Oil: Money, Politics, And Power In The 21st Century: What You Should Be Reading This Week

It's impossible to know everything, but we're willing to give it the old college try. Each week we'll be looking at books that help make sense of the world around us. We're not trying to be the smartest here -- just smarter than everyone we know.

More than two months after Deepwater Horizon exploded off the coast of Louisiana, BP announced this week that its gaffe-prone chief executive, Tony Hayward, would be replaced by -- of all people -- Robert Dudley, the current head of BP's operations in the region. The irony of the appointment may be coincidental, but it suggests the broader cavalier behavior in the bones of the oil biz. Oil: Money, Politics, and Power in the 21st Century offers a narrative of the oil industry over the past two decades, following the major executives, traders and politicians as they wrestle for big profits and access to the world's most important natural resource.

“Elephants” And “Orphans”

Tom Bower's account of the oil industry takes us through the fine print of negotiations between Big Oil and government for access to reserves, consolidation among the major companies and a (basically) unregulated market for trading the commodity. It’s equal parts politics and business, with valuable lessons for guys who deal with shifty international partners.

The text is dense but enlightening, and several patterns emerge. One that’s central to the book and gives context to the Deepwater mess is the boom/bust cycle. Explorers find an "elephant,” or major reserve, and there’s serious dick swinging; drilling into an ”orphan,” or dry well, means losses in the millions (or billions) and shame in the industry. (It definitely sounds shameful.) The same is true with successful/collapsed negotiations, and with good publicity or bad press resulting from accidents or spills. In all cases, the business reacts loudly and then runs for cover. “In oil, mistakes get buried in the mists of time,” waxed Philip Watts, former chairman of Shell.

More For Less

It turns out that BP’s chief executive from 1995-2007 spent most of his tenure doing bong rips off the mists of time. Although each of the majors has done its share of grim bidding -- Exxon in Alaska (major spill), Shell and Chevron in Nigeria (major death) -- John Browne’s motto was “more for less,” and he had a reputation for relying more on management consultants than on engineers. Safety lapsed, with a series of fatal explosions in Texas and Alaska, oil leaking from corroded pipes in Alaska's Prudhoe Bay, and -- in the Gulf of Mexico -- the Thunder Horse platform tilting a dangerous 20 degrees because of poor engineering, which BP had farmed out to freelance contractors.

“How can you prove BP is 'Beyond Petroleum'?” Browne was asked. “We’re only a petroleum company. It's a simplistic and provocative slogan. The press will be cynical. They'll murder it. And so will Exxon.”

While he was cutting costs to boost profits, Browne  -- who, not that it’s important, apparently met his lover on a site called Suited and Booted -- claimed, insanely, that BP was the first “green” oil major. Together with the ad guys at Ogilvy, he replaced BP's old tag, “British Petroleum,” with the shinier “Beyond Petroleum.” He was reinventing the company with a new, environmentally friendly image.

Which, uh, didn't work out.

The reality is that oil is a risky business, environmentally and politically. Corruption is practically required to get at oil reserves in the Third World. Scandal and mishap are the cost of doing business. And even developed governments can only do so much to regulate. Energy security and expectations of endless fuel demand their cooperation, at least until entire coastlines are threatened. The question now is whether Deepwater Horizon will lead to any fundamental change in the oil game. Bower's book, already on the press at the time of the spill, gives us context to believe that it won't.

The Truth Hurts

"Back in the 1910s and 1920s, everyone went to Latin America and talked about risks. Indonesia was meant to be terribly politically risky. We went to Saudi Arabia and we went to Iran and got nationalized twice. We got thrown out of Libya. My point is that's the nature of the business." 

- Lee Raymond, former CEO and Chairman of ExxonMobil, quoted in Oil: Money, Politics, And Power In The 21st Century


Read more: http://www.askmen.com/entertainment/austin_500/517_oil-money-politics-and-power-in-the-21st-century-what-you-should-be-reading-this-week.html

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