BUSINESS:Private Empire: ExxonMobil and American Power, By Steve Coll, Allen Lane, 685pp. £25
THIS IS A HUGE, thoroughly researched book about one of the largest US oil companies. It describes how Exxon was hived off from John D Rockefeller’s Standard Oil monopoly in 1911 and how it later merged with Mobil in an $81 billion deal. ExxonMobil is one of the biggest companies in the world, bigger than many national economies. It makes a profit of about $30 billion a year, and its chief executive is paid about $30 million. It employs more than 80,000 people around the globe. The last chief executive to retire, in 2005, was given a package of $400 million. The company’s top executives work in huge, plush offices known as the God Pod, and they can use any of nine corporate jets for any purpose they see fit.
The book begins with the Exxon Valdez oil spill, in the Gulf of Alaska in 1989, and ExxonMobil’s tightening up of its systems and regulations in the wake of that disaster. Other disasters are detailed dramatically, including the appalling leak in Jackson, Maryland, in 2006 and the subsequent litigation. Mention is also made of the more recent leak in the Gulf of Mexico: the culprit there was BP, not ExxonMobil, but the author points out that the difficulty in plugging that leak was caused in part by unstable cement provided by Halliburton, an oil-related company in which Dick Cheney had interests.
Lee Raymond was chief executive of ExxonMobil until 2005, when he was replaced by Rex Tillerson. The former denied global warming and objected to the Kyoto Protocol. Popular opinion forced his successor to accept the existence of some aspects of climate change; he was, latterly, in favour of carbon taxes rather than the alternative of caps and carbon-trading.
Both men scoffed at the idea that the world was running out of fossil fuels. They paid lip service to the notion of renewable sources of energy. But in private Tillerson referred to ethanol and biofuels as “moonshine”. It is not clear which side of that debate the author of this book is on. He seems to suggest that liquefied gas, coal, tar sands and fracking have given the extractive industries a new lease of life.
Both chief executives were well connected in Washington DC, interacting with both Bush presidents, Dick Cheney, Halliburton and, occasionally, the CIA. US embassies were also at their disposal. ExxonMobil clearly had the support of the US government, if only because of balance-of-payments considerations. Steve Coll says nothing specific about money and favours being exchanged. In 2010, however, the US supreme court reaffirmed the freedom of corporations to fund “political advocacy”!
The recurring dominant concerns of ExxonMobil were twofold. The first was to keep the return on capital employed as high as possible. The second was “reserve replacement”, meaning that new discoveries should at least replace the volume of oil that had been pumped the preceding year.
It is suggested that this second metric was occasionally massaged to please Wall Street and keep the share value up. But there is no doubt that reserve replacement was the factor that drove ExxonMobil into some of the most dangerous countries: Chad, Nigeria, Equatorial Guinea, Sumatra, Iraq and Venezuela. Long-drawn-out negotiations with Russia eventually paid off when ExxonMobil did a deal with Rosneft to develop oil beneath the Arctic Kara Sea.
ExxonMobil had help from US embassies and, at least on one occasion, from the World Bank, but in general the company lived with risk on a daily basis. The staff had to deal with appalling dictators – some of whose palaces are described as “Las Vegas baroque” – who wanted oil revenues paid directly to them and who ignored human rights. This was the main cause of the “resource curse”, whereby a country that discovered resources often became poorer because of kleptocracy.
ExxonMobil often had to pay local soldiers to provide security. In many instances there were kidnappings, shootings, murders, and attacks by pirates and well-armed gangs. (The reader may feel that good pay at ExxonMobil is more deserved than the huge bonuses of investment bankers on Wall Street, who never put themselves in harm’s way.)
Given the huge global reach of ExxonMobil it was inevitable that it would become entangled in US foreign policy. The CIA, for example, was worried that China would beat the US to the resources of Africa. After 9/11 the US worried that oil rigs might become targets for al-Qaeda. ExxonMobil itself was a sort of roving ambassador. In many ways it was like an arm of the state, even though it was a private company. Coll might have probed this aspect a little more. How were conflicts of interest resolved?
There is one very revealing throwaway passage in the book. It refers to President Obiang of Equatorial Guinea, who, along with his 42 children, lived in ostentatious luxury. Fearing guerrilla attacks, he requested security from the US. The Bush administration did not want to get involved directly, so it told Obiang to contact Israel, which did provide considerable help. This shows how Israel sometimes has to pay a price for the ongoing support it gets from the US. (Obiang eventually achieved one of his nonmonetary ambitions: being photographed with President Obama.)
This monumental book leaves the reader in no doubt that the business of the United States is business, however rough and tumble it may be. ExxonMobil avoided most of the problems of the financial collapse in 2008, and its fate suggests that, at the end of the day, Main Street is more important than Wall Street.
One has the feeling that Coll has kept back some of the less savoury aspects of ExxonMobil. He can hardly be blamed for this, given the corporation’s total commitment to litigation, regardless of cost. On the other hand, he may have a sneaking regard for the tough, testosterone-driven culture of the company. His final point is that while America Inc has had its credit rating reduced, ExxonMobil is still a pristine AAA.
Michael Casey is former chief economist at the Central Bank of Ireland and is a member of the executive board of the IMF in Washington DC. His book, Ireland’s Malaise, was published by the Liffey Press in 2010
