Globalizing Oil: Firms and Oil Market Governance in France, Japan and the United States.
The oil shocks of the 1970s concluded the dominance of the Western oil conglomerates over oil production and set the stage for substantial changes in the governance of the international market. These changes in governance structures reflected the new strategies adopted by Western oil majors in response to the growing influence of oil producers in the third world that formed the Organization of the Petroleum Exporting Countries to counter Western control over oil. Llewelyn Hughes argues that contrary to the frequent framing of oil as a strategic resource that requires government protection, the dwindling influence of the Western oil majors has been accompanied by a general trend toward market liberalization. Why did some oil producing firms respond to the 1970s by lobbying their respective governments for more extensive protective measures while others lobbied for liberalizing the market?
This puzzle is at the center of Hughes's study of the market strategies that oil producers adopted in response to the crises of the 1970s. He builds on theoretical perspectives familiar to political economists and demonstrates that contrary to prevailing expectations, many oil producers responded to the crises by relinquishing control of national oil companies, abolishing markets controls, and diversifying their operations. His study deepens our understanding of the various strategies the companies adopted to cope with new market conditions. Hence, the central question is: what explains the variation in the strategies adopted by national firms?
Hughes answers this question by comparing the strategies of firms in France and Japan in which natural endowments are scarce. The framework links firm strategies to variation in domestic configurations and focuses on the nature of preexisting social compacts. In essence, the analysis looks at how standing social compacts conditioned the strategies adopted. A detailed case study of France centers on how industrial relations dating back to the 1920s shaped the emergence of two vertically integrated firms with substantial domestic market shares and international holdings. According to Hughes, these structures placed French firms in a unique position to respond to changes in the global market and take advantage of new opportunities. By contrast, Japanese firms were constrained by the existing social compact and unable to adjust to new conditions. In response, Japanese firms turned to the government for support, which resulted in a limited liberalization of the market.
Hughes places this book in the existing literature on the political economy and the politics of oil and presents a compelling framework for studying the variation strategies adopted by firms. His study is also enriched by careful analysis of official documents from France, Japan, and the United States. However, in terms of methodology, the inclusion of the United States as case study appears to introduce a number of new variables that the framework is not designed to take into account. Consequently, the US case runs the danger of introducing more questions rather than deepening our understanding of those already explored in the aforementioned cases. Overall, Globalizing Oil is a well-researched and informative study that should be read by anyone interested in the politics of oil and the broader issue of how national firms respond to rapid changes in the international market.
Reviewed by Christina Faegri, guest reviewer
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|Article Type:||Book review|
|Date:||Oct 1, 2014|
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