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The oil world's new bullies
There's no reason to feel sorry for the giant oil companies yet. But increasingly, nations like Russia, Iran, Venezuela and even Chad are calling the shots.
By Jim Jubak
Move over, Exxon Mobil. Step aside, BP (BP, news, msgs). Run away home, Chevron. There's a new set of oil bullies on the block. And they're named Russia, Iran, Venezuela and Chad.
No need to feel sorry for the Exxon Mobils of the world while you're filling up your tank with $3-a-gallon gas. Who can feel sorry for a company that earned $36 billion in 2005, more than any U.S. company ever?
But as you seethe about $3 gas now and worry about $4 gas next year, remember that big oil isn't calling the shots anymore. Venezuela has forced ExxonMobil (XOM, news, msgs) to slink out of the country and has made Chevron (CVX, news, msgs) and ConocoPhillips (COP, news, msgs) take a 75% hike in royalties and a 50% increase in taxes and say, "Thank you, sir, may I please have another?"
Russia is blackmailing all of Europe by saying "sell us your natural-gas delivery companies or no natural gas for you." Iran has thumbed its nose at the United States and the United Nations, figuring that the world needs its oil too much to actually do anything about its nuclear weapons program. And Chad got the World Bank, the U.S. government and Exxon Mobil to cough up disputed royalties by threatening to shut its oil pipeline.
Boy, you know you're in trouble when Chad, a country of 8.1 million people living on 1.3 million square miles of desert, can push you around.
Related news and commentary on MSN Money
When Exxon Mobil is a small fry
How did Russia, Iran and Venezuela get to be the new bullies of oil?
It's not simply because they export lots and lots of oil -- although that certainly doesn't hurt. In 2004, according to the U.S. Energy Information Administration, Russia was the world's second-largest oil exporter after Saudi Arabia. Iran was the second-largest oil exporter in OPEC (the Organization of Petroleum Exporting Countries) after, again, Saudi Arabia and the fourth-largest oil exporter in the world. Venezuela came in at No. 5. (For the record, Norway rounded off the list of the top five exporters at No. 3. It's only the seventh-largest oil producer in the world, but because of its small population, the country exports almost all of what it pumps.)
The clout of these new bullies really results from their stranglehold on the world's big pools of discovered and discoverable oil.
Let's take the discovered, or proven, reserves first. Of the global oil giants, Exxon Mobil has the biggest proven reserves -- 11.2 billion barrels, according to Energy Intelligence Research.
But that makes the company only No. 12 in the world. And every company ahead of it in the rankings is an oil company controlled by a national government. That includes Russia's Gazprom (OGZPY, news, msgs) and Lukoil (LUKOY, news, msgs) at No. 9 and No. 10 with 19 billion and 16 billion barrels, respectively, Venezuela's PDVSA at No. 5 with 77 billion barrels, and Iran's NOIC at No. 2 with 133 billion barrels. (Saudi Arabia's Aramco is No. 1 with 263 billion barrels of proven reserves.)
Moving on to undiscovered oil resources: It is impossible, of course, to predict where the world's undiscovered oil resources are -- that's why they're called "undiscovered," after all. But the oil industry's odds-makers point to the border between Saudi Arabia and Kuwait, areas around the Caspian Sea belonging to Iran, Venezuela's Orinoco River Basin and Russia's Siberian north.
Oil-supply optimists such as Daniel Yergin's Cambridge Energy Research Associates, calculate that the world will be able to raise oil production by as much as 15 million barrels a day by 2010. That would be an increase of 18% from 2005 production of 82 million barrels a day. If the International Energy Agency's projection that global oil demand will grow by 1.6% a year during this period is accurate, then that increase in supply would be more than enough to meet global oil demand.
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