There will be blood

Issue: 128
Posted: 12 October 10

On Sunday 19 September 2010 engineers finally sealed the Macondo oil well in the Gulf of Mexico, which had exploded five months earlier and caused the “the world’s largest accidental offshore oil spill”.1 The explosion of the Deepwater Horizon oil rig in April killed 11 workers and the subsequent spill caused enormous damage to the local environment, but the effects of the disaster were felt far more widely. In Washington, Barack Obama has come under attack from a resurgent Republican right over his mishandling of the situation. BP, the corporation which owned the well, has been hammered by public opinion and the markets. But the disaster has also brought into sharp focus the danger posed to workers and the environment by the increasingly risky strategies for extracting oil that are being pursued by the fossil fuels industry.

Anatomy of a disaster

BP had high hopes of the possible gains to be made from the Macondo oil well. As Ed Crooks of the Financial Times reported:

Less than a year ago, Deepwater Horizon seemed to have set BP on a very different course. Last summer, the group drilled the deepest well ever developed for a commercial operation and struck oil. On September 2, it announced it had discovered a “giant” field, christened Tiber, which was likely to hold more than 500 million barrels of recoverable oil. BP’s shares rose by 4 percent in a single day, a rare event for a company of BP’s size. Moreover, it seemed that the initial reaction was, if anything, understated. Tiber was a harbinger of a new dawn for the company, in which production from the deep water of the Gulf would drive global growth.2

But despite BP’s optimistic outlook, its cavalier attitude to safety meant that an explosion like that on the Deepwater Horizon was an accident waiting to happen. Subcontracting and cost-cutting had been central concerns of BP’s operation for years. In an article examining the BP Texas City refinery disaster, which cost the lives of 15 workers in March 2005, Tomas Mac Sheoin quotes a consultant who claims that “BP’s culture was designed to be the most efficient cost-cutter in the industry…out of that came too many corners cut on maintenance and safety”.3

BP had contracted a corporation called Transocean to handle the extraction process at the Macondo oil well. The Wall Street Journal reported that the corporation had seen a rising tally of accidents on its operations, claiming that “nearly three of every four incidents that triggered federal investigations into safety and other problems on deepwater drilling rigs in the Gulf of Mexico since 2008 have been on rigs operated by Transocean”.4

At the time of the disaster a group of executives were visiting the rig to celebrate its safety record. Workers were sealing an exploratory well before moving into production when a methane gas bubble rose up the drill column, causing the explosion.5 The rig lacked an acoustic trigger, a remote controlled safety device that could have sealed the well before the explosion took place. The trigger is not legally required in either the US or Britain, unlike Norway and Brazil which demand them by law. The device would have cost $500,000—small change compared to the $560 million replacement cost of the rig, let alone the billions in liabilities BP now faces.6

The effect of the explosion on the local environment has been disastrous. According to the Guardian:

The White House says the BP oil spill is probably the greatest environmental disaster the US has faced, but the true impact on surrounding ecosystems could take months or even years to emerge. Experts say the unprecedented depth of the spill, combined with the use of chemicals that broke the oil down before it reached the surface, poses an unknown threat.7

The use of the chemical dispersant Corexit in the Gulf led to severe criticisms from scientists. The two versions of the chemical used by BP were “carcinogenic, mutagenic, and highly toxic”, and are banned from use in Britain due to their damaging effect on sea life.8

“Louisiana, the nearest state to the leaking well, some 42 miles offshore, has been the most impacted. The state’s governor, Bobby Jindal, said more than 100 miles of its 400-mile coast had so far been polluted.” Discussing the effects on wildlife, Prosanta Chakrabarty, a Louisiana State University fish biologist, said that “every fish and invertebrate contacting the oil is probably dying. I have no doubt about that”.9

The economic ramifications of the environmental disaster intensified the public outcry over the oil spill. The fishing industry is a major employer in the Gulf of Mexico, worth over $2.4 billion a year.10 The Financial Times interviewed a local fisherman who said that “the way things are looking now, we won’t be able to fish for a few months”. “This is the very beginning of our peak season,” he said. “This is the time we work 25 days a month.” The economy also depends on services provided to the fishing industry:

Rene Cross Junior, manager of the nearby Cypress Cove marina, said 30 to 40 boats were leaving each day to help clean up the spill. He was worried for his business, which includes a hotel used by competitive fishermen. “We were booked for fishing every weekend from June through August,” he said. “But this is going to devastate the fishing.11

The long-term concerns about fishing in the Gulf were exacerbated by the meagre haul of shrimp and oysters when waters were reopened for fishing. Most fishermen with their own boats have been employed by BP to assist the clean-up operation, but many who depend on the fishing industry for their livelihoods have been left out of work. The knock-on effects could be disastrous for the long-term employment prospects in the region:

Local seafood buyers bereft of supply are closing their docks to keep losses from multiplying, leaving shrimpers who couldn’t get hired by BP with few outlets to sell their catch. Meanwhile, national frozen fish buyers are driving down prices, threatening to eviscerate the Gulf seafood industry’s future markets by signing new contracts for Asian and Latin American shrimp.12

Even Barack Obama’s attempts to quell fears over the safety of Gulf seafood by serving shrimp at his birthday party are unlikely to overcome what could be a generational economic and environmental shock to the region.

Obama has faced growing criticism over his failure to deal with the disaster decisively. It is a sign of how disillusioned and demobilised much of Obama’s base must be that he can be outflanked on the issue by Sarah Palin, who popularised the slogan “Drill, baby, drill”.13

When Obama visited the region in June, he told reporters he was going there to find out “whose ass to kick”, while his secretary of the interior Ron Salazar promised to keep a boot “on BP’s throat”.14 Despite the rhetoric, various attempts to stop the leaking oil failed before a temporary seal was established on 15 July, almost three months after the explosion.

In an effort to divert criticism, Obama took to calling BP “British Petroleum”, a title the corporation had ditched in 1998. This rhetorical shift unsurprisingly elicited howls of outrage from the likes of the Daily Mail, complaining of “anti-British prejudice”.15 The Tory mayor of London Boris Johnson commented that there was “something slightly worrying about the anti-British rhetoric that seems to be permeating from America”.16 The revelations about BP’s lobbying of the British government over a prisoner transfer deal with Libya added fuel to the fire when secretary of state Hillary Clinton sought to ratchet up the pressure on BP by suggesting an inquiry into whether or not the corporation had played a role in securing the early release of the man convicted over the Lockerbie bombing, Abdelbaset al-Megrahi.17

As Gary Younge observes, “For some his performance over the BP oil spill is metaphoric—an inability to articulate and reflect the public’s urgency and discontent”.18 But it would be a mistake to write off the genuine concern shown by many Americans about the environmental damage caused at the height of the spill: a poll in late May showed that 50 percent of Americans believed that protecting the environment should be a higher concern than promoting economic growth against 43 percent who thought otherwise.19

The US administration eventually established a compensation fund for those affected by the spill which BP would fund over three and a half years to the tune of $20 billion.20 But it seems increasingly unlikely that even this amount will be paid out by BP. The new chief executive of the corporation, Bob Dudley, told City analysts that the total was likely to be lower than previously expected and that a facility had been set up to repay money from the fund back into BP’s coffers. Analysts at Citigroup predict that the corporation could resume paying out profit dividends as early as February.21 BP also moved to shift the blame for the explosion towards its contractors Transocean and Halliburton in what was widely perceived as an attempt to further minimise the amount it would be forced to pay out in compensation.22

BP has already shed around $9 billion in assets in order to cover the costs of the compensation fund, and it hopes to sell over $20 billion more. Credit Suisse has argued that BP is pursuing a “shrink to grow” strategy.23

Yet, after all the drama and the devastation, the Financial Times could smugly conclude, “For the global oil industry, it looks like being no more than a bump in the road towards further exploitation of deepwater oil reserves, even in the Gulf of Mexico”.24 This reflects the entrenched power of the fossil fuel corporations and their determination to continue squeezing oil from the planet.

Beyond the horizon

As global oil reserves dwindle, the struggle to control access to them has intensified. Rigs like Deepwater Horizon, drilling down over a mile into the seabed, have become a profitable proposition as oil prices have risen. As prices are certain to rise even higher as we approach the peak of oil production, the exploitation of ever more inaccessible sources of oil will commercially become viable.

An example of the lengths oil companies are prepared to go to in order to procure oil is provided by the current attempts by firms such as Cairn Energy to drill in the Arctic. In response to Cairn’s claims that the process is “relatively straightforward” and that “our programme is conventional”, John Sauven argues:

This industry has lost its grip on reality. Anyone who has seen the remarkable images coming from the Arctic over the last few days will know how unusual, dangerous and extreme this business has become. While icebergs the size of football stadiums are towed out of a rig’s path, ships equipped with high-pressure water cannons blast smaller chunks into submission. And all the while the clock is ticking. As the winter freeze edges nearer, this frantic exploration company rushes to finish the job before sheet-ice cuts off the region completely.25

The exploitation of tar sands in Alberta, Canada, is another example of the trend. Tar sands contain bitumen which can be extracted and combined with water to create a form of synthetic crude oil. According to Greenpeace:

Extracting tar sands bitumen from the forest wilderness in Alberta, Canada has major environmental impacts—not least the significant increase in greenhouse gases (GHG) produced by extracting and processing the bitumen into a usable product. The extraction process is thought to produce on average three times the GHG of conventional oil production.26

Tar sand exploitation leads to massive deforestation in Canada and threatens numerous First Nation indigenous areas. Each barrel of finished oil requires two barrels of fresh water, the leftovers of which are dumped in a toxic reservoir.

Tar sand exploitation is also incredibly inefficient. In order to measure the efficiency of preparing a given fuel, one must compare the energy return on energy input (EROEI)—that is, how much energy has to be used to extract the fuel. In his book The Party’s Over, Richard Heinberg argues that imported oil today has an EROEI of between “8.4 (that is, 8.4 units of energy returned on every unit invested in exploration, drilling, building of drill rigs, transportation, the housing of production workers, etc) and 11.1, depending on the source”. This compares with an EROEI of over 100 for oil discovered before 1950, and 40 between 1950 and 1970.27 Estimates for tar sands EROEI range from 1.5 to 5.2.28

The scramble for oil also lies behind much of the US policy in the Middle East. The US’s attempt to occupy Iraq and control its emerging rivals’ access to Iraq’s oil reserves has been a failure. Iraq’s first major oil deal was a $3 billion contract with the China National Petroleum Company in 2008.29 Moreover, the failure of the US to subdue the resistance in Iraq and Afghanistan has increased the confidence of China to compete for control of oil resources elsewhere—notably in Africa.30 In fact, the reduction of easily accessible oil reserves gives leverage to several rivals of the US:

As the world runs out of easily accessible oil reserves, international oil companies such as BP, ExxonMobil, Shell and ConocoPhillips—once classified as “supermajors” due to their dominance of the market—have found themselves sidelined by national oil companies which control the rights over the largest oil reserves.

More than three quarters of all oil reserves are now controlled by state-owned companies such as Saudi Aramco (Saudi Arabia), Gazprom (Russia), the National Iranian Oil Company and Petroleums of Venezuela.31

The relationship between capitalism, the state and oil is readily apparent in the case of the BP oil spill. Despite the oil corporations’ attempts at greenwash, rebranding themselves as deeply concerned about the environment, they still rely on fossil fuels for the bulk of their profits. As Paul McGarr argued in this journal a number of years ago:

There is indeed no reason in abstract why capitalism has to be dependent on fossil fuels and industries linked to them. Capitalism can profit from anything it can turn into a commodity… Once patterns of production become established and with them great concentrations of wealth and power established, they are hugely resistant to change. The people who head the giant corporations, and who embody the logic they must follow to survive and expand as profit-seeking beasts, will resist with all their power anything which fundamentally threatens their current basis of profit and power—the fossil fuel based economy.32

Oil is the lifeblood, the lubricant of capitalism. Without it, the gears of production would seize up. As the price of oil rises, so will tensions over access to and control over it. And, of course, the continuing burning of it and other fossil fuels is bringing about catastrophic climate change that threatens the future of life on this planet. All of this underlines the importance of fighting for programmes such as the One Million Climate Jobs Campaign that has now been endorsed by the TUC.

JJ


Notes

1: Crooks, 2010b. At around five million barrels, only the eight million spilled intentionally by Iraqi forces retreating from Kuwait in 1991 is greater.

2: Crooks, 2010a.

3: Mac Sheoin, 2010.

4: Wall Street Journal, 10 May 2010.

5: For more on the explosion and the immediate aftermath, see Bergfeld, 2010.

6: Wall Street Journal, 28 April 2010.

7: Guardian, 31 May 2010.

8: Guardian, 20 May 2010.

9: Guardian, 31 May 2010.

10: Hall, Jervis and Levin, 2010.

11: Crooks, 2010a.

12: Los Angeles Times, 26 August 2010.

13: Palin argued that the problem was with the government’s response to the accident and failure to hold BP accountable for any wrongdoing and insisted that “increased domestic oil production will make us a more secure, prosperous, and peaceful nation”-Silva, 2010.

14: Crooks, 2010a.

15: Daily Mail, 7 June 2010.

16: BBC News, 2010.

17: Guardian, 15 July 2010. For analysis of how al-Megrahi was framed for the bombing, see Basketter, 2009.

18: Younge, 2010.

19: Hall, Jervis and Levin, 2010.

20: To put that figure into some sort of context, BP made $25 billion in profits in 2008.

21: Guardian, 13 September 2010.

22: Guardian, 8 September 2010.

23: Wardell, 2010.

24: Crooks, 2010c.

25: Sauven, 2010.

26: Greenpeace, 2010.

27: Heinberg, 2003, p138.

28: Hall, 2008. The figure of 7.2 given in one estimate relates only to tar sand found on the surface that need not be mined.

29: New York Times, 28 August 2008.

30: Assaf, 2008.

31: Bergfeld, 2010.

32: McGarr, 2005, pp119-120.


References

Assaf, Simon, 2008, “Multinationals’ Scramble for Africa Fuels New Conflicts”, Socialist Worker (9 August), www.socialistworker.co.uk/art.php?id=15663

Basketter, Simon, 2009, “Lockerbie Evidence Shows Grave Miscarriage of Justice”, Socialist Worker (29 August), www.socialistworker.co.uk/art.php?id=18869

BBC News, 2010, “BP Oil Spill: Obama Comments ‘Not anti-British’”, www.bbc.co.uk/news/10303619

Bergfeld, Mark, 2010, “Not Beyond Petroleum”, Socialist Review (July/August),
www.socialistreview.org.uk/article.php?articlenumber=11333

Crooks, Ed, 2010a, “BP: The Inside Story”, Financial Times (2 July).

Crooks, Ed, 2010b, “BP Oil Spill Well ‘Effectively Dead’, Says US”, Financial Times (19 September).

Crooks, Ed, 2010c, “BP Leak just a Bump in Road for Oil Industry”, Financial Times (19 September).

Greenpeace, 2010, “Tar Sands in Your Tank”, www.greenpeace.org.uk/media/reports/tar-sands-your-tank

Hall, Charles, 2008, “Unconventional Oil: Tar Sands and Shale Oil”, www.theoildrum.com/node/3839

Hall, Mimi, Rick Jervis and Alan Levin, 2010, “Is Oil Spill becoming Obama’s Katrina?”, USA Today (27 May), www.usatoday.com/news/washington/2010-05-27-Spill-poll_N.htm

Heinberg, Richard, 2003, The Party’s Over: War, Oil and the Fate of Industrial Societies (Clairview).

Mac Sheoin, Tomas, 2010, “Chemical Catastrophe: From Bhopal to BP Texas City”, Monthly Review (September), http://monthlyreview.org/100901macsheoin.php

McGarr, Paul, 2005, “On the Road to Catastrophe: Capitalism and Climate Change”, International Socialism 107 (summer), www.isj.org.uk/?id=119

Sauven, John, 2010, “Weaning the World off Oil”, Guardian (31 August), www.guardian.co.uk/commentisfree/cif-green/2010/aug/31/wean-world-off-oil-greenpeace-arctic-protest

Silva, Mark, 2010, “Gulf Oil Spill: Palin Still Wants to ‘Drill Here, Drill Now’”, Los Angeles Times (3 May), http://latimesblogs.latimes.com/dcnow/2010/05/gulf-oil-spill-sarah-palin-still-wants-to-drill-baby-drill.html

Wardell, Jane, 2010, “BP’s Life on Frontiers of Energy Industry at Risk”, Associated Press (29 August), www.google.com/hostednews/ap/article/ALeqM5gRU07dMpL3LMzwiyQVN_a-R5DnQAD9HTA62O0

Younge, Gary, 2010, “Tea Party is Creating Waves for Republicans”, Guardian (9 June), www.guardian.co.uk/commentisfree/cifamerica/2010/jun/09/tea-party-success-us-primaries