The efforts of Venezuela’s Hugo Chavez to assert state control over the country’s oil industry are just one example of an important worldwide trend toward the nationalization of oil.
According to a very interesting report from Rice University’s Baker Institute for Public Policy, National Oil Companies (NOCs) now control 77 percent of global proved oil reserves. Production is also increasingly controlled by NOCs, according to the report:
So what is the significance of this?
The report asserts six broad conclusions. Those conclusions would seem to support the growing consensus of those concerned about the economic, national security and environmental implications of the oil economy: The United States and other oil-importing countries would be better off if they found a cost-effective way to reduce their reliance on imported oil and to move consumption toward alternatives sources of energy. (This article perhaps heralds the arrival of this notion as conventional wisdom.)
Here’s what the report says about what the growing importance of NOCs means for oil-importing countries like the United States:
This being the Baker Institute (in built-on-oil Houston, Texas) the solution proposed in the above paragraph’s final sentence to the risks outlined in the first three sentences make no mention of alternative sources of energy, instead advocating policies that attempt to make the world oil market as free as possible. But common sense tells us that to the extent competitive alternatives to oil can be found, the risk associated with nationalization of oil will be mitigated.
Ironically, because it is less efficient, the nationalization of oil by undemocratic regimes is helping to make alternatives to the commodity that is the lifeblood of those regimes more competitive. (And, in the case of Chavez, killing the golden goose that pays for the social spending that keeps him in power.)