Sunday, July 02, 2006

Supporting Evidence

In my recent post "Not Good For Michigan or America" I wrote:

"The price of gas is determined by the price of crude oil, which is being bid upon daily by nations all around the globe. Most of these bidders are governments not private oil companies."

I didn't know then the numbers but thanks to HBLer Duncan Curry I now do. Mr. Curry provides a link to a Baker Institute Energy Forum article which says in part:

"Through out the 1990s and into the next century, economic liberalization, market economy reforms and Western-style corporatization management reorganizations have characterized the oil and gas industries of major energy producing countries such as Russia, Norway, Canada and Malaysia, as well as the energy industries of major consuming countries in the developing world such as China, Brazil, Japan and India. These emerging hybrid firms, together with remaining traditional oil and gas state monopolies, control the vast majority of proven resources remaining for exploitation and development. The Western international oil majors now control less than 10% of the world’s oil and gas resource base."

This means that Western oil majors now have to compete with government run companies and as Mr. Curry points out:

"...oil prices keep raising because
state-ownership and control of the world's oil reserves keeps
increasing (now 90%). Nationalization of the oil industry, by
economic law, leads to inefficiencies, production shortages, and
higher prices."

(HBL is a private email subscription only list that discusses current events from a rational self-interest perspective. Host Harry Binswanger offers a free one month trial which can be had here.)

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