Fossil Fuel Capitalism
The Tyranny of Oil
by Antonia Juhasz
We have to re-examine whether having only a handful of giant oil companies can coexist with the needs of the American consumer and a rational energy policy in this country—I do not believe it does. I’ll be offering an amendment…that will require a complete examination as to whether or not we should break up the big oil companies. Enough is enough.
-Senator Charles Schumer, 2006.
The United States is an “oiligarchy”
America is a nation in which a small cadre of oil interests governs the most pressing decisions of our time. Consequently, oil and gasoline prices are skyrocketing, feeding the already overstuffed pockets of Big Oil at the expense of investments in meaningful and sustainable clean energy alternatives. But this is just the most obvious tip of a much larger iceberg. As oil becomes harder to find, more competitive to acquire, more expensive to produce, and more polluting to refine, we will be further pressed to decide just how far we are willing to go to get the last drops. Will our climate crisis be expanded? Will communities be destroyed? Will more wars be fought?
As long as the nation’s largest oil companies continue to use their unparalleled access to both money and political power to pursue their goals, we will continue to follow the more destructive path. Only by restoring democracy and bringing the oil companies into check will we have a chance to choose a more peaceful, sustainable, and secure future.
Today Big Oil is the most profitable industry in the United States and in the world. The largest oil companies operating in the United States took in $133 billion in profits in 2007, making ExxonMobil, BP, Shell, Chevron, ConocoPhillips, Valero, and Marathon together the fiftieth largest economy in the world. Their combined profits were larger than the individual gross domestic products of New Zealand, Egypt, Kuwait, Peru, Morocco, and Bulgaria, among 129 additional countries. Each company is also dramatically increasing its profits. For example, between 2003 and 2007, Chevron’s profits increased by an astounding 158 percent, ConocoPhillips’s by 153 percent, and ExxonMobil’s by 89 percent. And their profits just keep growing.
The oil industry reached its current behemoth proportions through megamergers that in most cases should not have been permitted. These megamergers have led not only to market consolidation on a massive scale but to skyrocketing prices. Over the stern objections of members of Congress, state officials, consumer advocates, and antitrust experts, (the regulatory body) the FTC permitted the mergers of BP, Amoco, and then Arco; Exxon and Mobil; Chevron, Texaco, and then Unocal; Conoco and Phillips; Shell and Pennzoil; and numerous joint ventures between these companies, among other mergers. The FTC permitted the mergers in the face of its own econometric analysis, which should have made these mergers unthinkable—or at least called for placing significantly greater conditions on the mergers than the token gestures ultimately required by the FTC.
Petro-imperialism and its discontents
The permission to merge in the face of existing concentration gave Big Oil the keys to the kingdom. As a result, we have been paying higher gasoline prices that have contributed to the highest oil company profits in history.
The mergers also facilitated Big Oil’s reacquisition of sizable portions of the world’s oil following nationalizations of their holdings during the 1970s and 1980s. By buying up smaller companies and then merging with each other, Big Oil has recaptured about 13 percent of the world’s oil market. ExxonMobil, Chevron, ConocoPhillips, Marathon, Shell, and BP hold approximately 40 billion barrels of oil reserves among them. Were these companies one country, it would be tied for ninth place among the nations with the largest oil reserves in the world.
Big Oil has used its political influence to persuade the federal government to abdicate its regulatory authority over the crude oil futures market, which is today the primary determinant of the price of a barrel of oil. Energy traders working for Big Oil companies on the regulated NYMEX have been found guilty of or have been charged with intentionally manipulating energy markets. We know nothing of what these traders are up to on the unregulated exchanges. The actions of energy traders on the futures market have contributed to the second-highest run-up in oil prices in world history. The skyrocketing price of crude oil drives Big Oil’s profits and is the primary determinant of the companies’ recent record-setting profits.
Big Oil has turned this megawealth into mega-political influence. ExxonMobil, BP, Shell, Chevron, ConocoPhillips, Valero, Marathon, and other major oil companies use their money to create a labyrinth of financial control that weaves through state houses across the nation, into the courts, and up through the U.S. Capital and the White House. It blocks virtually all other players and seeps through all of the nation’s policy-making. With the help of front groups, trade associations, creative media, and the revolving door, more often than not we are not even aware of Big Oil’s actions against the public good.
The cost of “business as usual” has been borne out most destructively on our environment, on communities caught in the cross fire, and on workers at oil facilities, while it weakens the entire national security posture of the United States government and its military. Oil from the tar sands of Canada, the shale regions of Colorado, and in the world’s waters is extracted at enormous financial and environmental costs. The pursuit of these methods of oil extraction imperils the globe’s very ability to sustain life. Communities unlucky enough to reside near decrepit refineries are forced to suffer health risks, environmental pollution, and political manipulation. Those living where oil is produced face mass human rights abuses, the rule of corrupt governments, and death. Nations unwilling to turn over their oil face invasion and war.
The United States has already invaded Iraq to acquire its oil. Our military is laying down its roots for the long term, while our oil companies contemplate 35-year contracts for control over Iraqi oil. Iran appears next on the horizon. The U.S. military has become an international security force for Big Oil, with bases and deployments following the world's oil supply and transportation routes. People from Ecuador to Indonesia and from Angola to Oman confront the constant visible presence of the U.S. military, and the threat of force over their daily lives. Presidential candidates do not address this petro-imperialism, though it becomes ever more clear that our actions do not take place in a vacuum. China, for example, pursues oil in the same manner as the U.S. government has for decades; by supplying arms in return for oil. New alliances that threaten global stability are quickly emerging as oil and war become twin threats looming over the globe.
The U.S. government appropriated some $800 billion to fund its wars in Iraq and Afghanistan. Nobel Laureate economist Joseph Stiglitz has estimated that when costs such as future military operating expenditures, health care and other needs of veterans, interest on war debt and costs on the broader economy are taken into account, the war in Iraq alone will ultimately cost the U.S. taxpayer more than $3 trillion. Yet the larger costs may ultimately lie in future petro-imperialism conflicts. The United States is on an unsustainable course. We are digging ourselves into a hole from which we may soon be unable to get out.
This article was extacted from the ninth chapter of Antonia Juhasz's groundbreaking book of the same name. Ms Juhasz is a director at Global Exchange in San Francisco, and a leading oil, trade and financial policy expert. She writes for the New York Times, International Herald Tribune & LA Times among other publications, You can view a related video presentation by Antonia Juhasz here.