Reliable in the long run? Petroleum policy and long-term oil supplier reliability

Accelerating oil import dependence in energy consuming nations highlights the importance of having energy supplies at sufficient levels and at stable and reasonable prices. Consequently, it is crucial that oil exporters realize their full production potential. Current debates on energy security are often focused on short-term risks e.g. sudden disruptions due to wars, domestic instability, etc. However, when it comes to assessing oil supplier reliability it is equally important to assess their longer term ability and willingness to deliver oil to the global market. This study analyzes the effects of petroleum investment policies on crude oil production trends in 14 major oil producing countries (2000–2010) by focusing on the political–institutional frameworks that shape the investment conditions for the upstream oil sector. Our findings indicate that countries with less favorable oil sector frameworks systematically performed worse than countries with investor friendly and privatized sectors. The findings indicate that assessments based on remaining reserves and planned production capacities alone could inflate expectations about future oil supplies in a world where remaining crude reserves are located in countries with unfavorable investment frameworks.

► We explore if policies favoring state-ownership in upstream oil undermine output expectations. ► We compare petroleum policies of 14 major oil producers vis-à-vis production trends 2000–2010. ► We find major differences between countries favorable to state-owned or private investors. ► Substantial private investment seems needed for oil production to meet long-term demand growth.