Oil Companies

Oil is your best friend when you are cooking. Although, perhaps that’s the wrong type of oil! Oil as an energy resource is a much bigger industry in the global market. Society uses oil as an energy resource daily, making it a critical industry. But what are the different oil companies and exporters across the globe? Which types of oil companies exist? Are oil companies considered as TNCs? Let's find out.

TNC oil

Oil is a critical resource in today’s modern society. We use oil to generate energy for transportation, heating, electricity, manufacturing and other industrial production. In fact, oil is the third most exported product in the world! TNCs are transnational corporations, of which many oil companies come under the header.

What are Oil TNCs?

Transnational Corporations (TNCs) are essentially companies that exist and run across multiple countries. Examples of TNCs include McDonald's, Starbucks and Amazon. There are many examples of large TNCs; however, in relation to oil, we can look at companies like Shell plc. Shell is a vertically integrated British-Dutch company, yet it exists in multiple different countries. Vertical integration means that the company undertakes all the processes itself, even though the company exists across multiple nations.

There are two kinds of TNCs that we can discuss here. Some TNCs are public and privately invested (by the general population). Shell and BP (British Petroleum) are examples of these, often found in capitalist economies. Other TNCs are state/government-owned and often found in communist/mixed economies. Examples include Saudi Aramco and Sinopec of China.

How do TNCs operate?

By becoming a TNC, companies can reduce the costs of running a business. TNCs can develop and spread due to a lack of international barriers, trade blocs, and policies that allow the creation of Special Economic Zones (SEZs).

The ability for TNCs to operate in multiple countries across the globe generates foreign direct investments (FDI), which increases global connections and encourages globalisation. The role of TNCs is to continue this spread of globalisation. This can be done through growing production networks, new market developments, and utilising economic liberalisation via outsourcing and offshoring.

What is the difference between outsourcing and offshoring?

Largest oil companies

Many countries have large oil reserves, which can then be exported worldwide. The top oil exporters in the world are Saudi Arabia, Russia, the USA, Canada, and Iraq.

Since there is such a high oil demand, there are many oil companies across the globe.

Big oil describes the top oil companies in the world. These are the oil companies that are the largest in trading and are investor-owned. These include:

• ExxonMobil
• Shell plc
• TotalEnergies
• BP
• Chevron
• Marathon
• Phillips 66
• Valero
• Eni
• ConocoPhillips

Fig. 1 - the famous Shell plc logo

Types of oil companies

There are different sections of the oil industry that produce different outcomes. The table below shows these various methods.

Although the major oil companies are TNCs, some organisations help the oil industry through support, for example, OPEC. OPEC (Organisation of the Petroleum Exporting Countries) is an inter-governmental organisation that aims to support the oil industry by ensuring suitable policies across the oil exporting countries. It ensures an effective oil supply to consuming countries whilst also ensuring economic benefit to investors.

The members of OPEC include 13 different oil-exporting countries. These are Baghdad, Iraq, Iran, Venezuela, Saudi Arabia, Kuwait, Congo, Angola, Libya, the United Arab Emirates, Nigeria, Algeria, and Equatorial Guinea.

OPEC can regulate the amount of oil that enters and leaves the global market since it owns large amounts of the world’s oil reserves, therefore having relative control over much of the world's oil supplies.

Oil companies in Saudi Arabia

Although Saudi Arabia doesn't have the most oil reserves globally, they are topped by Venezuela, the country still has a rich supply. Saudi Arabia is the world's top exporter of oil, and roughly 92% of Saudi Arabia's economy is funded by oil exports. Because oil is so globally valued, Saudi Arabia has become a relatively powerful country. Saudi Aramco (Saudi Arabian Oil Company) is an oil company based in Dhahran and is now the world's leading oil producer. It accumulates a huge profit, even more than Apple, the global tech giant!

Fig. 2 - Saudi Aramco logo

Aramco was set up through a contract with the government of Saudi Arabia and the Standard Oil Company of California in 1933. In 1938, an oil well was drilled, leading to the discovery of the largest petroleum source globally. This was the beginning of Aramco. In the years following this, Aramco expanded hugely, producing oil all across Saudi Arabia, and even creating its own pipeline, known as the Trans-Arabian pipeline.

British oil companies

One of the most famous British oil companies is BP (British Petroleum). This is a multinational corporation (MNC), which means that the company operates in the host country as well as other countries. MNCs are very similar to TNCs, but MNCs tend to have their management system in one place, whereas TNCs, have management all over the world. However, BP has a fascinating history; once upon a time, it wasn't an entirely British company. Let's take a historical trip to Iran.

In 1908, the Persian Gulf oil field was discovered. The following year, the Anglo-Persian Oil Company (APOC) was founded, later renamed the Anglo-Iranian Oil Company. This company was the first to use oil reserves in the Middle East. The company's primary owner was British, having the largest stocks; more money went into providing Britain with power rather than supporting the development of Iran. In 1951, the Anglo-Iranian Oil Company was nationalised after a rise in nationalism within the country.

After the assassination of the Prime Minister at the time, General Ali Razmara, who favoured the British, nationalism followed with the new Prime Minister, Mohammad Mosaddegh. The oil company then essentially came to a standstill, as the Brits (among others) didn't want any involvement with the country. This is known as the Abadan Crisis. Following this, the British Intelligence and US CIA undertook a coup d'état (when government power or government control is overthrown or seized) to essentially overthrow Mosaddegh. This was known to the British as Operation Boot. In 1954, the company became the British Petroleum Company (BP). Following the coup, Iran received 50% of the shares.

Fig. 3 - the famous British Petroleum logo, seen at many petrol stations across the UK.