THIS MONTH'S THEME

OIL / KEYNOTE

There’s a giant step before I can get my foot up to the first rung. After that it’s a piece of cake. The zigzag metal stairway leads to the cab of the biggest truck I’ve seen, a steel behemoth. Ahead of me Dorothy Voyageur, a smiling young woman from Fort Chipewyan makes her way confidently to the controls of the Caterpillar 797, billed as the largest truck in the world. She motions me to sit down beside her, a disembodied voice crackles from her two-way radio and we’re on our way – perched two stories above the broken, frozen muskeg. The whining engine carries us smoothly a few hundred metres to the open face of the mine.

Dorothy works in the Athabasca oil sands, a vast region of dark, gooey sand saturated with petroleum about 450 kilometres northeast of Edmonton, Alberta in Western Canada. The spindly aspens, poplars and black spruce and the soil covering the oil sands (what the companies call ‘overburden’) have been scraped away and the scarred landscape stretches far into the distance.

There is so much oil buried beneath these rolling Boreal forests that it strains belief. The Alberta Energy and Utilities Board estimates there are more than 300 billion barrels of ‘recoverable’ bitumen (thick, viscous oil) in a ‘hydrocarbon triangle’ of almost 78,000 square kilometres.

They don’t drill for oil here, they mine it – scooping up tons of the sand in giant shovels, each of which can hold 100 tons. Three or four passes and massive trucks like Dorothy’s are loaded, ready to haul the stuff to the crushers. From there it is transported in a slurry of hot water to separation vessels where the bitumen is removed. This thick, tar-like material is washed out of the sand and purified in a series of treatments, after which it is upgraded into synthetic crude. This is then shipped by pipeline south for further refining. It may sound simple but it’s a complex engineering feat on a massive scale, an enormous industrial operation in the midst of the wilderness. And in these days of $30-a-barrel petroleum, the oil sands are booming.

Dorothy works at Suncor, the oldest operator in the region. The company is in the midst of a $1.8 billion expansion designed to multiply production four-fold to 450,000 barrels a day by 2002. Syncrude, the other pioneer in the business and the larger of the two companies, brings together major players like ExxonMobil, Gulf and Petro-Canada. It is also in expansion mode with a $5.1 billion investment aiming to double output to 170 million barrels a year by 2007. In total, more than $21 billion in new investment by dozens of hopefuls is planned in the next decade. By that point Alberta’s oil sands could be producing nearly half of Canada’s oil.

Twenty minutes south of the Suncor plant, an impressive four-lane highway quickly deposits you in the town of Fort McMurray. Winding along the Athabasca river valley, the town was founded in 1870 as a Hudson’s Bay Company fur-trading post. Bitumen oozes from the river’s banks in places and as long ago as 1788 the Scots surveyor Alexander MacKenzie wrote of ‘bituminous fountains into which a pole of 20 feet may be inserted without the least resistance... When mixed with gum, the resinous substance collected from the spruce fir, it serves to gum the Indians’ canoes.’

Today the once-sleepy backwater is straining to accommodate the phenomenal growth. Housing can’t keep up with the demand from new arrivals. Local service industries are desperate for workers, many of whom can no longer afford to live in the town as oil money inflates the price of land. When I was there, a local fast-food restaurant was offering a trip for two to Mexico for anyone who stayed on the job for longer than three months.

Anne Dort-McLean runs a local social service agency called Big Sisters which provides friendship and guidance for young girls.

‘We’re worried,’ she says frankly. ‘We just don’t know what the cumulative impact of all this growth will be, either socially or environmentally. Already we’ve got the highest housing prices in the province and there’s more cocaine around than you can imagine.’

The town’s population has exploded from a few thousand in the mid-1960s to 42,000 today. Hundreds of job-seekers arrive every month and thousands more are projected over the next decade. Those who land jobs in the oil sands are mostly young, with money to spend. Truck drivers like Dorothy Voyageur can make $64,000 a year working in 12-hour shifts. And construction workers can pocket $2,600 in two weeks. As one Suncor manager said: ‘If you’re a pipefitter or welder you can pretty well name your price.’

In Calgary, a couple of hours north of the US border and the corporate centre of Alberta’s oil patch, this frantic economic activity has the industry in an upbeat mood. Cash is flooding into the coffers of the companies and the provincial government. The North American Free Trade Agreement (NAFTA) has opened the spigots to oil and gas exports. Recently re-elected Conservative Premier Ralph Kline has even mused about doing away with income taxes.

Crispin Hughes / Panos Pictures

Prices are up and so are profits.

The industry is pumping fossil fuels south as fast as it can into the seemingly insatiable maw of the American market. In 1998 nearly a third of Canada’s total energy production was sold to the US. And exports have skyrocketed with the recent electricity shortage in California.

According to energy analyst Larry Pratt: ‘There is virtually no exploration risk now for companies in Alberta. NAFTA guarantees an export market for as much as they can produce.’ Pratt, a soft-spoken ex-academic, believes that Canada has become a virtual energy colony for American multinational corporations. Canada currently supplies about 1.7 million barrels a day to American refiners and is the top US supplier, ahead of both Saudi Arabia and Venezuela.

We’re sitting in a near-deserted coffee shop on Edmonton’s trendy White Avenue, a mishmash of faux English pubs, big-box book stores and ethnic restaurants. Pratt is leading me through the state of the oil industry in his home province.

‘The main goal is production,’ he says, ‘as much and as fast as possible.’ He calls this new market-driven energy regime ‘the political economy of speed’.

‘We’ve got a continental energy policy,’ Pratt says. ‘And in a continental market you share prices as well as resources. We learned that lesson this winter. If Chicago bids up the price of our natural gas, consumers here are going to have to pay the same price. NAFTA’s purpose is to boost production. It doesn’t encourage wise or prudent management of our resources.’¹

Not that this seems to worry the new administration of George W Bush. With strong ties to the oil business himself (his father made his millions in east Texas) and a cabinet chock-full of blinkered oil enthusiasts, George W has pushed energy to the centre of his policy agenda – casting covetous eyes at both Mexico and Canada. Shortly after taking office Bush travelled south to meet Mexico’s new leader, Vincente Fox. Energy was the first issue discussed.

‘When we talk about an energy policy at home, it is also in the context of Mexico and Canada. It is a hemispheric issue and it needs to be elevated to the presidential level.’² Indeed, so oblivious is the President to the concept of borders that during a debate with Al Gore leading up to last year’s election he suggested that the US increase drilling in Mexico to lessen the country’s dependence on ‘foreign’ oil.³

America has just five per cent of the world’s population. But they are an energy-hungry bunch – gobbling up a quarter of the globe’s petroleum, more than half of which is imported.⁴ Its own reserves have been on a downslide for more than 30 years and the country has already used up more than two-thirds of them.

Despite new supplies from Alberta’s oil sands and Mexico’s offshore wells, the lion’s share of conventional oil is still controlled by the Organization of Petroleum Exporting Countries (OPEC) – half a world away from the car-choked freeways of Los Angeles and the unseemly sprawl of North America’s auto-dependent suburbs.

The International Energy Agency (IEA) in Paris predicts that OPEC will increase its grip on the world oil market over the next two decades. The group will supply 54 per cent of world oil in 2020 – up from the current 40 per cent. At the same time demand in the Majority World is expected to mushroom. China’s oil appetite will more than double to 11 million barrels a day. And consider this: the IEA warns that electricity generation in the South will rise at an average annual rate of nearly five per cent during the same period – growth which may trigger the construction of up to 30,000 new electric power plants, most of which will be fossil-fuel fired.

All this, of course, is based on the assumption that the price of energy will not go through the roof. By no means a sure bet.

Oil, after all, lies at the core of industrial society; it is the lifeblood of economic growth. Its influence is so pervasive and so fundamental that we scarcely give a thought to how utterly dependent we are on the stuff. E F Schumacher, the visionary author of Small is Beautiful, understood this clearly 40 years ago when he wrote: ‘There is no substitute for energy. The whole edifice of modern society is built upon it... It is not “just another commodity” but the precondition of all commodities, a basic factor equally with air, water and earth.’⁵

That’s a key issue because petroleum is a non-renewable resource. They’re not making any more of it, at least not in any time span that you and I would care to think about.

Undaunted, oil companies continue their frantic explorations. Spurred by globalization the industry has gone through a flurry of mergers over the past five years. As jobs have been slashed and operations ‘rationalized’, the world price of oil has floated around $30 a barrel, a level not seen for decades. As a result profits have soared. Last year ExxonMobil reported the highest profits in US corporate history of $17.72 billion.

The giant multinational companies known as the ‘seven sisters’ had a stranglehold over the oil trade right up to the 1970s when OPEC snatched control of pricing from the majors. Now in a new global climate of deregulated trade and investment the big companies are clawing their way back to power. The seven have become four: ExxonMobil, BPAmoco, Royal Dutch/Shell and ChevronTexaco. And they are amongst the most powerful, influential corporations in the world.

Nevertheless, state-owned companies in Saudi Arabia, Mexico, Venezuela, Iran and elsewhere are still in the driver’s seat – the top 10 national oil companies control 70 per cent of the world’s reserves.⁶ But ‘Big Oil’ is once again consolidating its power, helped mightily by those eager enforcers of global economic integration: the International Monetary Fund, the World Bank and the World Trade Organization.

Debt-strapped Third World nations, forced to adopt economic ‘adjustment’ policies, are selling off national petroleum companies and rushing into joint deals with the multinationals. For example, Argentina and Bolivia have sold their publicly owned oil companies in recent years. And BPAmoco, Shell, ExxonMobil, Agip and TotalFinaElf have joined the Kazakhstan state oil company drilling offshore in the Caspian Sea. The ex-Soviet state is a weak and willing partner: four times as large as France the country has an $8 billion foreign debt.⁷

Nigel Dickinson / Still Pictures

The companies pour millions into exploration, slicing seismic exploration lines through remote rainforests and Arctic tundra alike. On the map Northern Alberta is a trackless wilderness – from the air seismic cuts transform the forest into a cross-hatched web of green. According to Petroconsultants, a company which advises the oil industry, nearly 15 million kilometres of seismic lines were cut around the world from 1987 to 1997.

As the oil giants move into environmentally fragile and isolated frontier areas they do so with scant consideration for local cultures or the human-rights records of governing regimes. In one country after another the companies find themselves the brunt of popular discontent (see ‘Hotspots!’).

With reason. National and regional governments are hypnotized by the lure of easy wealth from black gold. The number of countries with active exploration programmes tripled in the 1990s. But time and again the promise of oil prosperity turns out to be a cruel mirage. Corruption, greed and mismanagement are the usual results, with a tiny élite reaping the benefits.

Nigeria is one celebrated case. Oil dominates the national economy, making up 80 per cent of the country’s GDP and 90 per cent of government revenues. Corruption is rampant and the industry as a whole employs just two per cent of all Nigerians. Meanwhile, the Ijaw and Ogoni people protest that oil development has poisoned their lands and destroyed their livelihoods. Their opposition has been met with systematic repression and terror by the military. All across the South petroleum-led development strategies have fed into a spiral of debt and dependency. And the capital-intensive nature of oil exploration has derailed other development priorities (see ‘Perilous prosperity’).

But all this destructive exploration can’t postpone the inevitable – what one US Geological Survey expert has called ‘the big rollover’. This is the point at which the demand for oil begins to exceed the rate at which new reserves are discovered.

More than 800 billion barrels of oil have been burned since the oil-era was launched in the backwoods of Pennsylvania nearly 150 years ago. But all the big strikes have already been made.

The respected geologist, Colin Campbell, raised the scarcity issue in the summer of 1999 when he told stunned British MPs: ‘The world’s oil companies are now finding only one barrel of oil for every four that we consume.’ North Sea oil, he said, is at its peak. Venezuela, the former USSR, Mexico and Norway are all past theirs. Saudi Arabia will peak in less than a decade. It’s only a matter of time before the gap between decreasing reserves and growing consumption makes itself felt. Campbell says global production will start to feel the pinch around 2005 when reserves begin to dwindle by three-per-cent a year.

That’s when things may get nasty as countries addicted to petroleum begin to scramble for their share. We’ve seen hints of this in the recent past: Western access to Kuwait’s oil was the main reason for the Gulf War. And Washington’s ‘Plan Colombia’, a $1.3 billion aid plan supposedly designed to torpedo the country’s cocaine trade has more to do with oil than drugs. Colombia has been ravaged by a bloody civil war and oil wealth is at the centre of the violence.

In May 1997 a White House report on national security policy called access to oil in this region a ‘vital interest’. According to military analyst Michael Klare: ‘This has significant security implications. Once a source of oil is designated a “vital interest”, it becomes incumbent on Washington to assure the long-term safety of these supplies. In the past this has often entailed direct military intervention by US forces or providing military aid to friendly governments.’⁸

It doesn’t have to be this way. There are compelling and urgent reasons for breaking our oil addiction now. The big one is climate change. Despite vigorous attempts to dupe the public into thinking otherwise, ‘Big Oil’ and its supporters (Mr Bush’s administration being a key ally) can’t ignore that the burning of oil, coal and gas is the chief cause of climate change.

As Greenpeace and others have shown, we are faced with a case of ‘carbon logic’. Burning even a quarter of known reserves will ensure climate catastrophe: three quarters of all the oil in the ground needs to stay there in order to protect the planet for future generations. This means a rapid phase-out of fossil fuels and a quick transition to non-polluting, safe, renewable forms of energy (see ‘Shifting gears’).

But the big issue is timing. With economic growth expected to double in the next 20 years the panic-driven battle for dwindling reserves will be with us soon enough. If we don’t address the need for alternatives now, we’ll not only mess up the climate, we’ll make the transition that much more difficult and disruptive.

The policy analyst David Fleming estimates that 25 years would be ‘the absolute minimum time it would take to rebuild Europe’s energy economy on renewables’.⁹ The challenge is considerable. The global airline industry, the shipping business, as well as millions of buses, cars and trucks will need to be weaned from oil as will millions of buildings now heated and cooled by fossil fuels. And then there is modern, industrial farming which runs on oil-powered machinery and is premised entirely on petrochemical inputs – fertilizers, pesticides and herbicides. Thought, too, will have to be given to settlement patterns and urbanization. Without more compact land use and a reversal of wasteful, energy-intensive and car-dependent suburbanization, even a full-scale Marshall Plan for energy alternatives will not be enough.

But first steps first. Only by freeing ourselves from the tyranny of the oil industry can we begin to push for the political and social changes necessary to build a bridge to an oil-free future. We can begin by demanding a moratorium on new oil exploration and an end to all public subsidies and support to the oil industry by national governments and international bodies. Globally, fossil-fuel industries are subsidized from the public purse to the tune of $120 billion a year.¹⁰ Instead, subsidies should be quickly steered towards renewables. And developing nations should be given a generous helping hand in incorporating renewables into their future energy plans.

But the end of oil will entail casting the net wide, by looking at everything from auto emissions and affordable public transport to urban sprawl and corporate power. Make no mistake about it: the stakes are high. They include not only the ecological integrity of the planet but the nature of human society over the coming centuries.

1 For more on this see Pratt’s Energy: Free Trade and the Price We Paid, Parkland Institute, Edmonton 2001.
2 Toronto Star, 17 February 2001.
3 The Texas Observer, 19 January 2000.
4 C Flavin, ‘The real price of oil’, Worldwatch News Brief, September 2000.
5 Quoted in The Prize, Daniel Yergin, Simon and Schuster, New York, 1991, p559.
6 Greenhouse Gangsters vs Climate Justice, TRAC, 1999.
7 The Guardian, 15 November 2000.
8 ‘The Real Reason for Aid to Colombia’, Mother Jones, 7 April 2000. BPAmoco is the country’s largest foreign investor and controls its biggest oil field at Cusiana-Cupiagua. Other major investors include ExxonMobil, Shell and Occidental Petroleum.
9 D Fleming, ‘After Oil’, Prospect, November 2000.
10 State of the World 2001, Worldwatch Institute, Washington DC, 2001.