Final answer:
The government oil company aims to achieve vertical integration by taking control of the entire supply chain to reduce costs and increase efficiency. This strategy, which was utilized by historical figures like John D. Rockefeller, could also result in economies of scale.
Step-by-step explanation:
When a government oil company decides to take control of the entire supply chain from locating deposits to retailing the fuel to consumers, this strategy is known as vertical integration. Vertical integration allows the company to manage all aspects of a product's lifecycle, thereby potentially reducing costs and eliminating the reliance on outside entities for stages of production and distribution. This approach was famously used by John D. Rockefeller with Standard Oil, leading to significant control over the oil industry and economies of scale through consolidated operations.
Economies of scale are another potential outcome, where the increase in the quantity of output can lead to a reduction in the cost per unit. However, in this particular case, vertical integration is the primary objective of the government oil company as it seeks to navigate issues with private refineries and transporters and establish a more streamlined and controlled production process.