Ever feel like you're in Bizarro World? Especially now, when North American energy firms are welcomed back into Libya with (more or less) open arms, and yet our neighbors to the south are working us over?

The latest blow comes courtesy of Occidental Petroleum (NYSE:OXY) and the government of Ecuador (or rather, state-owned Petroecuador). Ecuador has decided to revoke Occidental's contract in the area and will soon begin to take over the oil fields in question. It all seems to stem from a dispute over a sale of a stake in a claim to EnCana (NYSE:ECA) and has since boiled over. Occidental said the sale was legal; Ecuador disagreed.

And these aren't tiny stakes. Occidental is a major player in South America; about 7% of its recent production comes from Ecuador and about 3% of its reserves reside there. Ironically, though, Occidental may be able to replace at least some of this with developments in Libya -- where the crude is light and sweet (generally the most desirable kind) and the local dictator is now seemingly more America-friendly.

As for Ecuador, good luck. Occidental was one of the largest investors in that country. And here's the trouble with "yanqui go home" politics: eventually we will -- and we'll take our investment dollars with us. This dispute has already harmed free trade talks between the United States and Ecuador, and this development isn't going to help. Sooner or later this oil boom will subside and these countries may not find Western companies all that willing to come back to invest -- they still aren't in Africa, for instance. And while China and India can, and do, get away with a lot, that's because they have 2-freakin'-billion people or so between them.

In the meantime, companies like Ballard Power (NASDAQ:BLDP) and Pacific Ethanol (NASDAQ:PEIX) couldn't ask for better friends right now than the governments of these South American countries. Make it more difficult and expensive for us to secure oil supplies and we will eventually pursue these non-oil automotive options with vigor and make them real.

All in all, this isn't a huge blow for Occidental, and it doesn't change my favorable opinion of the company and stock. It's a nuisance, and a serious one at that, but not insurmountable over the long haul.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).