Big Oil, that pejorative used by today's politicians to refer to large petroleum companies such as ExxonMobil and Royal Dutch Shell, needs an overhaul. While our politicians today continue to point fingers at private oil companies as an example of capitalism run amok and the source of significant global disruption, from global warming, to price gouging to globalization, a new specter has been rising.
Diana Hsieh over at Noodlefood had a nice post showing where the majority of the worlds oil reserves are located. The follow-on implication to that is that today, the bulk of the world's oil is controlled by state-owned companies. 16 of the 20 largest oil companies are state-owned. They control over 90% of the worlds oil reserves. In the mid-20th century, the Seven Sisters that made up Big Oil were all private. With the advent of nationalization of many of the developing worlds oil fields, and the rise of state owned petroleum companies, the new Seven Sisters (as named by the Financial Times). They are, in order of prominence: Saudi Aramco (Saudi Arabia), JSC Gazprom (Russia), CNPC (China), NIOC (Iran), PDVSA (Venezuela), Petrobras (Brazil), Petronas (Malaysia). Saudi, Russia, China, Iran, Venezuela; this is not a list of freedom-loving countries, and it is no accident that totalitarian regimes hold power in each. Aramco, by far the largest of these, by itself produces 5-6 times more oil than either BP, Shell, or ExxonMobil. And it has some of the lowest production costs of any oil producing venture, probably in the single digit $/barrel. That means it pockets over $90 of every barrel sold (at today's prices), where private companies don't make nearly that much money. Compared to the multi-national private companies, these state-owned firms are behemoths.
That much money serves as the national bottomless well in many of these countries, and it is what funds their statist ambitions. With the nations so well-endowed with resources, the negative effects of their totalitarian regimes are masked and, as in the case of Saudi Arabia, the country is able to prosper in spite of the politics driving it. Leaders are able to effectively buy their population's passivity.
The basic requirements of capitalism; long term planning, re-investment of resources, and expansion will ultimately be the undoing of these statist regimes. It already shows. Only three of the new Sisters has become a global players, the rest confined to their home fields as their surplus assets are siphoned off. But the downfall of these regimes will not come for a long time, and the threat they pose until that time is great.
While our politicians still hound Big Oil, they fail to see the rising threat and prefer to continue to hobble our own industry with extra gas taxes, environmental regulations, supposed price-gouging restrictions, restrictions on oil futures markets, and drilling restrictions. The answer is laissez faire; free up our own oil industry to compete aggressively; and defend the rights of private oil companies when bullied by the nations who deal with them.