Neg - Nationalization Add On - Michigan 7 2023 CFMP

Neg
1NC --- Economic Destabilization
Nationalization causes oil market and economic distortions — destabilizes in the long term.
Johnston 10 — Peter Johnston, Defense Scientist conducting Strategic Analysis for the Centre for Operational Research and Analysis, former infantry officer in the Canadian Forces, holds an M.A. in War Studies from the Royal Military College of Canada, 2010 (“The Security Impact of Oil Nationalization: Alternate Futures Scenarios,” Journal of Strategic Security, Vol 3, No. 4, Article 15, Winter, Available Online at https://digitalcommons.usf.edu/cgi/viewcontent.cgi?article=1085&context=jss#:~:text=In%20addition%20to%20the%20use,and%20sustain%20antagonistic%20political%20agendas., Accessed 07-14-2023, pg. 4)
Nationalization of oil reserves and facilities can contribute to oil market and economic distortions, the politicization/militarization of oil security, and the use of oil revenue in destabilizing ways. However, when countries that nationalize their assets are genuine liberal democracies with transparent revenue generation streams—including effective taxation regimes—and observant of international diplomatic and trade norms, then the impact of oil nationalization on energy security is neutral. Companies in these countries operate similarly to free market oil companies. Norway, with its state-owned Statoil, is a case in point in that it operates virtually the same as publicly traded IOCs. Yet, most of the nationalized countries listed in Appendix A are non-democratic and have limited transparency. Many of these states lack effective taxation regimes so their leaders often treat oil revenues as a primary source of funding for their agendas. Moreover, as detailed below, some of these states have used oil exports as a political weapon in the past and are likely to continue to do so.
In order to appreciate the level of influence that NOCs exert on global oil security it is necessary to understand their market share. Appendix A lists most of the countries that have nationalized their domestic and overseas oil company operations and indicates that they possessed 92.5% of total global proved reserves and accounted for 81.5% of total global oil production in 2008.7 This is not to suggest that all of the production or reserves listed in the appendix were the property of NOCs since, in many cases, IOCs also operate in the listed countries.
Nevertheless, it is noteworthy that the production ratio between IOCs and NOCs has virtually reversed since the 1970s. In 1972, the last year before the first major OPEC-driven oil shock, IOCs produced approximately 93% of global crude oil, whereas NOCs produced roughly 7%. In 2007, by contrast, IOCs accounted for approximately 23% of daily production against roughly 77% for NOCs.8 This trend in favor of NOCs will likely continue since much of the IOC production has occurred in nonnationalized regions, such as the United States, where fields are generally older and closer to depletion. Moreover, recent history has witnessed more nationalization, such as those undertaken by the Venezuelan or Ecuadorian Governments.
xT --- Economic Destabilization
Nationalization would crash the global economy
Baltimore - 07[Chris Baltimore; Februrary 2007 ; Oil nationalization threatens output, investment https://www.reuters.com/article/us-energy-cera-nationalism/oil-nationalization-threatens-output-investment-idUSN1431714920070214]-rrm
HOUSTON (Reuters) - A drive by big oil-producing nations like Venezuela to renegotiate deals with international companies has already hurt global crude production, a trend that could worsen if foreign investment declines further. An oil worker conducts operations at Main Production Platform Urdaneta operated by shell in the middle of Lake Maracaibo 65Km (40 miles) from Maracaibo City in Venezuela, May 28, 2006. A drive by big oil-producing nations like Venezuela to renegotiate deals with international companies has already hurt global crude production, a trend that could worsen if foreign investment declines further. REUTERS/Jorge Silva In nations like Ecuador, Bolivia and major exporter Russia, soaring energy prices have emboldened governments to take a hard line on production contracts, many of which were struck in the 1990s when oil prices were below $20 a barrel. That’s a far cry from the highs near $80 a barrel set last year that left billions of dollars of export revenue on the table for leaders like firebrand Venezuela President Hugo Chavez, who relies heavily on the country’s state-owned oil company to finance his left-wing social agenda. Some of the world's top oil companies, including Exxon Mobil Corp. XOM.N, Chevron Corp. CVX.N, Conoco Phillips COP.N, Statoil STL.OL and BP Plc BP.L, are facing a May 1 deadline to renegotiate deals in Venezuela's Orinoco oil region or have their multibillion-dollar projects seized. In Russia, the Kremlin is also seeking ever-tighter control over its strategic oil and gas reserves where foreign investors like Exxon Mobil and Royal Dutch Shell RDSa.L already have only limited involvement. “(Nationalism is) certainly having an impact on supply growth potential,” said Ed Morse, chief energy economist at Lehman Brothers in New York. “In the case of Venezuela it has been either an unwillingness or an inability to attract capital to maintain current production, let alone to grow it.” Venezuela Oil Minister Rafael Ramirez has said the state would seize fields operated by foreign companies in the Orinoco if the May deadline is missed. “The point is that after the host country says ‘do as we say or we will kick you out,’ the oil companies face the question of settling for half a loaf rather than their contractual full loaf,” said Michael Goldberg, a senior partner at Baker Botts LLP and head of its international dispute resolution group. The trend in Latin America could contribute to an overall decline in output from the Americas this year, countering earlier expectations of a rise, experts said. For Ecuador, a go-it-alone strategy has led to output declines and a $2 billion bill to import fuel like gasoline as its own refineries are under-utilized, said Rene Ortiz, a former Ecuador oil industry official who now works at CERA. Ecuador ousted U.S.-based Occidental Petroleum Corp. OXY.N last year over accusations that the Los Angeles-based company sold part of a block without approval. Some experts warn that the current path chosen by Chavez and others could have severe negative long-term consequences, not just for oil production, but for the countries themselves. “If prices drop or even remain at the current level and they continue on this course, the host countries are not going to see a lot of new investment and expertise rushing into the countries,” Goldberg said. Many producers are banking on the fact that oil prices will stay high, he added. With high oil prices and a wide field of foreign competitors for projects from China and India, some see a lesser role for international companies. “Many (national oil companies) don’t need the help of big (international oil companies) any more,” said Leonardo Maugeri, a senior vice president at Italian-based Eni S.p.A. Rex Tillerson, head of Exxon Mobil, disagreed. “The international oil company community ... has developed a considerable technical capability, considerable know-how,” he said on the sidelines of the CERA energy conference in Houston. “That’s the role that we will continue to play in working hand in hand with national oil companies, ultimately to allow the country to realize the maximum value of its resources.”
1NC --- Market
Nationalization is bad for the market and profitability of IOCs.
Johnston 10 — Peter Johnston, Defense Scientist conducting Strategic Analysis for the Centre for Operational Research and Analysis, former infantry officer in the Canadian Forces, holds an M.A. in War Studies from the Royal Military College of Canada, 2010 (“The Security Impact of Oil Nationalization: Alternate Futures Scenarios,” Journal of Strategic Security, Vol 3, No. 4, Article 15, Winter, Available Online at https://digitalcommons.usf.edu/cgi/viewcontent.cgi?article=1085&context=jss#:~:text=In%20addition%20to%20the%20use,and%20sustain%20antagonistic%20political%20agendas., Accessed 07-14-2023, pg. 5-6)
Nationalization of oil has a negative impact on the market and on the profitability of IOCs by limiting their access to reserves.9 Most of the reserves controlled by NOCs are located in places where oil is more easily—and thus more cheaply—extracted, leaving more challenging and less profitable reserves for the IOCs. These companies generally run much more efficiently than NOCs and would possibly increase the global crude supply or develop spare production capacity if they could access reserves held by NOCs.10 Spare production capacity is vital to reduce the shock of supply disruptions.
Currently, the major oil development opportunities are in the Middle East, Russia, Venezuela, the Canadian oil sands, and offshore Brazil. Of these, only Canada is not a nationalized country and offers access to reserves in a low-risk political environment. The stable political situation in Canada has helped spur investment in oil sands development.11 There has been some speculation that the Arctic might also provide opportunities for IOCs in the near term. However, it seems likely that developments in this region will proceed slowly.12 Thus, IOCs are struggling to compete in a market saturated by NOCs.
The impact on the global oil supply of dwindling investment opportunities for IOCs is compounded by the trend toward mergers and acquisitions of publicly traded oil and gas companies in recent years. Consequently, the reserves held by IOCs have come under increasingly centralized control. In 1990, the five largest IOCs controlled 60% of total IOC reserves. By 2005 they controlled 84%. These companies have been slow to invest in new production in light of generally high oil prices. Consequently, it may be the case that IOC production will decline somewhat in the near- to mid-term due to decreased competition, possibly leading to a situation where NOCs produce an even larger proportion of the global supply.13
Oil market distortions can result from deficiencies in operations by nationalized companies. This is because the diversion of revenue from the oil and gas companies to government coffers reduces infrastructure reinvestment, leading to production declines that reduce global supply.14 For example, Mexico's crude output has steadily declined from its peak of 3.824 million barrels per day in 2004 to 3.157 million barrels per day in 2008.15 Some analysts predict that Mexico will become a net importer of oil within a decade. The Mexican Government taxes Pemex, the national oil company, at slightly more than 60% of its gross revenue. Consequently, in the absence of foreign investment, currently forbidden by the Mexican constitution, Pemex must rely on government borrowing to develop infrastructure and maintain operations. This has led to a deterioration of infrastructure that has significantly reduced productivity. Granted, Mexican reserves are believed to be declining as well, although a major reason for the output decline is inadequate investment in infrastructure.16
The economies of nationalized states often lack diversification and consequently are extremely sensitive to swings in oil prices. These states often succumb to the so-called "resource curse," characterized by susceptibility to boom and bust cycles; inflation of the value of the state currency, which increases the challenge of developing non-resource related industries because imports become comparatively cheaper;17 and the generation of resource revenue streams that can feed a culture of greed and corruption facilitated by the lack of transparency. Under these conditions, many citizens lack economic opportunities and become dissatisfied with their government, potentially to the extent that political unrest, sometimes violent, results.18 The seemingly intractable violence in the Niger Delta serves as a stark example of the resource curse.19
1NC --- Heg
Nationalizing fossil fuels can promote the use of “oil weapons.”
Johnston 10 — Peter Johnston, Defense Scientist conducting Strategic Analysis for the Centre for Operational Research and Analysis, former infantry officer in the Canadian Forces, holds an M.A. in War Studies from the Royal Military College of Canada, 2010 (“The Security Impact of Oil Nationalization: Alternate Futures Scenarios,” Journal of Strategic Security, Vol 3, No. 4, Article 15, Winter, Available Online at https://digitalcommons.usf.edu/cgi/viewcontent.cgi?article=1085&context=jss#:~:text=In%20addition%20to%20the%20use,and%20sustain%20antagonistic%20political%20agendas., Accessed 07-14-2023, pg. 6-7)
Another significant impact of nationalized oil operations is the use of the "oil weapon" by exporting states in order to influence the behavior of, or possibly inflict economic damage on, consumer countries. There are contemporary examples of this, such as Russia's cessation of oil exports to the Czech Republic on the day that Prague agreed to accept a U.S. radar installation on Czech territory as part of the European Ballistic Missile Defense.21 Consumer states often lack the ability to quickly change sources of oil supply due to the nature of contracts, the difficulty in shifting refinery processes to handle different grades of crude and, in periods of short supply, the dearth of spare global capacity to replace interrupted petroleum shipments. Yet, exporting states can also suffer from their own use of the oil weapon since they often depend on the revenue they obtain from their exports. If they cannot find new buyers, they must have other sources of revenue or can only afford to disrupt their exports for short periods of time.
There has been considerable debate in recent years regarding the longevity of the oil supply, with some analysts suggesting that global peak oil production has already been reached and others suggesting that it will occur at some point during this century.22 The issue of peak oil is outside of the scope of this article, although it is important to understand that the availability of adequate quantities of oil on the market reduces the impact of supply disruptions. A well-supplied market can lessen the degree and longevity of disruptions better than an inadequately supplied one. It seems logical then that states that have nationalized their oil resources might be reticent to interrupt exports for political reasons if the market is well-supplied. This is because, under this circumstance, countries whose supplies are cut will be more able to find alternative sources. However, this is not guaranteed since converting refineries to handle different crude can take some time; therefore, the impact of supply disruptions will still be felt to a limited degree, even when markets are well-supplied.
1NC --- Nationalization Turn
Nationalization not key — the process now already takes too long, it will be worse under a new system.
Rowland-Shea et al. 22 — Jenny Rowland-Shea, director for Public Lands at American Progress, Sally Hardin, Director for Lands on the White House Council on Environmental Quality, Miriam Goldstein, Director for Ocean Policy at the White House Council on Environmental Quality, Nicole Gentile, senior director for Conservation at American Progress, 2022 (“5 Reasons Why the United States Can’t Drill Its Way to Energy Independence,” CAP, March 10th, Available Online at https://www.americanprogress.org/article/5-reasons-why-the-united-states-cant-drill-its-way-to-energy-independence/, Accessed 07-14-2023)
The oil and gas industry already has plenty of land and ocean ready to be used
The oil industry can decide to produce more oil whenever it wants. In fact, the oil industry already possess more than 9,000 approved—but unused—drilling permits on federal lands. Nearly 5,000 of those permits were approved in 2021 alone—the highest figure since the second Bush administration.
9,000 approved permits to drill that are unused by the U.S. oil and gas industry
The number of permits already approved is about six times the average number of wells drilled annually in the past five years. Over the past 10 years, permits and wells drilled have followed a similar trajectory—except for now, when permits have increased and wells drilled have decreased. The oil industry has all it needs to increase production but has chosen to profiteer off the current crisis rather than act.
Industry CEOs are profiting hand over fist while average families suffer
Meanwhile oil and gas executives are raking in windfall profits while consumers suffer at the pump. Last year, four of the major oil companies—Shell, Chevron, BP, and ExxonMobil—posted record profits, totaling $75 billion. In the fourth quarter alone, ExxonMobil was bringing in $97 million dollars in profit every day.
The reason that U.S. oil companies haven’t increased production is simple: They decided to use their billions in profits to pay dividends to their CEOs and wealthy shareholders and simply haven’t chosen to invest in new oil production. According to Bloomberg, “U.S. oil companies generally have been reluctant to pump more, preferring to steer cash flows back to investors instead of spending it on new drilling that could flood the world with cheap crude.”
The oil industry is sitting on 10 years’ worth of unused leases
The oil industry already has at least 10 years’ worth of unused leases at its disposal. They are only producing oil or gas on roughly half of the area they have already leased. There are nearly 14 million acres onshore and more than 9 million acres offshore that are currently under lease but are not being used for oil production. At least one-quarter of these unused leases are sitting on lands that the Bureau of Land Management has deemed to have a medium or high potential for oil. What’s more, only 10 percent of U.S. oil and gas production occurs on federal lands and waters, limiting the federal government’s ability to impact leasing decisions—the other 90 percent is done on state and private resources.
New oil projects won’t bring down prices or increase supply in the short term
Nothing on the industry wish list is a silver bullet to solve the short-term crisis. According to the Government Accountability Office, on average, it takes more than four years for companies to begin producing on the federal lands they lease. Offshore production takes even longer, as it takes at least two to three years to build the needed rigs. This delay is not due to drilling permit review, which—at most—takes fewer than 200 days. Even oil and gas industry executives themselves are saying it: Launching more oil and gas projects now will have no effect on short-term global energy markets.
The United States is now in the era of extreme fossil fuel energy: The opportunities that exist for big new oil projects are not fast, not safe, and are not long-term solutions. Projects such as ConocoPhillips’ Willow in the Western Arctic; calls to drill the Arctic National Wildlife Refuge; or ultradeep offshore drilling are several years if not a decade away from producing oil and only set the country up to continue on the unstable path of a fossil-fuel-dependent future.
The bottom line is that investments today—whether in fossil energy or renewables—are about our energy systems in a decade. Now is the time to invest in the energy system that will make the United States truly energy independent.
Renewables are winning the free market
For the long-term transition, the market is pointing away from new drilling investments and toward renewables. Take this latest example: In November 2021, the Bureau of Ocean Energy Management held the largest oil and gas lease sale to date and offered 80 million acres in the Gulf of Mexico. The sale has since been rejected by the co

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