State monopolies nudge out Big Oil

The Washington Times reports:

Exxon Mobil, the world's largest corporation, is much criticized for raking in huge profits and polluting the environment, but could the epitome of Big Oil some day become an endangered species?

Oil experts say yes, the day of the freewheeling and powerful corporate enterprise that finds the oil, pumps it out and delivers it to customers around the world may be slowly coming to an end. The reason: Most of the world's oil fields are now owned by countries with state oil monopolies that either prohibit foreign investment or no longer require the expertise of big, integrated oil companies to bring their oil to market.

Exxon Mobil and all the rest of the Western world's private oil companies — including BP, Shell, ConocoPhillips, Chevron and Total — today control only about 7 percent of the world's oil reserves. The rest belongs to state behemoths like Saudi Aramco, which owns more than a fifth of the world's oil; Iran and Iraq's oil companies, which each control about 10 percent of the world's reserves; and Pemex, the Mexican oil company, with 1.3 percent of the world's reserves.

National ownership of oil reserves in some countries like Mexico and Saudi Arabia has been a longstanding tradition. Mexico's constitution since the 1930s has prohibited any foreign investment in the country's oil sector. Venezuela, Russia and Ecuador, by contrast, closely collaborated with Western firms through the 1990s but started seizing their assets through forced nationalizations this decade.

"The handwriting is on the wall" for oil companies like Exxon Mobil, which have barely been able to maintain their share of world production and reserves in recent years, said Amy Myers Jaffe, a professor of energy studies at Rice University.

"They may see a declining rate of production over time, and eventually that is bad news for both their shareholders and consumers," she said.

Consumers stung by high oil prices today will suffer even more as state monopolies cement their control over the world's remaining oil resources in coming years, analysts say.

What better proof that state monopolies and supply restrictions are the road to higher gas prices?