Title: Blowout
Rating: 4 Stars
This is the story of the resource curse. You’d think that if huge gas or oil reserves were to be found in a country that that would lead to a veritable bonanza for its population. For example, think of Norway. Flush with surplus cash from its petroleum sales, it established a sovereign fund for its citizens way back in 1990. This fund is to be used as necessary for future generations of Norwegians. It currently has over a trillion dollars. It is the largest stock owner in Europe. For such a small country, having this fund provides a nice healthy safety cushion for possible future troubles. Those crazy Scandinavian socialists and their silly ideas!
Alas, this sensible approach does not hold true for most countries. In fact, the spoils from oil/gas sales usually lands into the pockets of the very powerful few. Similar stories can be told in many countries, but here Maddow concentrates upon Russia and Equatorial Guinea.
The story of Equatorial Guinea is simply tragic. It is a poor nation. It has been ruled by a dictator (OK, fine, a ‘president’ that gets over 90% of the vote in elections) for over 40 years. All power flows from him. All petroleum revenue flows to him, his family, and a small number of his henchmen. In particular, his son (Teodoron Nguema Obiang Mangue) is a failed rapper impresario playboy with a fleet of expensive sports cars and a million dollar mansion in Malibu. While citizens of Equatorial Guinea have a falling literacy rate and limited access to clean drinking water, Teodoron is buying Michael Jackson’s glove and giving his girlfriends a shoebox of cash (some $80,000) to go shopping on Rodeo Drive. Anyone in Equatorial Guinea that has the nerve to even acknowledge this behavior is rewarded with years of torture in a prison.
The biggest kleptocracy of all is Russia. At one time, as hard as it is to believe now, the USSR was considered a legitimate existential threat to the US. I remember hearing news accounts about how much more scientifically advanced the Soviets were to Americans. Their system was considered brutally ruthless and would relentlessly beat down our flaccid liberal values.
We now know that it was all a Potemkin Village. When it did come crashing down and the Soviet Union ceased to exist, it brought into being, for a time, its own version of wild west capitalism. Fortunes were made if a person was lucky, ruthless, and not too concerned with the vagaries of law.
After Putin succeeded Yeltsin, the state became the head gangster. The relative few Western inspired innovative and efficient corporations were brutally taken over by its equivalent state favored corporation. The leaders of those bright new corporations were lucky to escape by only having to give up their equity and pay a massive fine. Some spent years in prison.
The state corporations had no interest in Western values such as return on equity or shareholder value. The corporations were run by Putin cronies of ex-KGB agents, friends from St Petersburg, and yes, believe it or not, judo instructors.
While a very few got unimaginably rich, the plight of the average Russian is sinking. Since Putin’s era, not a single multi-lane highway has been built in Russia. With no hope of succeeding, the current generation of potential Russian entrepreneurs is emigrating. With poor workplace safety, a high homicide rate, a high suicide rate, chronic alcoholism, and poor health care, the life expectancy of a 15 year old male is three years lower than in Haiti.
Who is one of the main enablers of this degeneration of countries such as Russia and Equatorial Guinea? It’s ExxonMobil.
In fact, transnational petroleum companies like ExxonMobil love countries such as these. After all, there is no bureaucratic red tape. There is very little concern with citizen protests if, say, I don’t know, their drinking water becomes polluted. They just have to pay a big enough bribe to the person in charge (and their cronies) and they get carte blanche to suck all of the oil and gas out of the country without regard to environmental damage. It’s great!
The second theme of this book is the role that American petroleum companies have in despoiling our country and our world in the name of the ruthless pursuit of oil and gas, wherever it might be found.
The development of feasible fracking has been a significant factor in the oil business. Previously inaccessible oil is now retrievable. Vast fields of gas are now available. Potentially a hundred years of supply exists within our borders. The dream of energy independence seems within reach.
There is the pesky problem of environmental damage. Near some fracking sites, pets and farm animals have died. Worrying instances of cancer have been identified. Drinking water is now not so drinkable.
Possibly more scary is that fracking seems to be creating its own earthquakes. For example, Oklahoma, not conventionally thought of as being particularly earthquake prone, began experiencing hundreds of earthquakes a year, some ten times the number that California has.
Even though this growth in earthquakes exactly tracks with the development of fracking, the petroleum industry for years fought the charge. They claimed any number of scientifically dubious reasons to explain this away and actively tried to fire Oklahoman geologists that had the courage to publish their own peer reviewed findings.
This is the US resource curse. There are states like Oklahoma that are absolutely beholden to the petroleum industry. While there are Oklahomans that are now billionaires, their school funding was being slashed. Teachers were some of the lowest paid in the country. Oklahoma, in the heart of tornado alley, did not have the funds to create tornado shelters in their schools. Ultimately, the people of Oklahoma did rise up, and in a rare burst of democracy, actually forced the Oklahoma government to raise taxes just a bit on the petroleum companies.
This is also acting out at the federal level. Let’s just start with Trump’s first Secretary of State, the former ExxonMobil CEO Rex Tillerson. With no previous state craft experience but armed with a tremendous amount of knowledge of the transnational oil business and a personal relationship with Putin, Russia was thrilled with his selection. One of the first bills passed by the US Congress during the Trump administration removed the previous requirements that petroleum companies had to report on exactly how much and who they were bribing overseas.
No matter how much they fight or how much power they currently wield, at the end of the day, the petroleum industry is doomed to lose. It should take its signal from the coal industry. It is already dying out. In the open market, coal simply can’t compete anymore. Oil and gas, especially as the costs of climate change become more obvious, will have to adapt or die.
It has huge resources of cash, so it should be able to adapt. However, for 150 years, the petroleum industry has been laser focused on finding, claiming, drilling, and draining every oil/gas field that it can find, anywhere in the world. Changing that mindset might, at the end of the day, just be too much to ask of an industry.
You might want to think about that if you’re a long term investor with exposure to petroleum stocks.
dorkenstein 