ABSTRACT
This chapter shows that the constant threats to the oil companies' claim on crude oil and the limited investment opportunities that are available to some of the Organization of Petroleum Exporting Countries (OPEC) countries caused the discount rates of the companies to be much higher than those of the host countries. The rise in prices increased the OPEC producers' revenues and also decreased their discount rates even further. Therefore, the increase in revenues, through its influence on discount rates, dictated further output reductions which in turn helped prevent the oil price from falling. The price of oil was being determined by demand, long-run supply costs, and the extent of competition in the oil market. Since the alteration of property rights, increases in reserves ceased to imply automatic increases in supply. As far as any oil-producing nation is concerned, the time of exhaustion is not influenced by threats of nationalization or the expropriation of the concession terms.
