During the BP Gulf oil crisis, there has been a lot of speculation about the role of oil companies not only in energy production but also in politics, environmental responsibility and human safety. The term Big Oil is often used to describe the powerful oil and gas industry and its place in business and government. Big Oil is more of a ‘who’ than a ‘what.’ The term refers to the six largest oil companies: Royal Dutch Shell, ExxonMobile, BP, ConocoPhillips, Chevron and Total SA. These companies are rather recently formed conglomerations. In the late 1990s, crude prices dropped. Some of the then 20 largest oil companies known as Majors merged to become these six Supermajors between 1998 and 2002. The mergers allowed the companies to feel a buffer against erratic crude prices and to make large investments in new energy areas and technologies. The Supermajors are collectively referred to as Big Oil. They are part of the privately owned oil market companies known as IOCs or international oil companies.
The Six Supermajors. Image: Boereck
The Supermajors only control 5% of the world’s oil supply. The remainder of the world’s oil is under full or partial state ownership, known as national oil companies or NOCs. On the list of largest oil companies in terms of known oil supply, the largest Big Oil holder, ExxonMobile, ranked 17th as of a 2008 report. Saudi Arabia is the nation with the largest known oil supply. Most of the world’s reserves are located in the Middle East. Many of these countries are members of the Organization of the Petroleum Exporting Countries (OPEC) which is a cartel, or agreement, between some of the largest oil exporting nations including Saudi Arabia, Venezuela, Iran, Iraq and Qatar among others. The Oil Embargo of 1973 demonstrated the power of OPEC to control prices and production, though this has been somewhat diminished as reserves like the Gulf of Mexico have been developed. NOCs are closely tied to national interests rather than the more commercially based IOCs, though NOCs may look towards diversifying their energy assets and competing with Big Oil companies for emergent energy technologies and resources.
World known oil reserves. Image: CIA World Factbook
What Makes Big Oil So Big?
The Big Oil companies are among the largest and most profitable companies in the world. According to the most recent Fortune 500 listings, ExxonMobile leads the profit list at over $45 billion in profits in 2008. Collectively, 2008 profits of all six were $115,087 billion (Conoco was the only loser at a near $17 billion loss after a $35 billion purchase of Burlington Resources natural gas producer.) Big Oil stocks are a presence in most portfolios, from pensions to IRAs, 401Ks and mutual funds. Forced to consider their profit futures, Big Oil is under big pressure to develop new reserves and technologies, including renewable energy like wind and solar as well as new oil and gas reserves. This is one reason why offshore drilling and developing the Alaska National Wildlife Refuge (ANWR) is so often debated.
The negative connotation of Big Oil is not in how big their oil supplies actually are, but in how big a control they command over prices and politics, as well as the possibility of profiteering during natural disasters and times of political unrest. Big Oil has long had a presence in politics, remaining one of the largest campaign contributors and lobbying industries. From 2008-2009, over $300 million was spent on lobbying by the oil and gas industry, during which time Congress lifted the ban on offshore drilling. In just 2009, the oil and gas industry spent $169 million, while the collective environmental movement spent $22 million, about the same as BP alone. These companies do end up on the ballot in other ways, notably through the Stop Hidden Taxes campaign in California, a ballot measure backed by oil companies that contests fees.
Too Big To Fail?
The Gulf of Mexico spill that is now been spewing oil for over 40 days is not the first oil accident that has resulted in the questioning of human safety and environmental responsibility for oil companies. In the US, Big Oil has been long suspected of receiving special treatment including lax regulations and little federal oversight. This relationship to government has recently exposed both sides as capable of failing their constituents and customers. Accidents do happen, but large companies have historically spent years in litigation to reduce their financial obligation towards affected areas. ExxonMobile is still currently contesting the bill for the Valdez spill over twenty years ago. Chevron is currently battling Ecuador over its 16 billion gallon toxic dumping into the Amazon. Perhaps the more public Gulf spill will expose the need for increased safety and regulation in Big Oil companies. As a public, we are still reliant on the energy these companies supply. The US consumed 23% of world oil use in 2008 for only 5% of the world’s population. Big Oil was created by our desire for non-OPEC oil security, but these companies also have the capability and capital to become the largest renewable energy sources in the world. A drastic reform of the Minerals Management Service (MMS) and a federal demand that oil companies take responsibility for the damage they cause may be a necessary step towards forcing these businesses to ensure a safer energy future. One day perhaps Big Oil will be known instead as Big Renewable.
its bigger than normal or even small oil
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