Much of the World’s Oil Is Owned by Governments. There’s No Good Reason for This.

It is as if the average human assumes that a coercive governance must be established or assigned despite the fact that such a government is often not very efficient or even involved in the outcomes we ultimately want, peace and prosperity.

—Walter Block and Stefan Sløk-Madsen, “Who Should Own the North Pole?“

In many oil-producing countries, governments own the resource (namely, oil) that they’re extracting. Whether this is a favorable state of affairs in matters of productivity and efficiency will not matter to us in this article. What does matter is that libertarians claim that government “ownership” of resources commits an infraction of the nonaggression principle.

This article will attempt to set to ink (or to bits) my sequence of thoughts regarding the issue. I will especially focus on making the argument that attempts of governments to own petroleum, or any resource, is an inherently unethical act with respect to libertarian ethics, save for a few situations that I will detail at the end. The article will focus on the state of Kuwait, but the argument may be generalized. Finally, I note that this is not a call for action but rather a practice in thinking out loud.

Let us start with the concept of ownership. Ownership is based on homesteading in the libertarian school of political philosophy. A resource, which was not previously owned or which was abandoned, may be partially or fully owned by an individual actor who appropriates the resource in use or in production. This is to be interpreted in the narrow sense: I may use the moon as the object of my view or contemplation, but I am not using it in a way that excludes others from using it in the same way without severely diminishing its utility and interrupting others’ use of it.

The same cannot be said about using an orange to produce orange juice: the use of the orange by one person severely limits the use by the other person. In other words, resources are exhaustible. By defining resources thus, the moon may not be regarded as an economic resource. Even the sun, which for all of history has illuminated our planet, will someday cease production—but that will not happen for billions of years. So, sunlight is not an economic resource. However, the land that is exposed to light, the physical space by which we may use sunlight, is scarce. It’s scarce because not enough of the resource exists to satisfy the totality of our wants.

This homesteaded resource becomes private property. To that, we have to add another important qualification: private property can only be owned by single human beings. Human beings, as acting agents, may use resources as means to achieve their ends, but they cannot completely share ownership. This is because, at any time, no two human beings may exercise the same act of ultimate disposal of the resources, which defines the nature of private property. (This encourages us to call it several property, following Friedrich von Hayek.) Even a company, which is legally partially owned by many stockowners, is not actually owned in the strict sense by any member. No individual can exercise ultimate disposal of the company’s resources. An individual’s part-ownership is more than nominal, but he may not access and dispose of the resources as he wishes.

Article 21 of Kuwait’s Constitution declares that “All of the natural wealth and resources are the property of the State. The State shall preserve and properly exploit those resources, heedful of its own security and national economy requisites.” This leaves the most important natural resource in Kuwait, petroleum, in the hands of the state. However, even this ownership is metaphorical. No single man really owns all the petroleum. In the end, it is impossible for any single person in Kuwait to use any amount of petroleum as he wishes, even if he claims that this is done for the public’s benefit, because many people with positions of authority differ on what exactly is the public’s benefit (notwithstanding that the term constitutes a Rousseauian categorical error).

Then, what can we mean when we say that the state owns the petroleum? Some of the state’s agents, its ministries, surely extract the petroleum. Not all the petroleum, however, is extracted—let alone discovered—and become part of the state’s reserve. We surely understand that, in the event that a new petroleum reservoir is found, it will automatically be claimed by the state. Then, government ownership of resources differs from the classical type of ownership that we discussed above.

Government ownership, here, may be understood by considering this example. Suppose one was walking in the wilderness and discovered an untapped pool of oil. He soon discovers that he’s standing on an oil reservoir. He may extract some of that oil in a tanker and bring it to officials in the relevant ministry, and they will immediately claim ownership. He may not repeat that act of filling another tanker with oil without suffering legal consequences. He loses the liberty of owning that oil, which he has discovered and extracted. He is not able to use that oil for any purpose anymore, unless by gaining permission from the state. This leads us to a new way of defining government ownership. A state can own resources by two methods: either by homesteading, wherein an official has the capacity of ultimate disposal of the resource, or by threatening others from homesteading the resource.

It is in defying article 21 of Kuwait’s Constitution that one may discover his inability to own any disclosed natural resource. Under the threat of aggression, he is not allowed to homestead a resource that was previously not owned. He is also threatened into not sharing in the use of a resource that is not fully owned by any acting agent from the government’s side. These threats come regardless of whether a citizen actually subscribes to article 21 of the constitution since, in any case, claims of ownership do not translate to the rightful ownership of any resource. (Else, anyone may claim to own other human beings, Antarctica, or the Pacific Ocean by simply saying so.)

Therefore, this type of ownership is in total defiance of the ethical principle adopted by libertarians under the name of the nonaggression principle, which states that acting agents are ethically not permitted to initiate or threaten to initiate invasion or forceful interference upon persons or their properties. Government ownership of resources constitutes such an aggression.

We note that this government “ownership” does not aggress upon persons who believe that government has such duties and who might support such ownership. We also note that should officials from any government homestead the resource, this might be allowed in the libertarian sense, if the official acts by virtue of him being a private citizen without exercising his political authority in any regard and then hand that homesteaded resource to a ministry.

Whether government “ownership” is the most efficient way to utilize resources, in our estimation, is irrelevant. Some ethical systems may use efficiency as a basis for their principles, but libertarians are concerned here with whether it infringes on the nonaggression principle. We hope that the argument is understandable here, and it helps the reader see the situation from this perspective.