How did it come about that only a few international oil companies held concessions to all of this region Middle East at the end of World War II? The … - Neil H. Jacoby

A foreign oil industry consisting mainly of private multinational companies competing in open markets has unique values to the Western World. Profit-motivated firms have proven to be better adapted to accept long-term risks and to allocate investment multinationally than have politically motivated government agencies.

Expropriation and nationalization of private oil properties, and the growth of government oil companies, extended public ownership in oil. However, the primary result of postwar government petroleum policies was to enhance competition in the industry. Governments encouraged new entrants, which diffused the structure of the industry. The number of competing firms increased, and the market positions of the largest international oil companies declined, reducing concentration. As the entrants developed more concession areas, the growth of petroleum supply relative to demand accelerated, intensifying competition in both crude oil and product markets, and depressing prices and rates of return on investment.

While it is true that not everyone in such a country will agree that this is the best way to run the government’s ‘civil service,’ by and large one has to conclude that a system of petty extortion and bribery has become entrenched over time simply because the country and its people have decided that they want it that way.