Big Oil’s days are numbered – but the industry could still take us all down with it. From divestment to disruption, Jess Worth explores how the transition to an oil-free future is being hastened.
In September 2014, the $860 million Rockefeller Foundation made an historic announcement. Timed to coincide with massive marches for climate action all over the world, the fund revealed it was going to divest from fossil fuels. Following in the footsteps of the World Council of Churches, the British Medical Association and Stanford University, the latest major institution to make such an announcement is also the most symbolic. Because the Rockefeller fortune owes its very existence to oil.
The Rockefeller story is also the story of the rise and fall of the first ‘oil major’. Standard Oil, founded by John D Rockefeller in 1870, soon came to control the burgeoning US oil industry, from extraction to refining to transportation to retail.
It built an unprecedented monopoly that ultimately became so publicly despised that the US government stepped in and broke it up – birthing Exxon, Mobil and Chevron, among others. But by then, Standard had already set the Western world on a path to oil dependence that we are still shackled to, chain-gang-style, today.
The forced break-up created the Rockefeller millions. A century later, those millions are being used to make a dramatic point: we are witnessing the beginning of the end of the oil age.
The age of oil has been an age of inequality, of staggering wealth and abject poverty. The discovery of hydrocarbons has often brought fortune to the few and misery to the masses. The phenomenon of the ‘oil curse’ is well-documented: many oil-rich countries suffer distorted economic development, financial instability, repressive authoritarian rule, stifled human rights, soaring poverty and pervasive corruption.
In the oil-addicted West, its toxic political influence echoes through domestic and foreign policy. Today’s oil majors deploy their power deftly, and devastatingly, their probing tentacles lubricated by de facto impunity and state collusion. The CEO of Exxon clicks his fingers: national armies are mobilized. Shell’s chair has a quiet word: democratically agreed policies are shelved.
The costs to society of enforcing Big Oil’s geopolitical interests have been immense. USand UK taxpayers spent, respectively, $806 billion and $15 billion to fight the 2003-11 Iraq war and access its massive oil reserves for Exxon-Mobil, BP and Shell.1 Now that access is threatened by Islamic State, the West is embroiled all over again.
Yet change is coming. The dominance of the Big Oil companies is being assailed from all sides. Oil’s future is looking increasingly – exhilaratingly – shaky.
Decades of accelerating carbon emissions have set Big Oil on a collision course with the interests of humanity. Oil extraction has always externalized its environmental costs, shifting them onto nearby (usually economically disadvantaged or Indigenous) communities: polluted drinking water, cancer and respiratory disease, poisoned fish stocks, deforestation. Now the damage it is doing to the climate on a global level has started to bite.
Oil companies’ current extraction plans for the next two decades set us on course for a six-degree global temperature rise and an unliveable planet. To have a chance of keeping the rise to a disruptive but not catastrophic two degrees, we need to leave 80 per cent of known fossil-fuel reserves in the ground.2 Financial markets and economies have got used to treating oil as infinite. But all the easy-to-extract crude has already been found, and largely consumed.
Now, most available oil is either in politically dysfunctional regions such as the Middle East and Nigeria, or in locations and forms that are much more expensive and risky to extract – tar sands, oil shale, ultra-deepwater, the Arctic. The oil majors are pinning their future drilling hopes on these ‘unconventional’ or ‘marginal’ sources of oil.
The technical risks of new oil projects have risen ‘to never before seen levels’, investors are warned by financial overlords Goldman Sachs.3 So capital expenditure – the amount companies have to invest to get new sources of oil flowing – has gone through the roof, while their all-important ‘Reserve-Replacement Ratio’ (by which markets judge their value) has plateaued. In a nutshell, oil is becoming less profitable.
The strain is starting to show. Companies are shelving major tar sands projects, denting their project portfolios considerably. This year has seen Statoil’s multi-billion dollar ‘Corner’ development put on ice, Total and Suncor’s $11-billion Joslyn project suspended, and Shell’s massive Pierre River mine plans mothballed.4
The extent to which oil company staff are being stretched beyond their limits on frontier projects has been laid bare in the court proceedings around BP’s culpability for the world’s worst oil spill, after the Deepwater Horizon drilling rig exploded in the Gulf of Mexico. The workers on the mobile offshore rig that had, a few months earlier, drilled the deepest underwater well ever were operating – in their own words – in ‘chaos, paranoia and insanity’ just before fatal explosion.5 The consequences almost bankrupted BP and lost its shareholders a fortune.
Shell has spent $5 billion so far trying – and failing – to drill in the inhospitable Arctic. Total has said it won’t even try, such are the challenges. Even the US boom in ‘tight oil’ from shale fracking, which has sent US oil production surging to its highest level in 25 years and is hailed as the key to US ‘energy independence’, rests on extremely shaky foundations. Shale oil wells deplete in a matter of months, and the costs of constantly drilling new ones keep profit margins low. Predictions for how much recoverable shale oil is in the ground have been downgraded dramatically.6
All this new oil is only really viable if the price is above $100 a barrel. At the time of writing, it isn’t – and there’s no guarantee prices will rise and stay high enough over the next decades as the renewables boom starts to give oil a serious run for its money.
Nevertheless, we cannot just sit back and assume the oil age is ending anytime soon. Big Oil may be on its way out, but left to its own devices it will take us all with it. There is still more than enough recoverable oil in the world to fry us.
Global oil demand, if there are no interventions for climate or other reasons, is projected to continue to rise until at least 20207 and, despite supply constraints, oil companies are planning to more than meet that demand. Investment decisions that are being made now, on pipelines, tar-sands mines and offshore fields, will spawn infrastructure that will lock us into a high-carbon world for decades to come. These plans are fundamentally incompatible with keeping global temperatures below two degrees. The industry’s projected tar sands extraction alone would push us over the edge.8 Big Oil has a business plan for the end of the world, and capital markets are financing it blindly.
Industry plans will lock us into climate disaster (source: nin.tl/supplyboom)
We need to hasten oil’s demise – for the sake of our warming climate and collapsing ecosystems, and in the service of democracy, poverty alleviation and justice.
It will be technically possible to meet the world’s energy needs, and give the Majority World’s growing populations equitable access to the energy the rich world currently hogs, using a combination of existing renewable technology and energy efficiency. Renewable generation is now breaking records almost daily, and reaching price parity with fossil fuels in many parts of the world.9
With recent breakthroughs in battery technology, the dream of wholly electrified transport systems is now within reach. China has committed to five million electric cars on the road by 2020 and Norway has undergone such an e-car boom that they are now clogging its bus lanes.10 Wind- and solar-powered shipping, large-scale organic farming, airships allowing us to still travel the world, albeit at a less breakneck pace – all would allow us to constrain our oil use to a much more sensible level.
Hydrocarbons don’t just provide fuel; they are an incredibly versatile source of essential plastics and chemicals. If we stop mindlessly burning them and halve our wasteful use of plastics, we can reduce global oil use by 90 per cent, according to research by Danny Chivers,11 who will be exploring how we can power the world without fossil fuels in depth in the April 2015 issue of New Internationalist.
What is missing is the political will to kick oil to the kerb.
The hope that Big Oil can be stopped comes in many forms, but perhaps the most surprising is the investment community. Carbon Tracker, a think-tank of shareholder activists and financial specialists, has been sending shockwaves through the investment world since 2012 when it first revealed the scale of the ‘carbon bubble’ that is building.
Investors, they argue, are sinking funds into future unconventional oil projects, and other fossil fuels, that are ‘unburnable carbon’ if the world is to stay under two degrees Celsius warming. Looking at the oil industry trends of skyrocketing capital expenditure, shrinking profit margins, intensifying risk and dwindling reserves, its concludes that $1.1 trillion of oil investment over the next decade needs to be challenged by investors as potential ‘stranded assets’ – projects that will never come to fruition in the face of more decisive government climate action and competition from renewables.
When I met Carbon Tracker’s founder and CEO Mark Campanale, he was buzzing with the possibilities their work unlocks: ‘The International Energy Agency says that, to 2035, $21 trillion will be spent on developing the oil and gas sector, which is extraordinary at a time when we know we’ve already financed the development of enough fossil fuels to take us beyond two degrees. It’s complete madness.’ Then his eyes light up: ‘This is where the money is going to come from for the low-carbon transition.’
Carbon Tracker is certainly being listened to by the financial sector – as their Chair Jeremy Leggett outlines in more depth in ‘Big Oil’s looming bubble’. But financial arguments will not be enough on their own. Mark argues that what oil companies should be doing is giving capital back to their shareholders – rather than investing it in ever more risky and expensive extraction projects. This is starting to happen in a small way. Conoco has contracted in size, preferring to focus on ‘high-value’ projects. BP and Shell, both struggling in different ways, have been selling off projects to provide their shareholders with healthy dividends this year.
Mark wants to see this trend accelerate until the oil companies are mere shadows of their current bulks. But the question of whether that money is reinvested in the building blocks of a low-carbon economy – and not, say, Monsanto or BAe Systems – remains up to the whims of largely unaccountable investors.
Organizations, such as London-based ShareAction, are working with pension funds and their members to encourage them to reinvest in the service of a climate-friendly future.12 But the investor approach has limitations. We can’t expect a notoriously out-of-control financial sector driven by profit to reallocate capital in a way that takes into account justice or allows power and influence to become more decentralized and diluted. Indeed, our current system of turbo-charged capitalism developed arm in arm with Big Oil. They will not break ties easily, or smoothly.
As Naomi Klein argues in her new book This Changes Everything, ‘we have not done the things that are necessary to lower emissions because those things fundamentally conflict with deregulated capitalism, the reigning ideology for the entire period we have been struggling to find a way out of this crisis.’13 The push for non-market-based solutions that curtail the oil industry, redistribute power and wealth, and have justice at their core must come from outside the financial system.
People have been resisting oil companies since the dawn of the oil age. Stalin cut his political teeth fighting the oil magnates of Azerbaijan. The Ogoni people kicked Shell out of Ogoniland in Nigeria permanently in 1995, though Ken Saro-Wiwa and eight others paid the ultimate price, and the struggle for justice continues today (see ‘The spirit of Saro-Wiwa rises’). But in recent years we have seen a new wave of anti-oil activism, with multiple groups strategically identifying where Big Oil is vulnerable, and targeting those chinks in its armour.
One of these is the divestment movement, which has taken the world by storm in the last 18 months. Deftly combining the carbon bubble financial argument with the moral imperative to act urgently on climate change, groups of students, churchgoers and local residents have approached public institutions such as universities, churches, city councils and states with the argument that the time has come to sever their financial ties with the fossil fuel industry.
It’s working. Just this year, 181 institutions around the world have pledged to divest more than $50 billion. The campaign continues to gather momentum, with big-hitting champions such as Desmond Tutu, UN climate chief Christina Figueres and, of course, the Rockefellers.
350.org is a driving force behind the ‘Fossil Free’ movement, and one of its campaigners, Louise Hazan, explained to me the thinking behind it: ‘The primary aim is to stigmatize the fossil fuel industry to a point where it weakens its grasp over the political system, and the ways it influences the process and blocks progress on climate change.’
The divestment campaign is one of several that are directly challenging Big Oil’s ‘social licence to operate’ – the public support, or at least acquiescence, that allows oil companies to continue. This social licence is carefully cultivated and maintained through partnerships with a range of cultural, scientific and educational institutions – and these are increasingly being targeted by groups seeking to make association with oil companies a social no-no.
In Britain, the Art Not Oil Coalition regularly protests BP and Shell’s heavy sponsorship of national art and culture through unsanctioned performance-based interventions in sponsored spaces. The recent opening of the David A Koch Plaza (named after the notorious oil billionaire) outside New York’s Metropolitan Museum of Art was met with creative protests and arrests. Greenpeace’s campaign telling Lego to end its partnership with Shell successfully shamed the toy-makers into dumping their oily benefactor.
The climate cost of 'unconventional' oil (source:nin.tl/hansengraph)
Meanwhile, movements on the ground are seeking to physically block the expansion of Big Oil’s most destructive projects – and are starting to win big. The most visible has been the campaign to stop the proposed Keystone XLpipeline, which would bring tar sands oil from Northern Alberta in Canada all the way down to Texas to be exported to new markets. Approval for the pipeline has so far been delayed for six years, thanks to a powerful coalition of Indigenous communities, landowners, grassroots activists and environmental NGOs that spans the entire route. The KXL campaign has reignited theUS climate movement, provoking waves of direct action, huge demonstrations, mass arrests and celebrity support, and even turning it into an election issue.
A similarly epic battle is being fought against the Enbridge Northern Gateway pipeline, slated to take tar sands across British Columbia. After years of opposition-induced delays it’s now been approved in theory, but a massive coalition of First Nations and residents have sworn it will never be built. The lack of available export routes is a major reason cited by Statoil, Total and Shell for their shelving of tar sands projects, and it is also causing jitters amongst investors. The ‘blockadia’ movement is genuinely stopping the industry in its tracks and shattering Big Oil’s pipe dreams.
Meanwhile, the actions of communities of just a few hundred people living in the heart of Alberta’s tar sands sacrifice zone could also stymie the world’s largest industrial project. Both the Athabasca Chipewyan First Nation and the Beaver Lake Cree have initiated legal challenges that, if they win, could call into question the approval of all tar-sands projects.14
This push to ‘leave the oil in the soil’ didn’t start in North America. Its origins can be traced to Latin America, where for years Indigenous communities have been locked in conflict with governments over oil extraction in the Amazon. This spawned the bold grassroots proposal to leave oil under Ecuador’s Yasuní national park unexploited, with international financial support.
The Yasuní proposal was turned into a carbon trading scheme when the government decided to take it forward, and then unceremoniously abandoned last year by oil-hungry President Correa. But the grassroots movement of ‘Yasunidos’ lives on, mobilizing hundreds of thousands of Ecuadorians to demand the oil remains untapped, and working with other frontline communities all over the Amazon to halt the assault on the world’s largest intact rainforest. The struggle over Yasuní isn’t over. There are examples of other local success stories in ‘A year of oil resistance’.
At the top of the world another frontier battle rages – to stop oil drilling in the Arctic. Greenpeace has been the most visible player, with its daring direct actions to block rigs drilling in icy seas, the imprisonment in Russia of 30 of its activists, and the mobilizing of hundreds of thousands of online activists. But years of dogged legal challenges to every phase of the approval process by Alaskan Native groups and NGOs have also been crucial in preventing Arctic pioneers Shell from yet squeezing their first drops of oil out of the fragile frozen seabed.
There is no doubt that we will witness the end of oil’s dominance over the coming decades. What speed and form that takes will depend on a host of actors. As the industry overshoots its limits in every direction and turmoil in the Middle East snowballs, the arguments for an immediate co-ordinated move away from oil dependence are overwhelming.
We need a managed and fair transition, not a massive oil shock which could plunge the already fuel-poor into further hardship and breed economic and social pandemonium. If today’s anti-oil social movements continue to strengthen, this could happen: through pressure from shareholders, the erosion of oil companies’ social licence, the physical disruption of operations by local resistance, the boom in renewable energy, and public pressure on governments to take more decisive climate action.
The oil majors will be forced to retreat, to shrink. Some will disappear completely. Perhaps there will be enough political will for states to step in and physically break them up, like Standard Oil. More likely in the short-term they will suffer painful economic shocks as their favourable terms of trade evaporate, dwindle rapidly as investors remove their capital to invest elsewhere, be asset-stripped by corporate raiders, and find themselves forced to transform or die, like so many obsolete industries before them.
However it happens, the oil majors will ultimately become oil minors, relinquishing their vice-like grip on the political process and making a much more diverse, decentralized and democratic energy future possible.
‘We will see the end of the oil companies in the rear-view mirror,’ predicts Big Oil’s long-term adversary James Marriott, who co-founded Platform over 30 years ago to monitor, expose, communicate and inspire creative resistance to the industry. ‘The last thing to disappear – like the smile on the Cheshire cat – will be the logos.’
James, who follows trends in the world of oil more than most, is feeling ‘immensely optimistic’ these days. ‘It’s obvious the oil industry is coming to an end. So what is the society we want to build in its wake?’
These seismic shifts bearing down on our civilization could spawn chaos. But if progressive social movements can seize the moment, then the end of the oil age could also be the end of a multitude of wrongs.
The Fossil Free campaign – to persuade institutions to end their investments in fossil fuel companies – is taking the world by storm. Wherever you are, whatever your community, you can get involved. Already hundreds of universities, churches, pension funds, states and city councils have responded to campaigns – and many have made the commitment to go fossil free. The driving force behind the international divestment movement is350.org
The Fossil Free website allows you to find out if there’s a campaign already happening near you and to join it. If there isn’t, it gives you everything you need to start one, including the ability to create an online petition. It also links to the global divestment community and shares latest news and successes from around the world. There will be a Global Day of Divestment Action in February 2015 – keep an eye on the Fossil Free website for details. gofossilfree.org
People & Planet
The student network is running Fossil Free campaigns at 46 British universities. Collectively the campaign has gained over 15,000 signatures of support. Fossil Free motions have so far been passed at 15 different Student Unions, and the National Union of Students is backing the campaign. Several universities, including Edinburgh and Oxford, are now considering proposals to divest and University of London SOAS has frozen all new fossil fuel investments while it makes a final decision on divestment.peopleandplanet.org/fossil-free
Churches across Britain are being encouraged to go Fossil Free by the Bright Now campaign, run by ecumenical Christian charity Operation Noah. The British Quakers and several individual churches have already committed to divest. They are joined internationally by the World Council of Churches, the Church of Sweden and the Uniting Church of Australia. brightnow.org.uk
In order to maintain their ‘social licence to operate’, oil companies sponsor major cultural institutions and sporting and educational events the world over. Removing that social licence will damage Big Oil’s easy access to power and render ineffective their greenwash. In Britain, BP and Shell-sponsored institutions are being targeted by members of the Art Not Oil Coalition, whose headline-grabbing artistic, theatrical and musical direct actions bring anti-oil messages into sponsored spaces and pressure the institutions to drop their oily benefactors. artnotoil.org.uk
Across North America, First Nations, Native Americans, landowners, grassroots activists and NGOs are joining forces to prevent new tar sands pipelines being built and new extraction projects being approved. Using a whole range of tactics from blockades and occupations to legal challenges and mass protests, this movement is stopping the tar sands industry in its tracks.
Greenpeace is campaigning to stop offshore oil drilling in the Arctic. As well as high-profile stunts like blocking exploration ships and occupying drilling rigs, it is co-ordinating massive public pressure campaigns aimed at the major companies and countries involved in Arctic drilling. So far, little oil is being extracted offshore in the Arctic so there is everything to play for. savethearctic.org
2015 will be the 20th anniversary of the killing of Nigerian writer and anti-Shell campaigner Ken Saro-Wiwa and the other Ogoni 8. The British-based organization Platform is planning to mark this with a year of groundbreaking art and activism. Working with allies from the Niger Delta and internationally they plan to use this moment to force Shell finally to clean up the mess it has made in Nigeria. Everyone is invited to get involved. platformlondon.org/oil-the-arts/asw/
Gavin Bridge and Philippe Le Billon, Oil, 2012, p. 169. ↩
Carbon Tracker, ‘Unburnable Carbon’, 2012, carbontracker.org/report/carbon-bubble/. ↩
Goldman Sachs, ‘380 Projects to Change the World’, April 2013, p. 123. ↩
Reuters, ‘Keystone XL foes claim victory as Statoil delays oil sands plan’, 26 September 2014 nin.tl/statoildelay. ↩
Natasha Lennard, ‘“Chaos, paranoia and insanity” at Deepwater Horizon’, Salon, 26 February 2013,nin.tl/chaosparanoia. ↩
Reuters, ‘U.S. EIA cuts recoverable Monterey shale oil estimate by 96 pct’, 21 May 2014, nin.tl/Montereyestimate. ↩
IEA, World Energy Outlook, 2013. ↩
‘Tar sands planned growth is 3X climate limit’, Oil Change International, 1 November 2012, nin.tl/tarsandsgrowth. ↩
Paul Brown, ‘Political will is only barrier to 100% renewables’, Climate News Network, 19 September 2014,nin.tl/100renewables. ↩
Matt McGrath, ‘Speedy charging driving a global boom in electric cars’, BBC, 3 September 2014, nin.tl/ecarboom. ↩
Danny Chivers, ‘Two Energy Futures’, July 2013, twoenergyfutures.org. ↩
Naomi Klein, This Changes Everything, 2014. ↩
acfnchallenge.wordpress.com, beaverlakecreenation.ca. ↩
This special report appeared in the ending the oil age issue of New Internationalist. You can buy this magazine or, to get stories like this one through your door every month, subscribe.