International Business History - Oil Industry - Case Study Example

Running Header: International Business History Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Contents 1.0) Bud-Frierman, L, Godley, A & Wale, J, 2010, Weetman Pearson in Mexico and the Emergence of a British Oil Major, 1901–1919. Business History Review, vol.42, no. 42, pp. 5-41 2.0) Bucheli, M 2010, Major Trends in the Historiography of the Latin American Oil Industry. Business History Review, vol.84, pp.4-24 3.0) Pozzi, D 2010, Entrepreneurship and Capabilities in a “Beginner” Oil Multinational: The Case of ENI. Business History Review, vol.84, pp.2-22 4.0) Bucheli, M 2006, Multinational Oil Companies in Colombia and Mexico: Corporate Strategy, Nationalism, and Local Politics, 1900-1951. Business History Review, vol.118, pp.5-18 5.0) Graham, E 1998. “Market Structure and the Multinational Enterprise: A Gametheoretic Approach.” Journal of International Business Studies, vol.29, no. 15, pp.24-60 6.0) Bucheli, M, 2008. “Negotiating under the Monroe Doctrine: Weetman Pearson and the Origins of US Control of Colombian Oil.” Business History Review vol.83, pp.15-49. 7.0) Mabro, R, 2002. “Saudi Arabia’s Natural Gas: A Glimpse at Complex Issues.” Oxford Energy Comment. Oxford Institute for Energy Studies, UK, pp.2-11 8.0) Madan, T, 2007. “India’s ONGC: Balancing Different Roles, Different Goals.” In The Changing Role of National Oil Companies in International Energy Markets. 9.0) Stalder ,P, Walter, A1997, Contribution to California oil and gas history: California Oil World, vol.2, pp. 2-8 10.0) Palacios, L 2002, The Petroleum Sector in Latin America: Reforming the Crown Jewels Business History Review, vol. 88, pp. 11-44. Introduction Oil and its products is one of the major commodities that have led to industrialization in the world. First the discussion will be based on the oil industry in Latin America. There were lesser other types of commodities from Latin America leading to the sensation that there was need for economic nationalism from oil. Since early twentieth century there has been a debate over the dominance of the foreign countries on the oil industry which is non renewable resource. The argument was that the multinationals dominated because the resource rich countries lacked capital and know how which the multinationals had. There were political tensions that took place because of the production of oil in areas which were under the control of the multinationals from the foreign countries which also supported home governments. These conflicting parties led the historians from the working sector before 1990 to put more emphasis on the relation of labor and international politics. In those days the primary sources were few which made the historians to base their findings on diplomatic records. Most of the historians assumed a divided world between the occupants of the center, who oppressed the available resources, and those at the neighborhood, who did get very little of the benefit from the natural wealth of their country (Bud-Frierman, Godley & Wale 2010, p. 58). After the 1990s there were more primary sources available and historians adopted new approaches methodologies in analyzing different topics; how private firms are internally organized, the role that was played by the capitalist from Latin America in the industry development, the oil industry impact on the culture of the society and the environment implications and how domestic policies have been determined by the oil industry. During this time historians were concerned on the matters of the productions and they did not take into account the issue of consumption which was discussed few years later. Historian said that production differed greatly between countries, mostly Mexico which benefited more and Venezuela which benefited less. A number of the countries at different moments have changed the rule of the game. The majority of the countries allowed dealing with multinational corporations in the early twentieth century. The oil shortage globally between 1917 and 1922 resulted to competition between the United States and Great Britain over sources of oil in America and this made the countries that produced oil to know that they are important (Bucheli 2010, p. 102). The responded by writing a new legislation which led to increases of state control of the oil resources which unavoidably led to conflict between the home governments along with the foreign firms and Latin America government. The labor unionism and rise of population in the 1930s and the recognition of the suggestion that the country could play a significant role in the economy made most of the government to take hostile action like modifying of the tax laws to increase payments which were made by companies, imposition of royalties and companies had to labor locally (Palacios 2002). In the 1960s Venezuela did launch the Organization of Petroleum Exporting Countries (OPEC), hence changing balance of power in the oil industry. In the 1980s and 1990s the international prices were moderately low and new Latin America showed a lesser role in the economy, this made a number of governments to reduce their participation in the industry thus encouraging entry of firms from other countries. Criticisms were aimed at the multinationals by the nongovernmental organizations, local human rights and labor organizations. The history of oil industry in Argentina has involved politics around Yacimientos Petrolíferos Fiscales (YPF) which did compete in the local market with Jersey Standard and Royal Dutch Shell (which was later named shell). Kaplan, who was a scholar, used the Marxist argument to show that the oil policies in Argentina from 1950 to 1956 did not recognize Yacimientos Petrolíferos Fiscales and showed some strong grounds in Argentina’s semi colonial status in the global economy. When Carl Solberg’s did study YPF, it showed that the firm’s rising eminence was piece of the rise of trade and industry nationalism that was well elaborate after world war I. Argentina began questioning the laissez-faire economic representation making it to change to protection model that relied on more powerful state protection (Pozzi 2010, p. 42). This was a new economic project which clashed the hopes of the petroleum producing areas whose governance wanted to remain monopolistic so that to attract investors from other countries by managing the oil wealth. Gadano, one of the first researchers, made use of YPF archives arguing that it did not supply the market in Argentina with the oil was produced locally thus hindering the management of the company. YPF’s succeeded in competition against Jersey Standard and Shell, which was a result of good government rules and regulations. Many scholars did begin to scrutinize the cultural and social effect of the oil industry in Argentina. The research showed that Yacimientos Petrolíferos Fiscales exploited the oil industry creating shaped communal norms and group hierarchies in the communities which had oil. Eleana Shever Showed Yacimientos Petrolíferos Fiscales educational impact in different areas of the society in Argentina which included urban middle class and workers from the oil field which she used in her analysis. Susana Torres did compare labor relationships in Yacimientos Petrolíferos Fiscales company town with scenarios of laborers in city controlled by Argentine private company. She found out that the two companies oppressed the ethic difference between Argentine and European laborers to manage their labor forces. The first instance of nationalized firm in Latin America was Jersey Standard in Bolivia in 1937. Herbert Klein did the analysis of the expropriation in the circumstances of the consolidation which occurred in Bolivia’s political system and showed how the oil industry managed the resources (Bucheli 2006). Philip also wrote about the same event in the 1980s in the sections of his book by the name oil and politics making the findings by Jayne Spencer of little use. Spencer wrote about the relations between the Bolivian government and Jersey Standard but the study of Jayne Spencer did not turn into a book because of her early death. However her encounters established the opinion that the war that was on that country with Paraguay, between 1932 and 1935 was the means of the expropriation, claiming as an choice that Bolivian state had in advance planned to make public its own oil even before of breaking out the war. Spencer did show that the government in Bolivia state did not only manage the new company owned by the state in a very pragmatic way but also showed avoidance of confrontation with other states about the issue. Oil in Brazil In the twentieth century Brazil was a small producer but a key consumer of oil. Nevertheless, the promises of discovery of oil provoked majority of private and foreign companies to begin explorations and forced the government in creating a monopoly company through the stages of value chain i.e. transporting bulky, refining, production and exploration (Furtado &Gomes 2000, p.52). Jon Wirth and peter Smith showed that there were two sides to debate on oil policies, which represented contrasting financial ideologies i.e. liberals which consisted of brazil high class earners who wanted the oil to be taken over by the private sector and the nationalists which in good number represented by the military members and they insisted on monopoly owned by the state and the second party finally worn. This resulted to a vertically incorporated firm and the argument by smith is that the firm will be untouchable politically in the following years and Michael Weis argument was that the creation of it made the relation of the other states and Brazil worse (Gelb & Associates 1988). There have been several studies since 1990s of Petrobras’ evolution as an organization in a corporate world. There were history calculated and compiled on efficiency of the firm on each segment i.e. marketing, refining, transportation, production and exploration. The history gave out the good marks of the management and the performance on the long-term of the firm. Martin Bell and Eva Dantas did take a novel advance of Petrobras history. They revealed that it was 1960s and 1980s that Petrobras submissively did get it self updated to information and technology and from 1985 to 1991 did a transformation to actively seek the knowledge. Finally in 1992 the firm became a very big innovator and it is after 1997 it did began to transfer the innovations to some of its partners. Brazil turned to be a key producer and this development has increased since 2007 from a monopoly state in low producing country to an international leader in oil industry. Oil Industry in Uruguay and Chile Uruguay and Chile lack local oil wealth and they are small countries hence they discussed together. The other states were establishing much control of their oil sources but Uruguay and Chile were coming up with rules and regulations of distribution and refining. It is in the 1930s that Uruguay came up with a company, which was state-owned by the abbreviations ANCAP (Goldstein, 2007), and the government in Chile did support domestic private corporation (Copec). Before 1920 there wasn’t much history about oil industry in Chile and they were limited to less pages of historian work. With the use of collective action theory it showed that the oil market in Chile was controlled by two multinationals before 1934 and it is after this year that the government in Chile forced for a creation of a cartel with a domestic firm Copec. At first, the multinationals were not for the idea they did only accept if after the government insisted. For a long period of time the firms from the other countries did get an advantage from this arrangement because of the reason that Copec had associations with the elite class of Chile an ensured that cartel did not face the hostile reactions from the officials of the government. The deal was to work until 1970 for both sides when the government of Chile did adopt policies that embraced free-market hence making the cartel to come to an end. Oil in Colombia There hasn’t much that has been studied about the oil history in Colombia despite the fact that Colombia is an important oil exporter. Several firms from United States dominated the Colombia oil productions for many years until 1951 when the Jersey Standards, which is an American firm, its contract expired and the oil industry was taken over by the government of Colombia. Several authors concluded that the United States government and the multinationals from America and the elite class of Colombia designed an oil policy, which benefited the upper class of Colombia and firms from other firms disproportionately (Graham 1988, p.14). The scholarly works that were produced in the 1990s and few years after 2000 dealt with upcoming issues that included the environmental effects by the oil industry, how the indigenous society related with oil companies and the unheard topic of the upper class in Colombia rule in management of oil before the Jersey Standard arrived in the country. Maria Teresa Ripoll discusses the issue of economic enclaves. She consults a large body, which deals with primary sources and shows the extent of investment by foreigners on the management of domestic class capabilities in northern Colombia and Pamela Murray gives the information how the oil industry did help to create technological and scientific knowledge in Colombia. Eduardo Saenz did argue that the elite class interests did result into a deal that unequally did benefit the multinationals. The multinationals in Colombia did negotiate for oil concessions which was based on the inside associations of the firm from Britain by the name Pearson and Son. It is argued that the Colombian inside politics and the United States did led to the succession of panama a result which did not favor British firms but favored American corporations (Buchel 2008, p. 23 ). Another study did the scrutiny the history files of Imperial Oil Limited which is a Canadian subsidiary of Jersey Standard in Colombia. This study revealed that some decisions that were made by the firm they were not only determined by the politics in Colombia or the United States relations but also by Canada economic and political developments. Oil in Ecuador Ecuador started exporting oil recently, so a smaller number of historians have done its research. Shell and Jersey Standard became active at the beginning twentieth century in Ecuador but Ecuador began exporting oil in 1972 which was as result of Texaco’s oil discoveries in 1969 and the country entered OPEC in 1973. From that time the oil in Ecuador has been determining the politics of that country and the development of the economy. John Martz has written several articles analyzing the subject. He compared the oil policies of democratic regimes and Ecuador’s military and concludes that the development of the policies is really shaped by external factors such as the struggles of internal politics and international oil prices (Mabro 2002, p. 37). The society in Ecuador benefited from the production of oil in the early stages, immediately after the 1972 oil era but after the drop of the international prices in 1980s, the dependence on oil by the country resulted to political crisis. Oil in Mexico Mexico’s has one of the richest oil historiography amongst the Latin American countries. The worry between the government and oil multinationals during the Mexican revolt (1910-1920), which culminated to exploration by the multinationals in 1938 which was followed by the emerging of pemex, has been well covered in different articles. Jonathan Brown who is well mentioned in oil and revolution in Mexico states that the dictator Porfirio Diaz who was pre-revolutionary was not a representative of the multinationals but he was a politician who cannily bargained with the firms from the foreign countries and making them to contend with one another. He also showed that the labor activities and events against firms from other countries were forced more by the concerns of security of the jobs than by patriotism. Linda Hall in an article writes about the exercises taken by the government of Mexico so that to ensure it is in good terms with the international financial community and subsequently coming up with harsh policies for the oil multinationals. There is analysis for the reasons why Mexican oil industry was very successful and there was increased investment by the foreigners that did take place in 1910 to 1921, which was one of the most complicated years in the Mexican revolution (Heizer & Robert 1995, p. 255). The author did argue that the political wavering made a major role to protect the firms from other countries from expropriation because of the reason that battling factions were not in a position to exploit their own soil and this rendered them to require income which was generated by companies from other countries. Mar Rubio in an article gave an explanation that the boom that did occur during the time of the revolution which was later followed by a decline, it was a reaction to the shortages in the international market at the time of revolution and the surplus in worldwide supply that came to the limelight afterwards and not as a result of technical politics or Mexican politics. In a history concerning the oil industry in Mexico, Myrna Santiago shows that the clashes between the oil workers and local communities with the multinational oils was as a response not only from difficult working condition and other countries’ racist policies but also the environment destruction by the industry which took place several years ago restraining the communities opportunities to involve in any economic activity and generally affecting their welfare (Madan 2007). Aurora Gomez indicated in an article that before 1917 most of the companies, which were working in the oil industry, took the advantage of the international prices which were high. Focusing on the evolution of the firms and their operations it breaks with a convention of sociologically or politically oriented studies. Oil in Peru Jersey standard has a subsidiary of the company in 1968 in Peruvian military government. In an article Adalberto Pinelo showed that International Petroleum Company (IPC) meddled with the country’s external and internal politics so that it was in position to maintain its rights in Peru while in another articles showed that the IPC did abuse its power and the Peruvian Economy did not benefit from it (Stalder & Walter 1997, P.41). George Igram made the point that although the activities were rational and legitimate, it did not have much effect on Peruvian economy because its time of occurrence, International Petroleum Company operations were not making any profitable. Oil in Venezuela Venezuela is one of the largest oil producers in the world and its economy has depended much on oil export from the early twentieth century. In the early twentieth century a lot of politics depended on the oil industry and the oil has contributed much on the economic developments. The country has built its infrastructure from the oil industry and has contributed much on the growth of the economy. Venezuela was moving very well until the change of the industrialization policy was put in place where at some point the small firms subsidized the oil wealth an occurrence that resulted to only a small number of firms being subsidized (Prutzman & Paul 1998, p.11). This change resulted to generation of political conflicts leading to the collapse of the two-party system in the 1990s. Miguel Tinker- Salas argues that the multinational events did shape no only the Venezuelan economy and system but also the economy’s gender relation, consumer patterns, corporate culture and identity of the nation. The effect of the events was not unidirectional and multinationals did adapt their cultures, which is corporate to Venezuela mores and customs. Conclusion The discussion showed that multinationals had dominated the oil sector and had effects on labor relations and domestic politics. Multinationals’ home governments benefited their companies by creating environments that favored them. The change in the viewing showed that the evolution in the oil sector was not only determined by labor abuse resistance in the domestic or geopolitical world powers but was necessitated by struggles among the domestic upper class because of how oil rents were distributed, hostility by the local communities due to the environmental and cultural changes that were made by the multinationals and strategies by the local rulers for political survival. The study shows that discussion of the oil sector internationally is dominated by few large international firms. The creative researchers indicate there still more areas which are yet to be discussed and get detailed analysis. 3095 words References Furtado, A, and A. Gomes de Freitas, 2000, “The Catch-up Strategy of Petrobras through Cooperative R&D.” Journal of Technology Transfer ,vol.25, no. 24, pp. 34-65. Gelb, A & Associates 1988. Oil Windfalls: Blessing or Curse? New York: Oxford University Press. Goldstein, A 2007. Multinational Companies from Emerging Economies: Composition, Conceptualization and Direction in the Global Economy. Basingstoke, UK:Palgrave Macmillan. Prutzman, K & Paul, W1998, Petroleum in Southern California: Sacramento, California State Mining Bureau,Vol. 63. Heizer,T, &Robert F 1995, Aboriginal use of bitumen by the California Indians, economic development of the oil in California: State Division of Mines. Screen Printouts of the sources. 1.) Bud-Frierman, L, Godley, A & Wale, J, 2010, Weetman Pearson in Mexico and the Emergence of a British Oil Major, 1901–1919. Business History Review, vol.5, no. 5, pp. 34-64 2.0) Bucheli, M 2010, Major Trends in the Historiography of the Latin American Oil Industry. Business History Review, vol.48 no.9, pp.14-88 3.0) Pozzi, D, 2010, Entrepreneurship and Capabilities in a “Beginner” Oil Multinational: The Case of ENI. Business History Review, vol.38, no. 35, pp.25-66 5.0) Graham, E 1998. “Market Structure and the Multinational Enterprise: A Gametheoretic Approach.” Journal of International Business Studies, vol.29, no. 15, pp.24-60 6.0) Bucheli, M, 2008. “Negotiating under the Monroe Doctrine: Weetman Pearson and the Origins of US Control of Colombian Oil.” Business History Review vol.83, no, 7, pp.52-62. 7.0) Mabro, R, 2002. “Saudi Arabia’s Natural Gas: A Glimpse at Complex Issues.” Oxford Energy Comment. Oxford Institute for Energy Studies, UK. 8.0) Madan, T, 2007. “India’s ONGC: Balancing Different Roles, Different Goals.” In The Changing Role of National Oil Companies in International Energy Markets. 9.0) Stalder ,P, Walter, A1997, Contribution to California oil and gas history: California Oil World, vol.2, no. 4, pp. 45-63 Read More