O&G Book Review: Tom Bower’s Oil

John Jennings, a former Shell chairman, once remarked, “Oil breeds arrogance because it’s so powerful.” And where arrogance and power meet stand the world’s top oilmen, wielding obscene amounts of money and influence while providing the world with its most critical resource. Tom Bower’s new book details how their behavior over the last two decades has made them some of the most hated and mistrusted people on the planet, and why that has had little effect on the world price per barrel.

In Oil: Money, Politics and Power in the 21st Century, journalist Tom Bower accepts and admires the logic behind the production and consumption of oil, and resists the temptation to proselytize about fossil fuels, peak oil, or the environment. Though some of his conclusions seem inevitable, he simply presents the evidence for readers to judge themselves.

Among his subjects are the senior leadership of the four major oil corporations (BP, ExxonMobil, Chevron and Shell), oil traders, politicians and Russian oligarchs. These heavyweights and their interactions provide the drama in Bower’s narrative. Looming large above all are Lee Raymond of ExxonMobil and John Browne of BP, both of whom, Bower argues, possess the quintessential qualities of a good oil executive: intelligence, vision, vanity, and arrogance.

But it is John Browne who occupies center stage in Bower’s work, and it is easy to see why. Ousted in a 2007 boardroom coup, Browne famously rebranded BP as “Beyond Petroleum.” Browne sought to remake BP through aggressive cost cutting and an environmentally friendly vision. At the height of his renown in 2001, Browne was granted the title “Baron of Mattingley” by Prime Minister Tony Blair and, in addition to taking a seat in the House of Lords, began to sign his correspondence “Lord Browne.” An employee absorbed from Amoco in BP’s 1998 merger with the U.S. company responded to this perceived affectation, “I only believe in one lord.”

But Browne flew too close to the sun (which he had also happened to incorporate into BP’s logo as part of the company’s $200 million rebranding campaign). His cost-reduction measures had cut into safety, and Bower holds him ultimately culpable for a string of disasters starting with a 2005 explosion that killed more than a dozen people in a Texas City refinery.

Bower’s Lee Raymond holds little regard for his public image. His consistent attitude is, “I’m running a global business. Stay out of my way.” The values of Exxon and the interests of Exxon shareholders are paramount regardless. In the early 1990s, for example, Raymond swiftly paid $70 million to Alaskan fish processors made destitute by the Exxon Valdez oil spill. Though he was first lauded for his actions, it was later revealed that Raymond had neglected to inform the fishermen that, as part of the settlement’s fine print, they had contractually agreed to partly repay Exxon for any additional punitive damages meted against the company for the spill.

Bower approaches both Browne and Raymond without any suggestion of outrage. His displays of distaste are reserved for a select few — mostly politicians, such as President Bill Clinton, who he accuses of unequivocally unforgiveable acts. Clinton, he asserts, ignored “a thousand years of regional history” by involving himself in oil negotiations with Azerbaijan, and used the oil majors as weapons against Russia. In Bower’s estimation, the oil majors were “encouraged by the White House to embarrass the Kremlin” and asked to act “belligerently” as part of United States policy in the region.

It is understandable that Bower spends a large portion of his story in Russia. In the years depicted in the book, Russia began using its possession of large deposits of fossil fuels as a powerful bargaining chip in international relations. Oil is a major source of Russia’s foreign currency, but though it is plentiful, it is difficult to obtain. Russia lacks the required technical expertise, and the oil majors expected to fill the gap. It did not turn out to be that simple.

Bower ignores Russia’s previous experience in the management of its oil resources. External assistance in oil production was critical to Russia even before the Soviet revolution. By the 1920s, circumstances were strikingly similar to those depicted by Bower in the 1990s. When Russia’s output declined and prices were low, the government sought the help of foreign companies to increase production, especially in the drilling, extracting and refining stages.

The Soviet Union, in the years prior to World War II, had few ideological qualms with receiving foreign assistance in marketing its petroleum, often selling its oil to companies like Shell and Standard Oil in order to facilitate distribution. In other cases, the Soviets would form local joint ventures to handle overseas distribution, and even went as far as operating retail filling stations abroad. Only when production increased did the Soviets begin to systematically terminate these relationships. From the perspective of Putin-era Russia, the use of, and the subsequent pressure placed on foreign companies, is more of a continuum than Bower suggests.

The nationalization of oil resources across the globe has defined a new geopolitical challenge for the oil majors. As Bower notes, more than 80 percent of the world’s oil resources are nationalized and controlled by governments, not private businesses. Bower demonstrates how Western companies failed to grasp the geopolitics of oil but still succeeded in making record profits by learning to persuade self-interested governments to share access to their reserves. Those reserves were then sold for record prices.

But it is the culture of the oil companies and not necessarily the countries in which they operate that holds the key to their future prospects. According to Bower, ExxonMobil’s success lies in an imperious secret society that breathes cardinal rules, deifies company founder John D. Rockefeller, and promotes the constant scrutinizing of every decision. BP, especially with the arrival of Browne, constantly sought only to streamline decision-making and cut costs. In trying to compensate for years of humiliation from disasters such as the refinery explosion and the near collapse of a Gulf of Mexico oil platform called Thunder Horse, BP provided economic incentives while taking less care with technological certitude. This lapse may be forgivable in a trading company, as BP was derisively perceived to be by other oil companies, but not in one operating wells in the depths of the Gulf of Mexico.

Bower does not forecast the Deepwater Horizon disaster that would occur only months after the book’s U.K. publication, but he details the mechanisms that eventually led to the catastrophe. Tony Hayward, who took over as BP’s chief executive after Browne, admitted that BP’s management style and obsession with costs helped lead it to failure, but pledged to make a “fundamental shift in the way BP works.” Hayward would be ousted in the aftermath of the spill, something that Bower could not have expected, but Deepwater Horizon speaks for itself. Readers of this book can easily come away with the impression that the disaster was close to inevitable.

Jeffrey Bigongiari is a Washington-based freelance writer.