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Nationalisation of Oil Industry - Essay Example

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Nationalisation of Oil Industry in Argentina Introduction Minder (2012) notes that Argentina, like many other South American countries, is endowed with vast amounts of oil and gas reserves. Despite its potential, Argentina remains one of the countries that depend much on oil imports from other countries…
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Download file to see previous pages However, Argentina has been forced recently to reverse its earlier decision to privatize the company by nationalizing 51% of YPF (Minder 2012). This move has been met with a lot of fury from Spain and other major stakeholders who are strongly opposed to move if media reports are anything to go by. The nationalization has been termed a forced purchase. As a result, the Argentine government is required to pay for Rapsol shares. Tracy (2012) reported that the Argentine government made such a move because of Rapsol’s continued failure to invest in gas and oil production in the country, a scenario that has forced Argentina to over-rely on imports to keep up with its high internal demand. For instance, Tracy (2012) reveals that Argentina spent over $9.4 billion in 2011 to import energy from other countries. This was despite the fact that Argentina is considered one of the countries with the largest hydrocarbon reserves in the world. The privatization of YPF snatched away the control of the government over oil and gas usage in the country. It is important for the Argentine government to understand that nationalization of oil supplies in the country has both its advantages and disadvantages. Advantages of Nationalisation to Argentine Government Oil and gas are commodities that contribute massively to the development of the economy of Argentina. As such they are products that should never be in shortage especially now that they are on high demand almost throughout the year. The Argentine government needs to ensure that no shortage of gas and oil is experienced in the country for their economic importance and therefore needs to be in control of the supply of the commodities. One of the main advantages of the move by the Argentine government to nationalize YPF is that it will give the government power to control how gas and oil is utilized in the country. Privatization takes these powers away from the government as has been the case since the Argentine government privatized YPF by selling it to the Spanish company, Rapsol. As Tracy (2012) states, the privatization of this YPF gave Rapsol absolute control of how gas and oil are used in Argentina. However, since Rapsol has not been able to adequately invest in equipment to boost productivity as was expected, Argentina has had to depend on energy imports from other countries, this despite its massive potential to produce its own energy. Nationalizing the company will give the argentine government control over the country’s oil and gas resources thereby enabling the government to invest in the petroleum industry and hence reducing its dependency on oil imports. Secondly, nationalization of the company will be of great advantage to the Argentine government in the sense that it will enable the Argentine government to be able to invest heavily in its oil and gas reserves so as to increase the production of oil and gas in the country. Doing this will enable the country become energy sufficient and avoid or reduce its import of energy as noted by Porter (2001). This is based on the fact Argentina is one of the countries that experiencing high-energy demand in the country. However, just as Tracy (2012) pointed out, privatisation of YPF interferes with the sector that used to supply much of Argentina’s gas and oil. As earlier indicated, Argentina spent over $9.4 billion dollars in 2011 alone because of energy shortage in the country. However, a closer look at what caused this shortage points at the inefficiency of ...Download file to see next pagesRead More
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