Nationalization of Oil

Oil Nationalization...

What is Oil Nationalization?

Oil Nationalization is the process of confiscating privately owned oil production and property by the government. (Wikipedia) Essentially, the government takes over all the oil production in a country. 

Now, why would a country like to take over all the oil production in a country? For some countries, the nationalization of oil is a means of increasing government revenue. Saudi Arabia is a prime example of a country that has nationalized its oil for revenue. Saudi Aramco, one of the largest oil firms in the world, is government owned and helps finance the Saudi economy. 

Aside from a revenue-based motive, countries may nationalize their oil as a means of independence. Some countries may have implemented their oil nationalization because it allowed the country to become less dependent on foreign, transnational companies. A prime example is Venezuela. Venezuela confiscated the oil production land and facilities of Shell. Today, Venezuela is a part of OPEC and is one of the largest oil producers in the world. 

There are numerous benefits and detriments to nationalizing oil. Venezuela is a good example of country that has experienced benefits from oil nationalization. The population of Venezuela enjoy prices as low as 40 cents per gallon. 

Oil nationalization has its detriments. One, is that foreign relations can get damaged from nationalization. The US and Iran are a good example of damaged relations due to oil. When the government of Iran wanted to nationalize its oil, America and Great Britain implemented operation Ajax that ousted the Iranian government and replaced the Shah. This operation has been a base for many anti-western sentiment for the US and it all started with oil nationalization. Because many of the oil companies in Iran, at that time, were from the US and the UK, the companies and the governments had a lot to lose from the nationalization.