The current commodity giants
The commodity trading market does deal with many different types of assets and is resultantly rather large. However, some assets, generally speaking, are more valuable than others. The companies that deal with these are, therefore, far more influential on the global scale. The most obvious example of this is oil. There are numerous oil companies out there, which try to deal with different aspects of the oil market. However, as times change, so do their strategies, something we will discuss shortly.
Nation states in oil commodities
After Europe felt its grip on many oil-bearing nations loosen, these places tended to seize their oil for themselves. No longer did European companies have exclusive access to the world’s oil centres. To ensure that they could keep their resources safe, many of these countries formed OPEC. This is a coalition that continues to exist to this day. It currently consists of : Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Congo, Saudi Arabia, U.A.E., and Venezuela.
All of these countries nationalised their oil industries, and made sure most of the wealth would go directly to them. This was not an overnight process, as embargoes continued and countries nationalised their oil fields more, from the 70s to the 80s. In many cases, this turned out to be a huge success. Places like the U.A.E. would be nowhere near as rich as they are were it not for their success in the oil market.
As a result, the major oil companies now had to change their strategy to ensure that they could still keep making profits. As a result, these companies could focus far less on oil extraction. They eventually had to settle on finding ways to trade with these national oil companies (NOC) to get their commodities. They would then put more focus on refining their oil and selling it to their customers (petrol stations, and such).
From then on, futures contracts became the primary method of obtaining oil worldwide. They also figured out standard prices and tools to hedge price risks. By using independent contractors to trade the items for them, the companies had to worry less about the risk of shipping as well. They could then focus on what mattered most to them, mainly refining.
So, as it stands today, many smaller trading companies deal with shipping oil, and the big oil companies focus on refining and selling it to consumers.
The big oil commodity companies
Many of the largest companies we have today are in the NOCs due to the power of the OPEC group. We will need to mention a few of these.
Saudi Aramco, is, as you may have guessed, a Saudi Arabian company. It deals mainly in oil extraction and distribution. Saudi Arabia being one of the most oil-rich countries in the world, this is a very simple process for them. Overall, it makes over 465 billion dollars annually, making it the most profitable oil company in the world.
Sinopec is the next company to mention. This is another NOC, based in China. It also mainly deals in oil extraction and distribution services. Sinopec, unlike Saudi Aramco, also deals outside of China itself. It has explored areas in Africa as well as China. To some, this may seem a form of neocolonialism that China is forcing on African nations. In addition, it has caused pollution in many of these African nations, sometimes even in their national parks. The company makes 455 billion dollars a year.
Next, we have the China National Petroleum Corporation. This is, of course, another Chinese company. It focuses more on the refining process of oil and selling the products. However, it does have some interest in exploration. It makes around 423 billion dollars a year.
Publicly traded commodity companies
We should also note the trajectory of the oil companies. Originally, a very large portion of the major oil companies were under one company, standard oil. However, in 1911, the U.S. government declared that standard oil was an illegal monopoly. They split it into many different companies following this. However, many of these companies started merging, and today we have far fewer, but more powerful, oil companies than we did immediately after the breakup.
ExxonMobil is one of these merged companies. It is the result of the merger between Exxon and Mobil, two of the largest companies in their time. It is the largest American oil company, and one of the largest in the world. Its main focus is on exploration, finding areas around the world available for drilling. It makes a total of around 269 billion dollars a year. As you can see, this is frighteningly smaller than the production of some of these NOCs.
Next time we will be discussing commodity giants in multiple different assets.
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