Review: the new oil curse

[Matt Rees]

Seizing Power: The Grab for Global Oil Wealth by Robert Slater (Bloomberg Press, $29.95)
Just when Goldman Sachs had you convinced that Wall Street would be the instrument of global doom, this excellent primer on the future of oil arrives to demonstrate that the specter of diminishing crude reserves could be just as lethal. And not just to the world economy.
The “petroaggressors” of Robert Slater’s new book aren’t the usual Middle Eastern suspects. “Seizing Power” lifts the veil on a major shift in the oil business that brings enormous wealth and power to relatively small dictatorships and represents another tool with which China, for one, has stolen a jump on the United States.
Slater, biographer of hedge-fund kingpin George Soros and former General Electric chief executive Jack Welch, lays out the history of the world oil markets from colonial speculation, to dominance by the massive oil conglomerates known as the “Seven Sisters,” through partial or complete nationalization by developing countries, and on to the current nervous state of flux. He does this with a wealth of statistics, and with case studies of big time petroaggressors, like Venezuelan President Hugo Chavez, and the more common corruption of the hoodlums at the helm of Chad, an African nation whose rulers skim off oil money and aid while its people languish in poverty.
The rise in oil prices in the middle of the last decade — coming after the Sept. 11 attacks and war in Iraq — gave the likes of Chavez even more of a stick with which to beat the West. “The petroaggressors had always been strident, flexing their muscles inordinately, making threats, or delivering ultimatums to the West,” Slater writes. “However, the new oil wealth pouring into their coffers gave them an even greater capacity to throw their weight around.”
Why? Because Western oil companies know the oil is running out — reserves may be played out within 50 years and certainly within a 100, writes Slater, quoting latest estimates. “‘When there’s a lack of oxygen,’” Slater quotes an oil analyst, “‘we all want the tank.’” So oil companies are forced to enter unstable political environments and to pay ever larger fees for doing so. The risks are enormous (though that hasn’t stopped oil companies making equally enormous profits. Yet.)
A couple of cases in point:
Bolivia sent its military to take control of its oil fields in 2006, forcing their international operators to renegotiate deals in the government’s favor.

Read the rest of this post on my blog The Man of Twists and Turns.