Oil: Money, Politics, and Power in the 21st Century
The dirty game
By Steven Martinovich
The past few years haven't been so good for Big Oil on the public relations front. Big profits have seen calls for windfall taxes, environmental issues like BP's Gulf of Mexico spill have captured the public's attention, and decades of mistrust has exploded into outright hatred. Both here and abroad the major oil companies face attacks from activists, government and the public over their sins – both real and imagined. It's enough to make any oil company CEO wonder whether the job is worth taking.
The past two decades of oil industry history is the subject of Tom Bower's fascinating effort Oil: Money, Politics, and Power in the 21st Century, a surprisingly even-handed and thorough account. Although portrayed as all-powerful entities that are almost nations unto themselves, the picture that Bower paints is of companies handicapped by their own arrogance and incompetence, governments eager to collect as much revenue as possible, savage competition for new resources, traders manipulating the price of oil for profit and activists aiming to thwart the industry at every turn.
The timing of Bower's book couldn't have been better. Among the primary characters in his narrative is none other than BP and its former chief John Browne. Although Oil was written long before the Deepwater Horizon incident, it nonetheless offers clues as to why it happened. Bower reports that a culture of arrogance, cost-cutting and shortcuts on safety were among the issues that developed under Browne. Previous incidents in Alaska and Texas highlighted the company could be cavalier when it came to ensuring both worker and environmental safety in the drive to reduce expenses.
The most interesting aspect of Oil, however, is Bower's contention that the major oil companies are far less powerful than most believe – and growing less powerful by the day. He argues that with most second and third world nations establishing their own national oil companies, most new promising fields are closed off to the majors or open to them as junior partners. Nations like Russia are forcing renegotiations of contracts while others like Venezuela have simply nationalized their fields. Adding to the majors' problems are political hotspots like Nigeria which have seen efforts there stymied by local corruption and condemnation by activists who accuse the companies of fomenting strife.
When combined with environmentalism, poor public relations, grandstanding politicians at home and rising exploration costs, it's not hard to understand why some believe the future for the majors may be gloomy. And while some may cheer at humbled oil companies, Bower points out that many national oil companies simply don't have the technology to exploit their nations' reserves – that technology is possessed by the majors. We could face a future of rising oil prices and economic shocks not because we run out of oil, but because the bullet shot at the majors ends up striking ourselves.
With an effort like Oil one generally finds a number of problematic issues – be it bias or selective reporting – but the criticisms of Bower's effort should be so slight as to be almost unfelt. At times his in-depth coverage of how traders manipulated prices to earn enormous profits or the negotiations between nations and oil companies can drag, but Oil generally recovers quickly from those moments. And while it's clear that Bower found some of the people in the oil company distasteful, it was their own actions that made it possible for that to happen. All in all, Oil is remarkable for avoiding either for its own sake condemnation or cheerleading.
The future of the oil industry was written in the past – both in the reserves in the ground and the actions of the majors – and Bower does a tremendous job chronicling its last few decades. There are few soap operas that can compare to the real life drama that Bower has uncovered in Oil and it's a story well-worth reading. There are few resources as essential to the world as oil, something that will not change for decades to come, and it would do well for people to become more familiar with the industry and its challenges. It would be a difficult feat for them to do that better than by studying the story that Tom Bower has written.
Steven Martinovich is the founder and editor in chief of Enter Stage Right.
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