THE NEW OIL CRISIS
The Guardian (London), December 9 1998
If Exxon and Mobil are allowed to merge, they will create a monster with increasing power to conduct exploration in frontier areas, with devastating consequences, say Andy Rowell and Steve Kretzmann.
You could hear the ghost of John D. Rockefeller laughing last week. Eighty-seven years after Rockefeller's Standard Oil monopoly was broken up by anti-trust regulators, the largest orphans -Exxon and Mobil - are rejoining. If regulators allow it, Exxon Mobil will become the world's largest publicly traded company. With a total worth of $230 billion, it will have more resources than most of the countries in which it operates and will be worth six and a half times the Gross Domestic Product of Nigeria.
It is hard to see how the Exxon Mobil marriage benefits anyone but stockholders and corporate executives. Critics charge that workers, consumers, communities, and the environment all lose. "The growing power of these conglomerates means that the ability of national governments and regulatory systems to exercise any effective control or deterrents on their activities is going to be increasingly limited" argues Dr. Charles Woolfson from the Scottish Occupational Health and Safety Research Network at Glasgow University.
Exxon and Mobil are two of the "Seven Sisters", the oil companies that have dominated the industry this century. Their union follows the creation of another "Super Sister", BP and Amoco in the summer. Last week, France's Total announced plans to buy PetroFina of Belgium, creating the world's sixth-largest oil company. All indications are that further mergers will follow, and that we will end up with three "Super Sisters" that will effectively monopolise global energy at the start of the next millennium.
The mergers are a response to two forces. On the one hand costs are increasing as companies explore for oil in expensive frontier areas of the world. On the other, the oil price is at its lowest point for over a decade as increased production from these same companies has glutted the market. Analysts predict the industry will spend nearly $150 billion on exploration and production this year. The industry's continuing drive to expand the oil frontiers - farther offshore, deeper into the arctic and further into pristine rainforest and indigenous homelands continues to drive costs up.
"Exxon Mobil will have the clout to go anywhere in the world" states Tom Wallin, Group Editor of the Energy Intelligence Group. The clear benefit of the mergers is not in efficiency or economies of scale to better serve the consumer - but in the freeing up of funds for frontier exploration, where oil operations have a devastating ecological and cultural impact. According to environmental advocates, petroleum exploration threatens old growth frontier forests in 22 countries, coral reefs in 38 countries, and mangroves in 46 countries. In addition, indigenous peoples on all the habitable continents, including at least eight isolated groups face an immediate or near-term threat from oil exploration.
Hundreds of environmental and human rights organisations from around the world are currently calling for a moratorium on new exploration in these most threatened areas. Such a curb on new exploration would not only save critical ecosystems and cultures, it would vastly change the economics of new exploration if these most costly projects were factored out.
Much of this exploration will exploit gas. Both merged companies have prolific gas reserves - Exxon, Amoco and Mobil are the top three US companies for world-wide gas reserves, with Exxon and Mobil the top two producers. All signs are that the mergers will delay disinvestment by the oil companies out of hydrocarbons and into renewables. BP, which gained access to Amoco's vast gas reserves, will concentrate on utilising gas reserves rather than expanding its small renewable subsidiary. Exxon Mobil, the biggest energy company, has no renewable business interest.
Indeed, the two are at the forefront of moves by the industry against action on climate change, arguing that there is no scientific consensus. All indications are that urgent action is needed now otherwise we face catastrophic climate change within fifty years.
Despite this, Exxon and Mobil are the main companies involved in the two vociferous industry lobby groups, the Global Climate Coalition and American Petroleum Institute (API), that have tried to scupper UN negotiations. Documents leaked to the New York Times earlier this year showed how Exxon was spearheading the API's anti-science campaign. "Putting Exxon and Mobil together creates the Death Star of global warming" says John Passacantando from Ozone Action.
In addition, over 15,000 will be lost because of the mergers. Dr. Charles Woolson warns that job cuts and the low oil price "make for a dangerous cocktail of circumstances in which safety becomes ever more vulnerable to cost considerations." In contrast, a European Commission report recently concluded that up to 900,000 jobs could be created by the doubling of renewable energy by 2010.
Ironically, because of climate change, the dinosaurs which now dominate the industry could themselves become extinct, having banked their future on bigger oil production, rather than local renewable energy production. "The oil industry risks failure to anticipate the decentralisation of energy production" argues Lester Brown from the Worldwatch Institute. "Those who protect the past will become part of the past".
By Andy Rowell and Steve Kretzmann
Andy Rowell is author of Green Backlash - Global Subversion of the Environment Movement, Kretzmann is Oil Campaign Director for Project Underground, a human rights and environmental organisation in the US.
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