Introduction
As an international investment banker with Dresner Partners, I am very
interested in the politics of governments and how they affect the flow of
business transactions globally. In multiple trips to China, India, Turkey and
other emerging economies, I have observed first hand the voracious energy
appetite of these high growth economic engines. As the global energy industry
comes under ever increasing political scrutiny, and as governments worldwide
beg into favour and fund alternative energy technologies, these politics become
ever more important.
Historical Nationalization of Oil &Gas Reserves
Global trends in the nationalization of oil and gas reserves are well
understood with the historical formation of national oil companies such as
Petroleos de Mexicanos (PEMEX), Saudi Aramco, Petroleos de Venezuela,
PetroChina and Russia's Gazprom. While many private citizens in most countries
usually assume that the major oil companies control their product, in fact
nearly 80 percent of the world's oil reserves are held by national oil
companies with no private equity, and there are 13 state-owned oil companies
with more reserves than ExxonMobil, the largest public multinational oil
company.
The politics of nationalized oil usually revolve around jingoistic themes
that a country's oil is being "taken" by foreign oil giants. But in reality,
the economics of nationalized oil most always revolve around a few elites
gaining extraordinary wealth at the expense of their country's citizens. The
history of oil-dependent countries has produced what Stanford University
professor Terry Lynn Karl has called "the paradox of plenty."
Relatively speaking, oil creates few jobs and it distorts and destroys jobs
in other economic sectors. The export of oil distorts an economy, for example,
by increasing a country's exchange rate."Oil rents drive out any other
productive activity," said Karl. "Why would you bother to produce your own food
if you could buy it? Why would you bother to develop any kind of export
industry if oil makes your money worth more and that hurts all your other
exports?" Norway is the exception that proves the rule, with a national oil
sovereign fund worth 2.28 trillion kroner ($357 billion) for just 4.8 million
citizens.
As and when the world's economy begins to recover from the present deep
recession, global demand for oil will resume its steady growth. Based on what
is known about the world's petroleum reserves, nearly all of future increases
will have to come from countries that have national oil company monopolies.
These governments are, in many cases, politically unreliable except in their
desire to keep the price of a barrel of oil high.
© 2009. Petroleum Society of Canada (now Society of Petroleum Engineers)
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History
- Original manuscript received:
30 June 2009
- Revised manuscript received:
2 July 2009
- Manuscript approved:
7 July 2009
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