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How the Big Energy Companies Plan to Turn the United States into a Third-World Petro-State

Will North America become not just the next boom continent for energy bonanzas, but a new energy Third World?
 
 
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 The “curse” of oil wealth is a well-known phenomenon in Third World petro-states where millions of lives are wasted in poverty and the environment is ravaged, while tiny elites rake in the energy dollars and corruption rules the land.  Recently, North America has been repeatedly hailed as the planet’s twenty-first-century “new Saudi Arabia” for “tough energy” -- deep-sea oil, Canadian tar sands, and fracked oil and natural gas.  But here’s a question no one considers: Will the oil curse become as familiar on this continent in the wake of a new American energy rush as it is in Africa and elsewhere?  Will North America, that is, become not just the next boom continent for energy bonanzas, but a new energy Third World?

Once upon a time, the giant U.S. oil companies -- Chevron, Exxon, Mobil, and Texaco -- got their start in North America, launching an oil boom that lasted a century and made the U.S. the planet’s dominant energy producer.  But most of those companies have long since turned elsewhere for new sources of oil.

Eager to escape ever-stronger environmental restrictions and dying oil fields at home, the energy giants were naturally drawn to the economically and environmentally wide-open producing areas of the Middle East, Africa, and Latin America -- the Third World -- where oil deposits were plentiful, governments compliant, and environmental regulations few or nonexistent.

Here, then, is the energy surprise of the twenty-first century: with operating conditions growing increasingly difficult in the global South, the major firms are now flocking back to North America. To exploit previously neglected reserves on this continent, however, Big Oil will have to overcome a host of regulatory and environmental obstacles.  It will, in other words, have to use its version of deep-pocket persuasion to convert the United States into the functional equivalent of a Third World petro-state.

Knowledgeable observers are already noting the first telltale signs of the oil industry’s “Third-Worldification” of the United States.  Wilderness areas from which the oil companies were once barred are being opened to energy exploitation and other restraints on invasive drilling operations are being dismantled.  Expectations are that, in the wake of the 2012 election season, environmental regulations will be rolled back even further and other protected areas made available for development.  In the process, as has so often been the case with Third World petro-states, the rights and wellbeing of local citizens will be trampled underfoot.

Welcome to the Third World of Energy

Up until 1950, the United States was the world’s leading oil producer, the Saudi Arabia of its day. In that year, the U.S. produced approximately 270 million metric tons of oil, or about 55% of the world’s entire output. But with a postwar recovery then in full swing, the world needed a lot more energy while America’s most accessible oil fields -- though still capable of growth -- were approaching their maximum sustainable production levels.  Net U.S. crude oil output reached a peak of about 9.2 million barrels per day in 1970 and then went into decline (until very recently).

This prompted the giant oil firms, which had already developed significant footholds in Indonesia, Iran, Saudi Arabia, and Venezuela, to scour the global South in search of new reserves to exploit -- a saga told with great gusto in Daniel Yergin’s epic history of the oil industry, The Prize. Particular attention was devoted to the Persian Gulf region, where in 1948 a consortium of American companies -- Chevron, Exxon, Mobil, and Texaco -- discovered the world’s largest oil field, Ghawar, in Saudi Arabia.  By 1975, Third World countries were producing 58% of the world’s oil supply, while the U.S. share had dropped to 18%.

 
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