Stand with Standing Rock

Standing Rock and Beyond: Big Oil’s Corporate Dislocations and Extortions

Wendell G Bradley, CounterPunch, Nov 8 2016 - 10:45

If a corp (o’rat) wants to be criminally normal, here is how it must think/act:

Conceive of a project that is bigger than ever, yet still propagandizable as ‘in the public interest’.

Such capitalization, in the billions, makes it eligible for government-engineered (made-easy) credit access, and with regulatory approval already ‘play-booked’, for example, as with oil and gas.

Make the project as ‘venturesome’ (risky) as possible, thus bondable only in those high-yield categories the especially brave, free market entrepreneurs alone dare to inhabit, ostensibly creating benefits for everyone.

Big banks are anxious to use their tax-gifted, ever accumulating slush funds (already in the hundreds of billions) to financially ‘correct’ low interest environments.

Such projects are said to deserve their automatic (publicly guaranteed) insurance policies against any/all failures, given they are integral to ‘our’ economy, especially as general job creators.

‘Too big to fail’ projects are not subject to the free market, democratic process. They are not about ‘informed consumers making rational choices’. Foreign Trade Agreements, for example, are made in secret. Slick advertising of the effective kind, affordable only by big, corporate money, is highly successful in shaping public attitudes. The corporately touted basis for ‘free markets’ becomes undermined.

Indeed most risky, big project ideas (think internet) are developmentally funded by public money, at places like MIT. Upon corporate adoption, such tax-financed, highly promoted developments will yield insured, private profit, not free market trials under creative competition.

A particularly instructive ‘case in point’ is fracked oil and its delivery. At current and expected prices ($50/bbl), US oil is largely uneconomic to produce and pipeline to market. For example, the break-even price for both the Bakken (ND) and Niobrara (CO) oil fields has proven to be, on average, at least $75/ bbl (includes acquisition, leasing, capitalization, and transportation charges).

Of course some wells, a few percent in very localized ‘sweet spots’, can still yield profits. However, large scale projects such as the Dakota Access Pipeline (DAPL), if based on total-formation output figures, will prove wholly unjustified–least of all for any public-benefit argument used to justify takings of private property, say by eminent domain proceedings.

For example, it simply does not make economic sense to justify DAPL’s $5 billion project cost on the basis of 400,000 bbl/day Bakken production if 90% of that oil, 360,000 bbls/day, is transported simply to recover some revenue from bad, initial investments at the wells.

The environmental degradations from the daily pipeline releases experienced across the US are huge. However, such costs do not figure into official economics. They are simply dismissed from accounting as ‘economic externalities’—another of the privileging violations of actual free market cost/benefit.

At current oil prices, the Bakken has few ‘economically recoverable’ reserves–the only ones that count in Securities Exchange calculations of legitimate investment. Accordingly, the future of legitimate oil development’s production/transport per the Bakken is highly speculative; too much so to establish any clear public benefit from DAPL. For example, if today’s proven oil reserves provided all US consumption, their depletion would fail energy independence in only 1.5 years.

Under a full accounting, DAPL’s justifications for forcible ‘takings/leasing’ finally evaporate altogether. For example, according to the International Energy Agency, two-thirds of all oil reserves must stay in the ground if economically devastating climate change limits are to be heeded. DAPL approval is therefore a form of climate denial, one directly counter to Obama’s professed doctrine requiring special review for all additions of climate-influencing infrastructure.

So, why take oil’s public risks, such as its economic and environmental dislocations from pipeline ruptures, when clean, renewable solar is currently available, more economically. For example, solar produces utility-level electricity at less expense than does oil production’s natural gas complement, according to our National Energy Lab (Berkeley). Renewables are even replacing oil in production of plastics and clothing.

Clearly, the oil industry is experiencing a market-based decline known as ‘creative destruction’ under solar penetration. It can no longer compete, even though hugely subsidized. Exxon, the world’s leading oil company, experienced stock price declines (17%) apparently due to profit declines (17%) since 2014, and had a credit rating reduction to its lowest value in 17 years.

The smart money is ‘going solar’; divestments and bankruptcies in oil are increasing (105 filings since 2015; expecting around 200 overall).

Oil is rapidly becoming the dinosaur of energy, yet it continues to enjoy developmental subsidies, world-wide, of about a million dollars per day. Oil is not a rational-market operation.

Indeed, oil’s bigger-than-ever project justifications, such as DAPL, can only be entertained within a captive regulatory framework whose blatant defiance of rational, democratic choice is increasingly being understood as a form of Class Warfare, one enabling an economic elite to extort wealth from a 70% disenfranchised public (Princeton study.)

Witness the deep, gritty awareness at Standing Rock, ND where indigenous people are the first to make all of the above crystal clear in their direct resistance to Big Oil as Water Protectors. What can be more fundamental to well-being than that?