Oil companies have more money than they know what to do with, and while it helps the related exchange traded funds (ETFs), they’re finding themselves struggling to spend it.

Much of the reason has to do with politics: Western oil companies are being edged out of resource-rich provinces, or being forced to renegotiate contracts on less-favorable terms, reports Jad Mouawad for the New York Times.

One expert is blunt: the industry is in a crisis of leadership, strategy and plans for the future. Despite the recent drop in prices, the world is still going to need more oil to satisfy developing economies, and those future supplies are going to be hard to come by if things keep going this way.

The supply problem that led oil’s leap above $100 a barrel this year became even more apparent when five of the companies said their output had fallen by 614,000 barrels a day. It was the steepest decline in five consecutive quarters of them.

Until the 1970s, Western corporations controlled more than half of the world’s oil production. Today, the 10 largest holders are state-owned companies, while Western companies account for only 13%. All this explains the push for offshore drilling in the United States.

When OPEC meets next month, it will address the supply and demand issues.

  • iShares Dow Jones U.S. Oil & Gas Exploration & Production (IEO), down 6.6% year-to-date
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.