Bigger Oil
Roger Pielke, Jr. (hat tip to a reader) points to an interesting FT Lex column that should offer some interesting insights to America's progressives:
"Big" and "oil" are mentioned so often in the same breath that it is easy to lose perspective. Motorists and environmentalists never tire of berating the dominant supermajors whose petrol stations and share listings make them the public face of the industry, their favourite target being America's ExxonMobil. If market value were the sole magnet for opprobrium then Exxon's executives could breathe a bit easier because PetroChina recently overtook it as the world's most valuable listed energy company.
But there is "Big Oil" "“ last year, Royal Dutch Shell earned more than $1bn a month "“ and then there is bigger oil. No oil major is able to affect energy prices on its own and even Exxon is far smaller than the world's largest energy company. It is not even close. Saudi Aramco's estimated hydrocarbon reserves of 300,000 million barrels of oil equivalent make it 15 times Exxon's size. Exxon comes in about 17th place, with the top 10 being entirely state-owned.
US oil company executives routinely get pulled in front of Congress to defend themselves against charges they are manipulating world oil prices. Huh? It would be as rational to accuse Grinnell College of manipulating national tuition rates. Americans can take comfort in the fact that by limiting their ability to seek new oil in the US, we have made sure that oil markets are not controlled by evil publicly traded companies like Exxon and Shell but instead are controlled by entirely more trustworthy entities like the governments of Iran, Saudi Ariabia, Venezuela, Russia, Nigeria, and China.
This chart also supports the one good argument I think there is for peak oil -- that most of the world's oil reserves are controlled by patently incompetent institutions (e.g. governments) that have very bad incentives that make them highly unlikely to invest well. The only reason these countries are able to produce at all is because western companies are stupid enough to keep walking into this cycle:
1. US companies invest huge amounts of capital and know-how to build oil industry
2. Once things are producing, local government steals it all (they call it "nationalization")
3. Oil fields go into extended decline due to short-term focused and incompetent government management
4. US companies invited back int to invest huge amounts of know-how and capital
5. repeat
