{
  "id": "RL34137",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "RL34137",
  "active": false,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 361201,
      "date": "2007-08-21",
      "retrieved": "2016-04-07T17:57:44.452029",
      "title": "The Role of National Oil Companies in the International Oil Market",
      "summary": "In the United States, the term \u201cbig oil companies\u201d is likely to be taken to mean the major private international oil companies, largely based in Europe or America. However, while some of those companies are indeed among the largest in the world, by many important measures, a majority of the largest oil companies are state-owned, national oil companies. By conventional definitions, national oil companies hold the majority of petroleum reserves and produce the majority of the world\u2019s supply of crude oil. Since national oil companies generally hold exclusive rights to exploration and development of petroleum resources within the home country, they also can decide on the degree to which they require participation by private companies in those activities.\nThe national oil companies typically do not operate strictly on the basis of market principles. Because of their close ties to the national government, in many cases their objectives might include wealth re-distribution, jobs creation, general economic development, economic and energy security, and vertical integration. Although these objectives might be desirable from the point of view of the nation\u2019s government, they are unlikely to be equivalent to the maximization of shareholder value, the stated objective of the private international oil companies.\nDiffering objectives might be considered to be important only if they lead to different characteristics and outcomes, which is the case for the national oil companies. Many of these companies have been found to be inefficient, with relatively low investment rates. They tend to exploit oil reserves for short-term gain, possibly damaging oil fields, reducing the longer term production potential. Some also have limited access to international capital markets because of poor business practices and a lack of transparency in their business deals. High oil prices since late 2003 have masked the effect of some of these characteristics in the flow of oil revenues. However, if the price of oil moderates, the potential supply constraint related to the inefficient operations of the national oil companies may be a destabilizing factor in the world oil market.\nA wide variety of policy directions can be taken to mitigate the potential challenge posed by the dominance of national oil companies. Demand management policy can reduce the U.S. dependence on imports. The U.S. government can use its political influence to try to encourage nations not to use national oil companies to forward the aims of the government, but to follow commercial practices to maximize revenue flows. An expanded supply of oil could be encouraged as a condition for trade and aid agreements in some cases. Finally, promoting international trade and recognized commercial practices could be encouraged.",
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      "typeId": "REPORTS",
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      "topics": []
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  "topics": [
    "Foreign Affairs"
  ]
}