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The governance of oil supply: an institutional perspective on NOC control and the questions it poses

The governance of oil supply: an institutional perspective on NOC control and the questions it poses Purpose – The purpose of this paper is to offer an appreciation of the role of national oil companies (NOCs) which control roughly 90 percent of the global hydrocarbon reserves, and whose operating and investment decisions affect prices, demand adjustments as well as their countries' policy options. Given that the role of NOCs is poorly understood largely due to prevailing economic and political clichés that substitute for analysis, this paper takes an institutional economics perspective to analyse the issue of NOC governance and related issues. Design/methodology/approach – The paper adopts an integrative approach. First, it introduces the language of institutional economics to broadly structure a review of NOC governance. It then links the theoretical discussion to an assessment of the macro‐economic imperatives to which the NOC and its governance may need to respond. Finally, an audit trail is used for assessing cases in their particular institutional, cultural and physical conditions. Any simple comparisons — across highly variable contexts – would not only be contentious but also run counter to institutionalist methodology. Findings – The paper shows that NOCs need not be treated as black boxes. They constitute an institutional response to failing market coordination with international oil companies and a means for producer countries to align political and economic interests. Yet, overriding the market and creating powerful stand‐alone, state‐owned, state‐run enterprises raise efficiency and broader regulatory concerns. The paper shows how institutional economics offers a conceptual apparatus to identify options for regulating NOCs at interrelated levels of control and suggests the need for case‐by‐case assessment. Research limitations/implications – Applying the conceptual apparatus outlined in the paper may allow future research to systematically discuss particular features of NOC governance, generate more general pattern models, and thereby improve the base for decisions on NOC's strategies and regulation. Originality/value – The originality of the paper lies in its integrated approach of analysis and employing the institutional economics approach to the case studies to reveal the role of NOCs in the energy scene. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Energy Sector Management Emerald Publishing

The governance of oil supply: an institutional perspective on NOC control and the questions it poses

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References (34)

Publisher
Emerald Publishing
Copyright
Copyright © 2007 Emerald Group Publishing Limited. All rights reserved.
ISSN
1750-6220
DOI
10.1108/17506220710836084
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to offer an appreciation of the role of national oil companies (NOCs) which control roughly 90 percent of the global hydrocarbon reserves, and whose operating and investment decisions affect prices, demand adjustments as well as their countries' policy options. Given that the role of NOCs is poorly understood largely due to prevailing economic and political clichés that substitute for analysis, this paper takes an institutional economics perspective to analyse the issue of NOC governance and related issues. Design/methodology/approach – The paper adopts an integrative approach. First, it introduces the language of institutional economics to broadly structure a review of NOC governance. It then links the theoretical discussion to an assessment of the macro‐economic imperatives to which the NOC and its governance may need to respond. Finally, an audit trail is used for assessing cases in their particular institutional, cultural and physical conditions. Any simple comparisons — across highly variable contexts – would not only be contentious but also run counter to institutionalist methodology. Findings – The paper shows that NOCs need not be treated as black boxes. They constitute an institutional response to failing market coordination with international oil companies and a means for producer countries to align political and economic interests. Yet, overriding the market and creating powerful stand‐alone, state‐owned, state‐run enterprises raise efficiency and broader regulatory concerns. The paper shows how institutional economics offers a conceptual apparatus to identify options for regulating NOCs at interrelated levels of control and suggests the need for case‐by‐case assessment. Research limitations/implications – Applying the conceptual apparatus outlined in the paper may allow future research to systematically discuss particular features of NOC governance, generate more general pattern models, and thereby improve the base for decisions on NOC's strategies and regulation. Originality/value – The originality of the paper lies in its integrated approach of analysis and employing the institutional economics approach to the case studies to reveal the role of NOCs in the energy scene.

Journal

International Journal of Energy Sector ManagementEmerald Publishing

Published: May 22, 2007

Keywords: Fiscal policy; Governance; Economics; Regulation; Oil industry; Gas industry

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