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Book Review: Oil on the Brain

Oil on the Brain: Petroleum's Long, Strange Trip to Your Tank by Lisa Margonelli

Oil on the Brain by Lisa Margonelli was recommended by Paul Sankey at the 2009 Energy Information Administration Conference as a book that provided great insight into the oil industry. I have had it on my list of books to read, and recently picked it up to read during my travels. I have been traveling a lot lately, and I like to read while I travel, so I knocked it out over the past couple of trips I have taken.

The premise of the book is that a person who doesn’t know much about the oil industry sets out to find out what it is really like on the inside. It reminded me in some ways of Crude World by Peter Maass (which I reviewed here). The biggest difference is that Margonelli was approaching the subject from a pretty basic starting point, and Maass had written quite a bit about the industry when he tackled Crude World.

I guess I never cease to be amazed by what people think the oil industry is like, and what it is really like. People seem to think that the oil industry is a bunch of guys in a smoke-filled room who conspire to set prices. To be honest, that’s probably the way I viewed the industry when I was growing up. And still, my first reaction to my cable bill going up is “Those greedy cable companies are ripping me off.” The big difference with the cable companies, though, is that their profits aren’t thrust in everyone’s faces at the end of every quarter. Every time oil prices do spike up and oil companies show nice profits, people do feel like they have been taken advantage of. But I digress a bit.

For this book, Margonelli embedded herself within various sectors of the oil industry. She spent time throughout the supply chain, hanging out at a gas station in California where she found that the owners made more money on candy and soda than they did on gasoline. She spent a day with a tanker truck driver and his dispatcher, and spent time in a refinery and on an oil rig. She even got inside the Strategic Petroleum Reserve, which is typically off limits to visitors. She traveled abroad to Chad, Venezuela, Nigeria, and even Iran to understand the world of oil and what is has meant to these regions.

Here were what I thought were some of Margonelli’s more interesting observations. She spoke a lot about the indirect costs of using oil. In talking about oil spills, she mentioned that her view of an oil spill had always been dominated by the Exxon Valdez. She had never connected these spills to her own fuel usage, but learned that drivers and boaters spill more oil every year than did the Exxon Valdez. The number she cited was 19 million gallons of oil products spilled each year in our waterways by boaters and auto drivers.

She wrote about the notion that oil companies are in a conspiracy to set prices. A jobber she spoke with – someone who has to buy fuel from the oil companies – said “There are eleven studies which show there isn’t a conspiracy. Chevron, Shell, Exxon – they hate each other. It’s like war daily. For them to collude is insanity, but people believe what they want to believe.”

On that topic, she noted an episode of hypocrisy displayed by Nancy Pelosi. One day in 2006 Pelosi told a group of school children that we hadn’t done enough to reduce our dependence on gasoline, and so demand was high and that’s why the price was high. Then she got in front of the cameras and she cited the conspiracy of big oil and the Republicans working for their interests. But as Margonelli noted, “the myth of conspiracy overwhelms reason, particularly when pump prices and oil company profits are high.” I think the lesson there is “If the talking point is working, keep pushing it.”

She met an old-time wildcatter named Michel Halbouty (now deceased) who complained that the country has not had a coherent energy policy in 30 years. He advocated more promotion of domestic energy exploration, and fears a slow slide into deindustrialization. He noted that the main problem is that “People. Don’t. Care.” As long as they can pull in and fill up, they just don’t care about energy policy.

In China, she met with someone within the government who was involved with energy policy. He noted that it would be a disaster for China to move toward an American way of life, but he says that cars are clearly there to stay in China. On GDP, Margonelli wrote that China requires 4 or 5 times as much energy as Japan per point of GDP. Finally, the minister commented that China needs “a bigger space to survive under U.S. hegemony.” On that point, she also spoke with a European analyst who said that U.S. hegemony is a part of China’s strategy; that if they can get the U.S. to bear the expense of maintaining the energy status quo, they will have the time and resources to retool their economy.

In the epilogue, Margonelli comments that there is no such thing as cheap gas; that there are hidden costs throughout the supply chain. But the population has come to expect cheap gas as a “grand bargain” with the government and the oil companies. When the price goes high, they look to the government to punish the oil companies so prices will come back down.

One weakness in the book is that it really didn’t address the question of depletion. It seemed to take at face value that oil will continue to be available and business will continue as normal for decades. However, I note that Margonelli was at the ASPO Conference this year (along with Peter Maas; I am sorry I missed that) so she got a heavy dose of peak oil information. Some very interesting comments by her can be found at this story covering the conference.

As one might expect, Margonelli emerged from her experience with a radically different view of how the oil industry works. I have to agree with Paul Sankey’s assessment that it does provide great insight into the industry, from a very basic starting point and with a balanced view. As one reviewer pointed out, it could have been titled “The Petro-economy for Dummies”, which is to say it is a book that is easily understood by those with zero knowledge of the industry. This book would be on my short list of books to recommend to people who want to know what the industry is really like.

November 13, 2009 Posted by | book review, China, energy policy, ExxonMobil, Lisa Margonelli, peter maass, Shell | 31 Comments

Book Review: Crude World

Crude World: The Violent Twilight of Oil by Peter Maass

Introduction

It succors and drowns human life. And for the last eight years, oil — and the people and places that make it — was my obsession. – Peter Maass

Today a new book by Peter Maass was released. The book is called Crude World: The Violent Twilight of Oil. Peter Maass is a name you may know from a 2005 article that he wrote for the New York Times called The Breaking Point. The story was a comprehensive look at where he thought oil production/prices were headed – and what the implications might be. Maass focused on Saudi Arabia in the article, and spent a lot of time covering Matt Simmons’ viewpoints. It was after reading this story that New York Times columnist John Tierney offered to bet Simmons on the future direction of oil prices. Thus arose the Simmons-Tierney bet.

I thought Maass’ 2005 article was well-researched, and it was a captivating read. So when Mr. Maass e-mailed and asked if I would like a copy of his new book, I thought it would probably be a book I would enjoy. I still have a stack of books that have been sent to me to review, but I jumped this one to the front of the queue. I hadn’t really intended to, as I am working on two other books right now*, and would normally finish those before starting another. But once I picked this book up and started thumbing through it, I couldn’t put it down.

The subtitle of the book is The Violent Twilight of Oil. The book talks about the twilight of oil, but as the chapter titles imply the focus is less on the twilight and more on the seedy side of the business. The book notes that there are some countries like Norway, Canada, United Arab Emirates, Kuwait and Brunei to which oil appears to have generally benefited the population as a whole. But then there are also many cases in which the discovery of oil seems to have brought many problems to the population. (The book suggests that countries with established democracies and strong self identities are less likely to suffer following the discovery of oil).

The Chapters

The chapters read like the Seven Deadly Sins: “Plunder”, “Rot”, “Fear”, “Greed”, and “Desire” are a few of the ‘sins’ covered in various chapters. Within each chapter, Maass then takes a look at an example that embodies that particular “sin.” That sort of style reminded me of a really good book I read a few years ago written by Matt Ridley. It was called Genome: The Autobiography of a Species in 23 Chapters. Each chapter of that book tells the tale of one gene from each chromosome. In Crude World, Peter Maass tells the story of oil one dysfunctional example at a time.

The book picked up where the New York Times story left off. In fact, Chapter 1 – Scarcity – was mostly about Saudi Arabia and incorporates much of that 2005 story. And if you liked his New York Times story, you will probably enjoy the book as the same style is evident. But I use the word “enjoy” loosely, as it is a sober read. You will find yourself shaking your head at some of the things that have been carried out as a result of the world’s desire for oil.

In Chapter 2 – Plunder – the book covers the case of Equatorial Guinea. The oil wealth was plundered, with the help of international oil companies, banks that looked the other way as government officials brought suitcases of money in for deposit, and governments eager for access to the resource. While he was investigating the oil story in Equatorial Guinea, Maass was accused of being a spy and kicked out of the country.

Chapter 3 – Rot – was all about Nigeria. I won’t tell you how that one turns out, but I am amazed at the (dangerous) lengths Maass went to for the story. Rot describes his journey deep into the Niger Delta in a leaky canoe, courtesy of one of the local warlords. It is well known in the oil industry that Nigeria is a dangerous place to operate. Oil companies generally pay very big premiums to get workers to agree to an assignment in Nigeria. Oil workers are kidnapped in Nigeria regularly (but rarely harmed) and held for ransom from the oil companies operating there. Warlords are constantly doing battle there, and Maass described his visit to one village that had been attacked. Shell also featured prominently in this chapter.

Chapter 4 – Contamination – tells the story of Ecuador, with special focus on the Chevron lawsuit. Maass notes the irony that California – one of the most environmentally conscious states – receives the largest portion of Ecuador’s exports.

The rest of the book’s ten chapters covers a litany of oil-induced miseries. Iraq, Russia, and Venezuela are all profiled. Former ExxonMobil CEO Lee Raymond is presented as the face of “Greed” (albeit it in the “Fear” chapter). There is an interesting explanation in “Greed” on why companies function as they do. Maass discusses a court case between Henry Ford and the Dodge brothers, in which the court ruled that a company’s mission “is organized and carried on primarily for the profit of its shareholders.” Thus, Maass argues that if Mr. Raymond had decided to run ExxonMobil in a more altruistic manner, the board would have removed him for not operating in the best interests of the shareholders.

The complaint that some will have about the book is that it isn’t balanced. There are a number of villains portrayed, but the oil companies really stand out. It seems that those who are telling the tales of misdeeds are generally trusted in the book, but those who are interviewed for balance are treated with suspicion. For instance, in the chapter on Nigeria, the author interviewed the director of Shell’s operations in Nigeria. The interview appears to proceed like a cross-examination. A Nigerian warlord’s words, on the other hand, seem to be taken mostly at face value.

But this is not intended to be a balanced book. It is a book designed to highlight the downside of our oil dependence. We can all think about ways in which oil has made our life better, but in the Western world we are generally spared from the nasty side of the business. In this book, Maass brings that message home loud and clear.

Conclusion

Crude World was released today, September 22, 2009. The general theme of the book is that the world’s dependence on oil has come at a very high price. This is not a book on peak oil, climate change, or renewable energy. It is not a technical book on the oil industry (for that see Morgan Downey’s Oil 101). The book covers the misery – the wars, the corruption, and the ruined lives – brought about primarily by greed from the lure of black gold. The book highlights the irony that oil could be used to improve the lives of a country’s citizens, but in far too many cases a country’s citizens end up being worse off after oil is discovered. The book was a fascinating read, and I couldn’t put it down once I started it. Now I can get back to my regularly scheduled reading.

Footnote

* The other books I am working on right now are Axis by Robert Charles Wilson and Outsourcing Energy Management by Steven Fawkes. The former is a science fiction book that I picked up because I really enjoyed Wilson’s previous book Spin. The latter has been a difficult read; I have been working on the book for six months. I met the author earlier in the year when he visited the Titan Wood plant in the Netherlands. We had quite a lot in common, and he sent me a copy of his book. But it is really a textbook, and so I have been reading it in small doses.

September 22, 2009 Posted by | book review, Matt Simmons, oil companies, oil consumption, oil exploration, oil production, peter maass | 55 Comments