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Oil's Shrinking Sandbox Leads to Northern Alberta

Making sense of a complex source of energy.

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In recent years, the challenges of securing global energy resources for a growing, industrializing world population have been made painfully apparent by soaring prices. Record profits at the world's largest public oil companies can often paint a tempting target in the search for a villain amidst our collective turmoil. But the world of energy isn't a simple one. In the same way that energy is intricately woven into the fabric of our everyday lives, so too is the market for energy affected by the complexities of politics and the environment. Executives at international oil companies (IOCs) can claim limited victory in record profits if they can't efficiently reinvest for the long term. What's stopping them, you ask? Perhaps the most difficult barrier is also one of the great issues of the day: access to resource.

Resource nationalism has resulted in national oil companies (NOCs) controlling most of the world's energy reserves. In many cases, nations dictate terms of investment to IOCs, and IOCs have to play along. That's not to say the IOCs don't have a say; some companies are the size of countries themselves, with commensurate influence, and without their investment and expertise, some energy-hungry nations may not be able to get projects off the ground. But stable partner nations have been hard to come by, and the sandbox in which the IOCs can play has been shrinking.

Kish Patel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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