Written by Peter Capsanis, CCL member from the Federal Electorate District of Reid, NSW
Rachel Maddow’s book “Blow Out” was published last year with much media acclaim. She asserts that the oil and gas industries are colossal titans that are completely unaccountable. According to Maddow, they have committed many acts of political, economic and environmental malfeasance – both domestically and internationally – especially in the developing world.
Putin’s Russia and ExxonMobil
According to Maddow, these oil and gas multinationals have propped up several dictators around the world. The most notable example is that of the Russian President Vladimir Putin. For example, ExxonMobil made a half a trillion dollars deal in 2011 with the state-owned company Rosneft to exploit the oil and gas resources of the Russian Arctic. Maddow states that Putin and his cronies directly benefited from this deal. These Russian state-owned monopolies became in effect “ATMs” for Putin and his government. They used the funds not only for personal largesse, but also internally to wage war against opposition politicians, and externally to threaten and sway nearby countries, such as Ukraine.
Oil and gas exports provide a short-cut back to Russia’s former superpower imperial status. ExxonMobil and other Western resource companies have lubricated this process by providing the necessary technology and finance to extract these hydrocarbons. The Russian state-owned industries would be incapable of competing in the global market. They are inefficient, as they are free from competition and are instead politically driven.
The paradox of plenty
How can such high-demand commodities like oil and gas be the cause of such extreme poverty, as it is observed in many exporting countries? As Maddow reports, the founder of the Organisation of Petroleum Exporting Countries (OPEC) Juan Pablo Perez Alfonzo referred at one point to oil as the “excrement of the devil”. Oil has also been referred to as the “Dutch disease”, “the paradox of plenty” and “the resource curse”.
Maddow reports the case of Equatorial Guinea. Equatorial Guinea is a small central African country of a bit over 1 million people ruled by the same person – President Teodoro Mbasogo – since 1979. The elites associated with the President and his clan have grown enormously rich from the production and export of oil. However, the vast majority of the population continues to live in poverty, despite oil revenues having gone up from $2.1 million to $3.9 billion annually. Per capita income has increased to $37,200 – one of the highest in the world. Yet, 77% of the population still live in poverty. In fact, 35% of the population dies before 40 years of age and 57% has no access to safe water. Infant mortality rates have increased, whilst health and education indices have actually declined.
This indeed appears to be a classic case of dual development. A small export oriented enclave develops, while the internal domestic economy stagnates. There are few linkages between the two sectors.
Maddow claims that the dual-development economic model is not accidental. Instead, it reflects the preference of the multinational oil and gas majors to deal with dictators. Having to do business with a limited, unaccountable elite simplifies their operations and – according to Maddow – reduces their “bribing costs”.
Besides the economic and social consequences of the oil and gas majors, Maddow does not forget about the significant environmental ones.
First in the list is the 2010 Deepwater Horizon oil spill in the Gulf of Mexico. This was the largest marine oil spill in the history of the petroleum industry, with up to 40,000 barrels a day escaping into the ocean. The resultant USA National Commission found that BP – the multinational company managing the oil-extracting operations – had cut corners to save both time and money. Additionally, there was significant failure in government regulatory oversight. BP finally admitted that “[they were] not well equipped to handle major spills”, as nothing really worked, not even dispersants.
Maddow also mentions the consequences of the fracking and oil shale gas boom. These terms refer to practices of extracting hydrocarbons that involve the injection of high-pressure water (and other materials) into underground rock formations. The technology was perfected around the mid 2000s, giving rise to an extracting boom that involved primarily North American explorations. Maddow details the sudden rash of earthquakes that occurred in Oklahoma as a result of the adoption of these new practices.
Austin Holland was the head seismologist at the Oklahoma Geological Survey (OGS) at the University of Oklahoma from 2010 to 2015. He was able to link fracking and horizontal drilling to the increased earthquake activity. The state Oil and Gas industry vigorously opposed his findings. In particular, the Oklahoma Independent Petroleum Association (OIPA) and large companies like Continental Resources, whose founder and chairman Harold Hamn is one of the richest persons in the USA. These companies used their enormous wealth to influence the Republican dominated state legislature and the Republican Governor, Mary Fallin. Their goal was to pass industry friendly legislation and to put themselves under more friendly overseers. They tried to get rid of Holland and eventually he did leave. However, the increasing earthquake activity couldn’t be ignored. Holland had laid the groundwork from which the Oklahoma state legislature belatedly passed regulations restricting fracking.
A balanced picture?
Maddow concludes by stating that the oil and gas titans are like lions – “you can’t stop them from eating the gazelles”. In other words, they can’t be reformed. Is this the whole and a balanced picture? Are they as demonic as they are portrayed by Maddow?
Maddow has certainly harnessed an impressive array of empirical evidence. She shows how but doesn’t set out a reliable theoretical explanation or model of why the oil & gas industry has to be so corrupt. She is making a generalisation that does not strictly apply everywhere. For instance, these multinational resource giants also operate in vigorous and well-developed democracies and economies, like Australia and Canada, where such blatant corruption and rampant poverty does not exist. Nonetheless, wide-ranging networks and webs of political influence have been traced in those countries as well.
We also must recognise, as Maddow indeed does, the powerful and positive effects the producers of hydrocarbons have had on the modernisation and development of our economies and societies. We wouldn’t have the prosperity and the lifestyles we now expect without them.
Moreover, it appears that a number of these multinational resource companies have in recent years bowed to shareholders, public activism and government pressure. They are increasingly advocating for more eco-friendly policies, especially on climate change. Indeed, many oil and gas majors support – at least in words – a price on carbon-dioxide emissions. Whether this change of heart reflects a sincere desire to reform, or rather a way to greenwash their operations, is still debatable.
People who are concerned with climate change – and more in general the long-term sustainability of our societies – may be able to cooperate with these businesses. Indeed, one can hope for them to be reformed in this sense. However, to achieve this goal pressure needs to be placed on them. At times it might be effective to steal the thunder of the left, by way of protest rallies, boycotts, bans, and lobbying governments to impose fines and regulatory measures. Nevertheless, we must always hold out our hands in cooperation and be willing to work together.
The alternative of persistently antagonising the resource multinationals won’t work. Many still fantasise about nationalizing their operations. Apart from the greater efficiencies provided by the free market, this will only confine the promoters to sterile opposition and to increasing conflict and polarization of our societies. Crucially, little action would meanwhile be taken in regards to any conservation issues, especially the now non deferrable fight to cut greenhouse gas emissions.
A short youtube interview with Rachel Maddow about her book “Blow Out”
Main picture source: http://writersblocpresents.com/main/rachel-maddow/