Essays on How Argentinian Government Decision Can Affect the Prospective Activity of Oil Operators Case Study

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The paper "How Argentinian Government Decision Can Affect the Prospective Activity of Oil Operators" is a perfect example of a management case study.   In this paper, we examine the nationalization of the oil industry in Argentina. Governments are more likely to nationalize oil when prices are high. They are also more likely to nationalize oil when political institutions are weak. Nationalization may be inefficient but does not occur in equilibrium when the prices of oil are high. Nationalization has a likelihood of happening when the quality of institutions is low and when prices of oil are high even controlling for country fixed effects.

The future of the oil industry has changed. Oil prices have moved to an alarmingly high level. New technologies are providing diverse as well as uncertain opportunities for the production of conventional oil in several parts of the world. Introduction Nationalization of the oil industry is the process of de-privatization of oil industries including operations. Recent years have brought up and back a phenomenon of forced nationalization of the major oil assets owned in a foreign land. Nationalization has become a major problem for many international oil companies.

Nationalization has sometimes caused losses in output. It can also cause a loss in the national income for countries that specifically depend on oil. It has been noted that the nationalization of oil companies takes place when the prices of oil are high. In the 1980s and 1990s, oil prices came down. This is the time when nationalizations disappeared. They only re-appeared or re-emerged in the last decade when the prices started climbing back to their previous levels. It appears natural that the higher prices of oil, the more valuable oil assets become, and the stronger the nation’ s incentives are to expropriate. Content Argentina’ s attempts to re-nationalize the oil industry came after accusations of Repsol for being responsible for the decline in production.

Since the year 2000, Argentina’ s oil production decreased by approximately 3 percent a year. This means it reached 650,000 barrels in a day in 2010. This was a drop from 815,000 in 2000. Demand for the product is now increasing rapidly every year and a fall in gas output made the situation worse.

Argentina has attempted to justify the re-nationalization because of the fall in oil production. The fall has been nearly 40 percent since its acquisition by Repsol. Repsol argued that the move to renationalize was discriminatory. Repsol has been a long-term victim of government as far as productivity is concerned. The move has had an impact on the oil industry in Argentina. It is, therefore, necessary that we distinguish between international and national oil companies. Private companies often have access to the smallest share of the world’ s reserves of hydrocarbon. This is despite the fact that their production relative to the reserves is higher than for national oil corporations.

They intensively exploit, which means that the decline of their natural fields will set in early (Mabro 6). Their small yet rapidly declining reserves prove the point for the urgency of their quest to access new resources. They are, however, affected by many factors. The major factor that constrains is nationalization.

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