Capitalism unbound: the oil industry

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)