Capitalism unbound: the oil industry

The oil industry was born out of modern capitalism and its thirst for "black gold". The industry was global long before the word was invented.

Royal Dutch/Shell (Shell), the third largest oil and gas company in the world, operates in more than 145 countries across the globe.

Per Olssen reviews Shell Shock - the Secrets and Spin of An Oil Giant by Ian Cummins and John Beasant - a story that reveals the true nature of the capitalist system.

Shell Shock begins with the crisis that erupts after Shell was forced to admit that it had overstated its proven reserves in January 2000. As the authors say, there are "Lies, damned lies and reserves".

The share price tumbled and the company's three top directors resigned. Shell's reserves fell by a fifth, equivalent to 4.47 billion barrels. Over the last 12 months Shell has been forced to cut its proven oil and gas reserves by almost a third. (See box)

However, the book first and foremost deals with the history of oil and business in general and Shell in particular. British Shell took its first steps in the oil business in 1881 and made a fortune in shipping oil through the Suez Canal. "Of sixty-nine oil cargoes to transit the Suez Canal by the end of 1895, only four belonged to other than Marcus [Shell's owner]". It wasn't long before the oil markets came under the control of a few, huge monopoly companies.

Shell was formed in 1907 by an alliance between Royal Dutch and Shell Trading and Transport but it was not until 2004 that the two merged. Shell, like other oil companies profited from World War 1 - the French fuel minister Henri Berenger said after the war: "Without Shell, the war could not have been won by the Allies."

Russian revolution

However, in the wake of the war a revolutionary wave swept over the world. The 1917 October Revolution in Russia brought the workers and the oppressed to power - the revolution shook and changed the world, including Shell.

Shell was by far the biggest foreign player in Russia, with a fifth of the country's entire oil production. The new workers' government nationalised the oil industry and expropriated the company's assets and interests.

Henri Deterding, Shell's leader at the time, never gave up his ambition for a capitalist crusade against what he called "the murderous anti-Christ Soviet regime". Shell tried everything in order to uphold the imperialist blockade against the new workers' state in Russia.

Deterding's "hatred of Marxists in general and the Soviets in particular was structural" and soon he became a committed Nazi, even though the British-based Shell was led and founded by a Jewish family. Shell and Deterding supported every fascist regime in Europe in the 1930s. Shell's ideology was "anti-communist", and still is.

The period of capitalist growth that followed World War II meant that Shell's hunger for oil increased as oil consumption rocketed. In return, Shell's record of defying governments, mobilising private armies and polluting whole areas of the earth became even worse.

The big oil companies exercise more political power than governments and, in upholding what they call "Capital discipline", Shell gets blood on its hands.

Power

the authors ask the question: "Who's running the country anyway?" and then lists a huge range of issues that have in fact been decided by Shell first and than carried out by the British government, particularly in the Middle East.

"When Shell or any of the other majors walked into a country such as Oman, they got what they wanted, when they wanted it..." Money talks, and that is why Shell and other transnational companies have such political influence.

Shell's budget dwarfs most of the smaller states - its profits in 2004 are bigger than the GDP of many of the world's poorest countries. Power comes from the production and transport of oil. Shell in Nigeria is a graphic illustration of this.

Recently, Shell has done a lot to portray itself as a company with a human face, caring for the environment (the "greenwash" campaign). They even donate money to environmental organisations; of course only to those who do not complain about the harmful impact of Shell's operations on human health and the environment.

When scientists arrive at conclusions other than what Shell wants, the company consults others willing to go along with them.

This was the case when scientists discovered that grey whales off Sakhalin Island (Russia) were badly affected by the oil installations. In response, Shell hired its own consultants who reached, surprisingly, the opposite conclusion.

If you need more facts and arguments in the struggle against global capitalism, then Shell Shock - the secrets and spin of an oil giant provides them.

Profits and lies

The year 2004 was, according to Jeroen van der Veer (Shell chief executive), "a year of extremes, with the reserves recategorisation on the one hand and record net income and cash generation on the other."

You may think that an oil company without oil is like a pub without beer, but capitalism is not a rational system. Quite the opposite. The profit system is irrational by its very nature and ridden by conflicts, contradictions and extremes.

Shell 2004 is a perfect illustration of how capitalism works. The company faced a crisis of confidence after fiddling the figures and overstating its reserves, but that did not stop Shell making a record net profit of $18.5 billion dollars, a 48% increase from the year before. The most profit ever recorded by a UK-listed company!

Shell promised to pay dividends of at least $10 billion in 2005, up from $7.2 billion in 2004, to its shareholders and buy back shares worth $3-$5 billion (buying back shares is another form of dividends).

"The move to buy back shares and the dividend increase are positive. The writing down of reserves is disappointing but hopefully they've drawn a line under the affair", commented Cavendish Asset Management fund manager Paul Mumford, whose portfolio includes Shell shares, after it became known that Shell had pumped up a record profit. (Reuters 3 Feb 2005)

This comment sums up what capitalism is all about - profit and dividend to shareholders comes first. And $10 billion is a huge sum to be shared out by a handful of big shareholders. It exceeds the total GDP of Zambia in 2004, ($9.4 billion) which has to be shared out amongst a population of 11.2 million. Zambia is one of the world's poorest countries - four out of five live below the poverty line.

The company behind the hangman

Nigeria is the largest oil producer in Africa, pumping more than two million barrels a day. Shell accounts for nearly half of this production.

Shell started to look for oil in Nigeria in 1938 and found it in 1953 in the country's Niger River Delta (the Delta). Shell's policy of divide and rule has been particularly disastrous in the Delta. The region has been in a persistent state of unrest since oil was discovered, with armed conflicts, including the horrendous Biafra war (1967-70), extreme poverty and ruthless exploitation of people and the environment.

A report, quoted in the International Herald Tribune 11 June 2004, concluded "that oil companies like Shell have worsened fighting in the Niger Delta through payments for land use, environmental damage, corruption of company employees and reliance on Nigerian security forces... With over 50 years of presence in Nigeria, it is reasonable to say that the Shell companies in Nigeria have become an integral part of the Niger Delta conflict".

The authors confirm this picture in detail and reach the same conclusion as the Nigerian trade unions: "Shell is the enemy of the people". The first demonstration against Shell in the Delta took place in 1990. Shell appealed for an anti-riot squad, who shot dead 80 people and damaged a large number of homes. This bloody event got publicity in the West and highlighted the struggle of the Ogoni people in the Delta.

This struggle was met with brutal repression, including the execution of Ken Saro-Wiwa and eight other members of his Movement for the Survival of the Ogoni People (MOSOP) in 1995. Shell was seen as being behind the hangman in 1995 and ever since the company has correctly been regarded as the real and ugly face of capitalism.

Shell Shock - the secrets and spin of an oil giant

By Ian Cummins and John Beasant

Mainstream Publishing. Price £16.99 (Hardback)

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