Oil Isn't Going Anywhere, And It Will Continue To Cause Problems

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Whether another oil crunch is looming or the price-per-barrel spikes again, two things are certain:One, petroleum demand isn’t going away anytime soon.

Two, it will continue to cause problems–both for the countries that need it and the often nasty regimes that produce it.

Peter Maass, a contributing writer for The New York Times Magazine, examines the global impact of ‘black gold’ in Crude World: The Violent Twilight Of Oil. He talks to rebels, royalty, middlemen, environmentalists, indigenous activists, CEOs — the stories that “tell the larger story of petroleum in our time.”

Maass explores the devastation oil has caused in places like Nigeria, Iraq and Ecuador, arguing that despite the green push away from petroleum, we seem unable to shake its grip on the global economy. And with limited supply for growing demand, prices will rise to new heights.

SEE THE COUNTRIES DEEPLY CORRUPTED OR CHANGED BY OIL>>>

We asked Maass to discuss his work. Here are excerpts from our conversation:

TBI: What’s the thesis of your book?

Peter Maass: The thesis is that some of the countries supply us with a lot of the oil that we use, and rather than getting rich off of it and becoming more peaceful, more prosperous, they actually end up getting poorer and becoming more violent.  So, we benefit from the oil, but even though we might think they benefit because we pay them a lot of money for it, in fact they can end up suffering economic, political, cultural and environmental losses that are quite significant.

It’s not every country, this is an important thing. Norway is a wonderful country that has a lot of oil, that depends on it and has benefitted from it. Canada has a lot of oil and benefits from it. The United States has a lot of oil, and has benefitted from it. So oil does not mean that you are going to suffer from it but there are kind of an important number of countries where it has been incredibly troublesome, it has determined their fate — not always in a good way.

Are oil company promises of “corporate responsibility” legitimate?

Some of these causes they put money into are good causes but these are incredibly minor low dollar value projects that they are involved in that they trumpet.  If proportionally the amount of their advertising budget that go into these sorts of social responsibility projects is very disproportionate to what these projects represent at the activity of the company.  So they are not lying when they say we are investing so much money in renewable energy, they are not lying when they say we are helping bring drinking water to one of the countries we extract oil from. It’s not a lie, but it’s not representative of their overall activity or necessarily of the impact of their overall activity, which you know if we are talking about a country like Nigeria, even though Shell has a very nice community program going, it just is not reflective overall of the general impact of their operations.

There’s a perception that we’re at a historical turning point away from oil? Is that fair?

It’s a misconception because we haven’t turned away from oil. We — in this case, the world — are using basically as much now as we have in recent years, around 85 million barrels a day. It hasn’t gone down significantly in the last couple of years.  In the last year it dipped slightly because of the global economic recession but generally speaking, we are not really moving away from oil in terms of our consumption of it.  We are still consuming a lot of it. And unless we change our ways, we are going to continue consuming a lot of it until basically there’s not enough left to keep up with the amount we need. 

And we are not, I think, entirely aware of that because there is a lot of attention and a lot of stories written about the what’s happening on the green side of things — alternative energy, renewable energy, etc. These are all great and necessary things and more needs to happen with them. But alternative energy, renewable energy so far provides below 5 to 10 per cent of the overall energy that the United States consumes.

Was the oil price spike last summer consequential in the long term?

I think that was very consequential because it had a number of interesting effects. One effect when oil got to $127 a barrell which translated into $4-a-gallon gasoline, was that we saw people altering their driving habits — they drove a lot less.  That was clearly a special kind of price. In the long run that’s what we need to do — drive smaller cars, drive more fuel efficient cars.

It’s going to go back to that level. Oil reached $127 a barrel because the global economy is expanding and America and China and other countries need huge amounts of oil. We were very close to the capacity for how much oil can be sucked out of the ground. There is a limit geologically as well as politically of how much oil we can get out of the ground everyday, and we’re going to go back up against it.

SEE WHICH COUNTRIES HAVE BEEN MOST DAMAGED AND COMPLICATED BY OIL>>>

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[slide
permalink=”nigeria-1″
title=”Nigeria”
content=”Nigeria’s Niger Delta region has much of the country’s oil reserves, but sees little of the revenue derrived from it. Militants in the region rountinely disrupt production and kidnap workers, anger that flows from years of environmental degredation and little revenue sharing from the central government.

Maass discusses Shell’s involvement in a recent Q&A:

Q: In Nigeria (the “Rot” chapter), you detail the suffering that oil has brought to the Niger Delta region, and you describe Shell’s reaction as being that of “a saddened bystander to social collapse.” But their presence there is undoubtedly fueling the conflict–how?

A: Shell is both a saddened bystander to tragedy and a perpetrator of the tragedy. I interviewed the head of Shell’s operations in Nigeria and I’m sure he would be delighted if the delta war would cease and if Shell could carry out its operations (as well as its social programs) without the obstacles of violence and corruption. But the firm played a key role in creating the conditions that it now bemoans, and it continues to play a role. For decades the company pumped oil from communities that failed to derive any benefit from the resources taken from their territory. Environmental damage was compensated at miserly levels. Faced with complex power structures, Shell encouraged corruption and violence by providing “contracts” to tribal leaders as well as youth groups that were informal militias. This was the easy way to do things–pay off some people while backing a government that suppressed others who couldn’t be bought off (like Ken Saro-Wiwa, the pro-democracy campaigner executed by the government in 1995). As I journeyed through the Niger Delta, where the oil facilities run by Shell are akin to isolated forts protected by abusive government forces, I was confronted with a surreal combination of Mad Max and Waterworld.”
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[slide
permalink=”iraq-2″
title=”Iraq”
content=”As the BBC reports, Iraq boasts the world’s third largest reserves of oil, with many potential fields not even tapped. But like before the U.S. invasion, its budget is almost entirely dependent on oil revenues, poverty is widespread, and violence persists.

Maass discusses American involvement in a recent Q&A:

Q: The chapter “Desire” is a fascinating exploration of the United States’ involvement in Iraq over the past few decades and its relationship to oil. What role did oil play in motivating our involvement there?

A: Donald Rumsfeld is not known as a standup comic but he said the invasion of Iraq had “literally nothing to do with oil.” That was a good one. I traveled to Iraq several times (I happened to be at Firdos Square when the now-infamous statue of Saddam Hussein was torn down by Marines) and realised that the question isn’t whether a particular war is about oil, but how it is about oil. A few days after American forces arrived in Baghdad, I visited the Oil Ministry and talked with a senior Iraqi there who waved aside the is-it-about-oil debate. “We have oil and you need it,” he told me. “The whole world is built around oil, so let’s talk about it honestly.” Rumsfeld wasn’t being honest but the opposite view–Iraq invaded only for its oil–wasn’t correct, either. The decision to invade involved a number of concerns–weapons of mass destruction being one–as well as a number of decision-makers who each had different priorities. As we know, Iraq did not possess WMD and the “evidence” was concocted or massaged, but that doesn’t mean our decision-makers knew the threat was false; I think they believed it to some extent. On the other hand, the Persian Gulf War of 1990-1991, when an American-led coalition pushed Iraqi troops out of Kuwait–that was about oil and nothing else. So it’s important to avoid dogma when looking at oil and war; don’t ask whether, ask how.”
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[slide
permalink=”ecuador-3″
title=”Ecuador”
content=”According to the CIA World Factbook, ‘Ecuador is substantially dependent on its petroleum resources, which have accounted for more than half of the country’s export earnings and one-fourth of public sector revenues in recent years.’

But the coutry’s oil sector has long been a significant polluter, leading to a number of lawsuits against oil companies. For example, Chevron is facing a $27 billion suit by indigenous groups.

Maass discusses Chevron’s involvement in the country in a recent Q&A:

Q: Parts of the Ecuadorian Amazon have been destroyed, due to drilling that is now being exposed in a class action suit against Chevron (the “Contamination” chapter). If the Ecuadorians win the suit, what could this mean for companies drilling in foreign countries?

A: First, it will put American companies on notice that they can’t use sloppy extraction methods in far-off countries. I think most first-order companies are more attentive to these concerns than they used to be, but a verdict against Chevron would be an emphatic reminder. More far-reaching, however, would be the precedent set for misdeeds of the past that have not yet gone to court. It takes a lot of time and a lot of money to sue an oil company, but the Ecuador case might serve as an inspiration for other suits. A number of public-interest lawyers are already working on legal briefs that lay the groundwork for cases of not just environmental damage but plunder–the theft of natural resources by dictators and the companies they dealt with.”
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[slide
permalink=”equatorial-guinea-4″
title=”Equatorial Guinea”
content=”Tiny Equatorial Guinea benefits from big oil reserves, but most of it goes to President Teodoro Obiang, a dictator and human rights abuser who doesn’t share much with his constituents. And even jobs in the country’s oil industry are taken my imported workers.

As the CIA World Factbook notes, ‘The president exerts almost total control over the political system and has discouraged political opposition. Equatorial Guinea has experienced rapid economic growth due to the discovery of large offshore oil reserves, and in the last decade has become Sub-Saharan Africa’s third largest oil exporter. Despite the country’s economic windfall from oil production resulting in a massive increase in government revenue in recent years, there have been few improvements in the population’s living standards.'”
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[slide
permalink=”iran-5″
title=”Iran”
content=”Iran is another country Maass singles out as uniquely affected by oil.

According to the CIA World Factbook, ‘Iran’s economy is marked by an inefficient state sector, reliance on the oil sector, which provides the majority of government revenues, and statist policies, which create major distortions throughout the system…High oil prices in recent years allowed Iran to greatly increase its export earnings and amass nearly $100 billion in foreign exchange reserves. But with oil prices currently below $40 per barrel, the Iranian government is facing difficulties…Iran continues to suffer from double-digit unemployment and inflation – inflation climbed to a 28% annual rate in 2008.'”
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[slide
permalink=”saudi-arabia-6″
title=”Saudi Arabia”
content=”Relatively wealthy Saudi Arabia hasn’t been wrecked by oil like Nigeria of course. But much of the country’s extremism and violence is fuelled by disdain for the ruling elite, who are propped up from many years of lucrative oil production.

According to the CIA World Factbook, ‘The country remains a leading producer of oil and natural gas and holds more than 20% of the world’s proven oil reserves. The government continues to pursue economic reform and diversification, particularly since Saudi Arabia’s accession to the WTO in December 2005, and promotes foreign investment in the kingdom. A burgeoning population, aquifer depletion, and an economy largely dependent on petroleum output and prices are all ongoing governmental concerns.'”
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[slide
permalink=”see-also-7″
title=”See Also”
content=”Despite such calamities, oil CEOs are still raking it in. See who made the most in 2008.
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