Who Owns Oil
By Arnold Kling
Modern science and unfolding technologies will, in all likelihood, double recovery efficiencies. Even a 10% gain in extraction efficiency on a global scale will unlock 1.2 to 1.6 trillion barrels of extra resources — an additional 50-year supply at current consumption rates.
…The national oil companies that hold over 90% of the earth’s conventional oil endowment will be pressed to adopt new and better technologies.
That last sentence may contain the most important fact about oil, which is that 90 percent of the oil reserve is owned by national oil companies. In other words, 90 percent is insulated from competitive pressure to invest in new technology.
Having oil in the public sector means that
1. Ambitious people want to take over governments, in order to have economic as well as political power.
2. There is less incentive to maximize the efficiency of oil extraction.
One of the sad things about biofuels, plug-in cars and what have you, is that we may only need them because governments are in charge of the world’s oil reserves. If a free market operated we could find advances in technology reducing the cost of oil over the next few decades.