In Homer's epic poem, The Odyssey, his hero Ulysses faced one character test after another in his quest to return to Greece following the conclusion of the Trojan War. One memorable test was the song of the Sirens, maidens whose passionate song drew sailors too close to a coast where their ships were smashed on to the rocks by unforeseen currents. Are recent events in the oil industry a repeat of Homer's character test, I wonder?
The heads of several national oil ministries, at the guidance of their countries' leaders have taken steps that increase, or give total control to, local authority over production rights, profitability and access to crude oil reserves and resources.
The U.S. government is not above reproach in this regard. Sanctity of lease contract terms, for example, are under assault by Congress as rising profitability of leases acquired a decade or more ago spur resentment. The lure of greater autonomy from multi-national oil companies whose home countries are in the OECD may be one verse of today's Sirens' song.
While it is correct and rational for a host government to expect full participation in the profit from extraction of their natural resources, recent history challenges the claims that national oil companies (NOCs) can maintain existing production rates. Of even greater concern is achieving the rate of production increase required by a growing world economy. Access to capital, project management expertise and the successful application of state-of-the-art production technologies are critical to maintaining rates and achieving growth goals. The multinational oil companies have a century of hard-earned experience in these activities. NOCs and governments are very recent arrivals in these "waters" and lack the decades and breadth of experience. As captains of the oil industry, will they drive themselves and us on to the rocks as they listen to the Sirens' song?
This past weekend, at the OPEC heads of state summit, Chavez of Venezuela and Ahmadinejad of Iran encouraged their OPEC peers to use crude oil as a political weapon against the West. Oil and geopolitics are forever intertwined, spoken in the same verse of the Sirens' song. OPEC chose to table consideration of Chavez and Ahmedinejad's recommendations. Just as Ulysses chained himself to the mast of his ship as he passed the Sirens' home, allowing him to listen to the Sirens' song but preventing him from seizing the helm and sailing toward the rocky shore, OPEC leaders listened but did not act.
The world's economy is dependent upon the strength of those chains that hold it from the rocky shore and enable it to sail on.
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