Since 2014
Nationalization and Privatisation of Petroleum Industry: An Evaluation of the Pros and Cons
Covenant Journal of Business and Social Sciences
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| Title |
Nationalization and Privatisation of Petroleum Industry: An Evaluation of the Pros and Cons
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| Creator |
Jónia Baguandji, Luciano Cordeiro, Télio Numaio & Vicente Sitoe, Cidália Cossa, Iracema Mondlane,
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| Description |
The purpose of this piece is to evaluate the overall pros and cons of the nationalisation and privatisation of the petroleum industry. According to Georg Erdmann (n/d), the economists assume that nationalized companies are usually less efficient than private companies. This belief has been confirmed by HARTLEY (2007) for the upstream oil industry. But we see today that governments tend to take over the control of oil, gas, uranium and power industries by restricting energy business rights in the company to national companies or by controlling the businesses of private companies by a significantly more restrictive regulation; whereas in the last two decades, many Governments did just the opposite when privatizing state energy companies. Nationalization of the petroleum industry is a pertinent topic for several reasons. Today, state owned companies hold around 85 percent of oil and gas reserves (Erdmann, n/d). As of 2012, between 73 and 95 percent of global oil reserves are controlled by national oil companies (NOCs) (Mahdavi, 2014). In fact, and according to Francisco Monaldi (2010), there are various factors leading countries to nationalize their petroleum industries, such as the civil society, regionalism, and the potential conservation and economic benefits from nationalizing the industry. According to Carneiro et al. (2003), deregulation of the oil and gas industry has led to privatization of the former state-owned oil and gas companies, in several countries. As a result, the competitive environment has become more hostile. The changes of ownership, together with modification in the competitive environment, have caused significant modifications in the competitive strategies. Companies were not used to clear competitive strategies; but after privatization they started to follow clear patterns of differentiation strategies while at the same time they seek cost parity in the industry. (Carneiro et al., 2003).The methodology for this paper was based only on literature review, with a view to improving our knowledge on the pros and cons of nationalisation and privatisation of the petroleum industry. We conclude that countries which possess natural resources such as oil prefer to nationalize the companies in anticipation of the high revenues that come with the high fluctuations of price of this commodity. Of course this fluctuation of prices is driven by some factors such as high demand of the resource and industrialization. The World Bank estimates that privatization is either under way or being planned in at least 50 countries.
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| Publisher |
Covenant University
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—
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| Date |
2019-12-16
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article |
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| Format |
application/pdf
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| Identifier |
https://journals.covenantuniversity.edu.ng/index.php/cjbss/article/view/1799
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| Source |
Covenant Journal of Business and Social Sciences; CJBSS: Vol. 10 No. 2, Dec. 2019
2334-5708 2006-0300 |
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| Language |
eng
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| Relation |
https://journals.covenantuniversity.edu.ng/index.php/cjbss/article/view/1799/1015
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| Rights |
Copyright (c) 2019 Covenant Journal of Business and Social Sciences
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