The UN secretary general, António Guterres has described the record profits of oil and gas companies as immoral. He was referring to the profits of three of the world’s top ten largest oil companies – Exxon, Chevron and Shell, which made a combined $100 million in profits.
The profits are partly due to the war in Ukraine, which has pushed up oil and gas prices throughout the western world. Of course, higher energy costs hit poorer households hardest.
Millions of people around the world would not hesitate to agree with Guterres, and his call for a windfall tax. But the truth is that governments either support the oil companies, or are powerless to prevent the continued destruction and inequality that the companies have produced.
The other top ten oil companies in China, Saudi Arabia and Russia no doubt are also making record profits. But importance of the western oil and gas companies is not only because of the market share that they control. It is also because of the degree to which the US oil industry is embedded in the country’s economy, and the US’s pivotal role in fighting climate change (or failing to fight it).
“Petro-capitalism”
Some political analysts have adopted the term “petro-capitalism” to describe our modern economies that appear locked into the oil and gas industry.
How did the world end up giving so much power to these companies?
Part of the answer is that oil is such a convenient source of energy. It is compact, therefore easily transportable. This has made it ideal for vehicles. For many decades, only coal was cheaper than oil and gas. Moreover, in virtually every country producing oil, the industry has been strongly tied to the state.
After the discovery of oil in Texas in the 1920s the federal and state governments used quotas and import controls to protect prices and support the industry.
Cartel
In the 1930s, seven US and British corporations controlled almost all the oil that came out of the Middle East. With the help of the US and British governments, the seven companies run a cartel that kept prices stable and profits high.
The US government pumped huge amounts of money into oil related industries to fuel the Allied forces during the Second World War. After the war, oil was central to the massive expansion of capitalist economies. The US’s Marshall Plan provided money to European countries to buy US oil.
The power and influence of the western cartel declined after the oil producing countries formed the OPEC (The Organization of the Petroleum Exporting Countries) in 1960. The cartel’s influence declined further after the 1970s, when most oil producing countries nationalized their oil reserves and established national oil companies.
Today, only five of the 10 largest oil and gas companies are large western corporations. But their political power is immense.
Exxon’s role
The role of Exxon has been particularly damaging. In the 1970s and 1980s Exxon conducted extensive research into climate change and global warming. The company was 100% aware that the burning of fossil fuels was warming the planet.
Exxon executives understood that public knowledge about global warming would lead to calls to phase out fossil fuels. They clearly believed, with some justification, that this would pose a strategic threat to their business. So, in the 1990s, they began a deliberate campaign of misinformation, setting up pseudo-scientific institutes and other organizations to discredit the science behind global warming.
Oil and gas companies used the American Petroleum Institute (API) as the public face of their well funded push back against organizations, scientists and politicians raising warnings about climate change.
Their strategy was so successful in this that they delayed meaningful action on climate change in the US by 20 years. They have captured the mainstream of the Republican party, which is fiercely resistant to any curbs on fossil fuels.
Buying politicians
The other weapon that the fossil fuels lobby uses is the buying up of politicians. About 63% of the US members of congress, both Republican and Democrat, receive money from fossil fuel (mainly oil and gas) companies.
Climate activists are naturally filled with revulsion at the massive profits of oil and gas companies in the midst of unprecedented heat waves, wild fires and droughts. But of course, these billionaire executives whose actions are responsible for so much damage to the planet, are only doing what they were appointed to do – maximize profits for the shareholders. The pursuit of profit is the essence of capitalism. Corporate responsibility is nice to have, but it seldom, if ever gets in the way of profits.
The oil industry’s new strategy to protect its future is greenwashing. Companies boast about how much they are doing for the “green transition”, while they continue their core businesses of supplying and refining oil.
Nationalization of oil and gas
A real green transition will require the power of the oil industry to be broken. Oil, gas and coal industries will either need to be nationalized or very heavily regulated, and their output capped.
This should be a key demand of climate activists and socialists in western countries. Only a strong political campaign will end the dark power that oil companies wield over our future.
The end of the oil and gas companies in their current form will not mean the end of capitalism. But it will put the world on a path to decisive reductions in greenhouse gases.