BBC reports that "Ecuadorean oil officials cancelled Occidental Petroleum's operating contract after a long-running dispute." This follows Bolivia's nationalization of foreign energy companies and the imposition of hefty extraction taxes upon oil companies in Venezuela. There's something very interesting going on in South America, although Bush is too obsessed with the Middle East to notice.
For years, the conventional wisdom has been that countries couldn't nationalize assets because it would scare off investors. No one would, for example, build natural gas pipelines or oil wells if they worried that, once built, they'd be seized by the state. There may still be some wisdom to that, but I'm not sure that it's the hard-and-fast rule that it was once thought to be. Once a company recovers its investment and makes some profit, nationalization may be disappointing, but not necessarily disappointing enough to stop all future investment. Occidental Petroleum invested money in Ecuador. It made a large profit in Ecuador. Why wouldn't it invest again just because that profit was finite?
As I've noted before, I think that, over the next fifty years or so, oil and natural gas assets will have to be nationalized. Carbon-based resources are too scarce and the demand for them is too high to allow private investors to reap the windfalls that are already beginning to occur. Perhaps by the time we overthrow the Bush Coup, our neighbors to the South will have a history of energy asset nationalization that we can learn from.
5 comments:
This follows by about a year the cancelling of a contract by UAE with Hunt Oil, because the contract was made at a time oil wasn't getting the profits it now is, and was beginning to make big profits for Hunt without their having to fork over a significant return to UAE. It was being contested by Hunt to no avail, last I heard.
Ruth
As always, an interesting, thoughtful post, Hecate. You articulate things I have a sense of, but can't put into words -- your blog is a daily treat.
A favorite story from a Mexican engineer friend of mine.
Decades ago, the Mexican government told the American oil companies running the oil fields in that country that the government was going to impose a property tax. They asked the American companies to assess the value of all their property in Mexico.
The American CEOs laughed and assessed their property at just a few pennies on the dollar.
Mexico President Lázaro Cárdenas, told the Americans that he was nationalizing their businesses but they would be compensates at exactly the value they had just reported.
Now I have to research the truth behind this story so I can put it on my blog. Thanks, Hecate, for the extra work.
I said over at Eschaton that the US has this backwards, the oil companies have taken over the government rather than vice versa.
We should also remember that in the old days, the chief means of reprisal against asset nationalisation wasn't so much a withdrawal of future investment as it was military intervention by the US. Which is no longer feasible, and not only because the US military are pinned down in West Asia.
This is how Mexico nationalized their oil production back in 1938. (See all the work you made me do. sigh)
Post a Comment