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Oil Price Decline Undercuts Policies of Oil-Rich Nations


The plummeting price of oil is having an impact on nations that restrict oil exploration and production to state-owned companies. Analysts say many use the revenues to further their ideological objectives and expand their influence, and falling prices could affect such policies. VOA's Bill Rodgers reports.

The price of oil is down dramatically, from a record high of $147 a barrel earlier this year to less than $55 in recent days.

And analysts say this is having an impact on petroleum-producing countries that have used oil revenues to further their ideological ambitions.

Russia's new military resurgence is considered to be fueled by petrodollars. Iran has used its oil revenues to extend its influence in the Middle East and defy sanctions aimed at blocking its nuclear ambitions. And, Venezuelan President Hugo Chavez has gained power and influence to counter U.S. policy in the Western Hemisphere because of the steady flow of oil money.

But falling oil prices could weaken a government's hold on power, says energy analyst Kenneth Medlock at Rice University in Houston.

"It makes it very difficult for the government to remain solvent, basically," Medlock said, "and continue the types of programs that they've had in place when oil prices were higher, or initiated when oil prices rose. And that, of course, for the politicians who are in power, puts them in a very tenuous position."

In Iran, concern is rising that the country could face an economic crisis because of declining oil revenues.

This comes as President Mahmoud Ahmadinejad seeks re-election next year.

In Venezuela, spending on social programs and other initiatives to build President Chavez' socialist-inspired state could be affected - though he recently downplayed the effects of falling oil prices.

"We're not singing victory, no," Chavez said. "But we have the capacity to resist the crisis. And not just resist it, but to continue investing."

Yet Venezuela's opposition scored significant victories in local elections Sunday, in part because of fears the country's oil-fueled economy is sputtering.

Venezuela's oil, like that of many countries, is tapped exclusively by its state-run company, PDVSA.

Many of these nations have shut out major Western oil companies from accessing their petroleum-rich regions in a policy known as "resource nationalism."

The so-called petroleum "majors" like ExxonMobile now control much less oil, says Conoco-Philips head James Mulva.

"The state-owned oil companies represent the top 10 reserve holders internationally, and the western international oil majors control less than 10 percent of the world's oil and gas resource base," Mulva said.

One reason for this is the belief by some countries that nationally-owned companies can better protect a nation's oil wealth. But energy analyst Jerry Taylor of the libertarian CATO Institute says there is another reason.

"When you have large private corporations generating revenue you are creating potential pockets of resistance in society to the political regime," Taylor said. "And since a lot of these countries find that oil extraction is the major source of income for their economies, owning those industries actually helps crowd out the potential development of opposition."

Taylor says while Saudi Arabia's ARAMCO is an example of an efficient and productive state-owned oil company, many others are like Mexico's PEMEX - inefficient and unproductive.

According to Medlock, "they've demonstrated in many cases an inability to develop those resources in a timely, efficient manner. And the international majors have the ability to do that. They have adequate commercial incentive to go in and make these things work."

And the prospect of pumping more oil and increasing revenues could be attractive to governments, opening opportunities for the western oil majors while eroding resource nationalism.

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