Hey Hot Cakes,
Launch day is here for the return of the podcast! Ep 1: The Real F*ckbois of Fossil Fuel, in which we place the focus of Earth Day where it belongs, on oil companies and their bullshit. Episodes coming soon include a conversation on nationalizing oil, with The New Republic's Kate Aronoff; a look at the intersection between the unraveling of democracy and climate, with The Atlantic's Adam Serwer; a discussion on climate and COVID with The New York Times' David Wallace-Wells; and the connection between climate and toxic masculinity, with Rebecca Solnit. In celebration of the launch, we're sharing last month's paid essay with everyone. We hope you like it all!
Thanks for your support!
Mary + Amy
The World Is an Oil-garchy
By Amy Westervelt
Russia’s invasion of Ukraine is increasingly being described as a “fossil-fueled” war, which is totally accurate. It’s doubtful that without billions in oil and gas money, Putin would feel emboldened to invade a sovereign country. But what’s often missing from this discussion is the way oil companies—state-owned or not—occupy a geopolitical space above sovereign governments, one that enables them to operate beyond the legal or political constraints that limit the behavior of governments. They effectively act as countries with no borders and no rules.
One of the more brazen examples of this is the so-called Red Line Agreement. Originally drafted in 1928 and dissolved in 1948, it was an agreement between the world’s seven largest oil companies (not countries, mind you), through which they drew a literal red line around the Arabian peninsula and divvied up the oil resources there amongst themselves. The agreement was dissolved mostly so that Standard Oil of New Jersey (ExxonMobil today) could get a bigger share of the pie, and those same companies kept hold of Middle East oil fields for decades. When Iraq and Saudi Arabia nationalized their oil industries (in 1972 and 1980 respectively), it meant devalued assets and less money for some companies, which is part of what drove the desire for U.S. companies to reclaim Iraqi oil fields during the 2003 U.S. invasion of Iraq.
Another very clear example: international arbitration. Thanks to a clause in most trade agreements between countries, corporations around the globe have access to a system called “international investment arbitration.” If a country passes legislation that suddenly makes a company’s investments in said country less profitable, they can file an arbitral claim. That triggers a quasi-legal hearing process through which a secret tribunal (seriously!) of three judges, one of which is appointed by the company in question (really!), decides whether or not the country in question owes the company money to make up for lost profits.
Biden’s cancellation of the Keystone XL pipeline triggered this process recently – TC Energy, the Canadian pipeline company that was building Keystone XL, filed a claim alleging that the U.S. government owed it $15 billion. When it started to look like it was going to lose its case in Ecuador, Chevron filed an arbitral claim alleging that the Ecuadorian government owed it money for allowing the case to proceed at all. In 2008, when the government of El Salvador put a pause on mining permits while it figured out how to stop mines from contaminating the country’s water supply, Canadian mining company Pacific Rim filed an arbitral complaint, asking the government to pay $301 million—about 2 percent of the country’s GDP—to make up for the fact that the fate of its planned mine there was now uncertain.
A recent report from the International Institute for Environment and Development highlights how these mandatory arbitration clauses in trade agreements could make it that much harder for countries worldwide to take strong climate action: Since most of the world’s coal plants and oil-and-gas drilling sites are governed by international trade treaties, and those treaties almost invariably include arbitration agreements, fossil fuel companies have a great deal of power to file complaints against countries whose cuts or caps on carbon pollution interfere with their profits.
Then there’s the role of oil companies in international climate negotiations. At COP 26 in Glasgow last year, fossil fuel representatives far exceeded the representation from any one country. As I’ve written before, the industry also shaped the UN Framework on Climate Change, which underpins both the Conference of the Parties (COP) global climate meetings, but also the reports put out by the Intergovernmental Panel on Climate Change every few years. Employees of the world’s largest oil and gas companies are deeply embedded in the authoring of those reports as well. From 1998 to 2007, Brian Flannery, a manager at ExxonMobil and a key part of the company’s shift from researching climate change to casting doubt on climate science, was lead author of the “Working Group III” assessment in the IPCC’s reports. That means that during an absolutely critical decade for climate, the lead author of the report on mitigation—actually reducing greenhouse gas emissions—was one of Exxon’s top guys. And lest you think this problem is in the distant past, allow me to point you to the author list for this year’s mitigation report, coming out in April. The Coordinating Lead Author, a role that holds a lot of power over what makes it into the final report, works for Saudi Aramco and one of the review editors is a longtime Chevron staffer.
Oil companies, or more accurately as Mary has started to call them “oilgarchies,” operate above and beyond the laws of any sovereign government. When a country’s laws don’t suit them, they either find a way to change them or punish governments enough for passing them that they’ll think twice about it next time. They’ve divvied up the world’s fossil fuel assets without any concern for immediate or long-term repercussions, and with little input from citizens or the governments that are supposed to represent them. In many cases, they’ve done so in a way that doesn’t even benefit a country financially at all. The best example recently is the contract ExxonMobil signed with Guyana to drill its deepwater offshore oil reserves, one which is unlikely to ever benefit the country financially but will all but ensure the ruin of its ecosystems.
Lately, there’s been a lot of talk about Russia’s oligarchs, but not a lot of discussion of what an oligarch actually is. Like aristocrats, oligarchs tend to hold the bulk of a country's power and wealth, but they do not so much inherit it as take it, usually via corruption. An oligarchy is ruled by the few; an oligarch is someone who doesn’t just hold power and money, but also controls enough resources to influence politics or government in a meaningful way.
Sounds an awful lot like an oil company. If Russia is an oligarchy, then we all live in an oil-garchy. And if we hope to have any sort of just transition, we’re going to have to strip oilgarchies of their power.