National Oil Companies

On August 10th 2006, The Economist wrote an article entitled 'Really Big Oil'. Here are some excerpts:

When activists, journalists and others speak of “Big Oil”, you know exactly what they mean: companies such as Exxon Mobil, Chevron, BP and Royal Dutch Shell. These titans have been making lots of money for their shareholders; their bosses enjoy vast pay packets; and their actions affect us all. BP's decision to shut down Prudhoe Bay, America's biggest oilfield, to repair leaking pipes is a case in point, outraging many and pushing petrol prices even higher.

Yet Big Oil is pretty small next to the industry's true giants: the national oil companies (NOCs) owned or controlled by the governments of oil-rich countries, which manage over 90% of the world's oil, depending on how you count. Of the 20 biggest oil firms, in terms of reserves of oil and gas, 16 are NOCs. Saudi Aramco, the biggest, has more than ten times the reserves that Exxon does. Those with misgivings about oil—that its price is too high, that reserves are running out, that it damages the environment, that it is more a curse than an asset for countries that produce it—must look to NOCs for reassurance.
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The easiest way to improve state oil firms' performance would be to privatise them. The authorities, no longer torn between nurturing their NOCs and milking them for all they are worth, could concentrate on maximising their oil revenue through taxes and royalties. Failing that, governments could instil a little market discipline by subjecting their NOCs to competition, either by encouraging them to expand abroad or by allowing foreign firms some access to their home territory. At least, they should grant NOCs operational autonomy, and allow them to retain and invest some portion of their earnings. The less bureaucrats interfere, after all, the more money their oil companies will generate for them to spend.