What Happens After?

Public control of oil production is no guarantee it will wind down, Gillies said.

“If the government isn’t going to prioritize the kind of just transition we need to see, then they’re not going to pursue that agenda through the ownership of these companies,” she said. “On top of that, the companies will continue to have an internal desire to preserve their relevance.”

Corruption at state-owned oil enterprises in countries like Angola or Syria, where civil-society groups are significantly weaker, is common. But Gillies pointed to the sweeping corruption scandal at Brazil’s state-owned oil giant Petrobras. Despite considerable oversight, including disclosures required for the company to be listed on the New York Stock Exchange, federal prosecutors in Brazil indicted more than 400 officials for bribing Petrobras executives to award inflated contracts to politically connected construction firms.

“The Brazil example is instructive because you had a middle-income country, democratic, had very sophisticated corporate governance structures, and still was susceptible to one of the biggest corruption schemes the world has ever seen,” Gillies said. “And Petrobras was not even the worst-case scenario when it comes to national oil companies.”

If the U.S. nationalized its oil production, the job of rooting out that corruption at those operations would fall on the Department of Justice and the Securities and Exchange Commission, Mahdavi said. Those agencies, in their present form, look unprepared for that task.

The SEC proposed new rules just last month that critics say undermine the spirit of a 2010 law requiring oil companies to disclose payments to governments at home and around the world. The statute was meant to increase the transparency of state-owned oil companies, limiting their ability to bribe officials. But the proposed rules would make the disclosures so general it would be difficult to decipher anything meaningful, much less information that could be used for enforcement. The Justice Department, meanwhile, dramatically scaled back enforcement of anti-pollution laws since Trump took office in 2017.

Advocates say a painful shift away from oil is coming either way, so the question is not whether to nationalize, but how much misery will be tolerable in the process.

“Markets aren’t good at large-scale transitions ― for that, you need government planning,” said Mark Paul, an economist at the progressive Roosevelt Institute.

You also need to remove the biggest obstacle to implementing those plans. “The simplest argument is that it’s a one-time buyout of the political capital of the fossil fuel industry,” he added. “What if we could neutralize that power in one fell swoop?”