Profit And Corruption Widens Energy Inequality
By Farooque Chowdhury
04 November, 2012
Profit is the opposite side of poverty and deprivation, which is ignored by mainstream although the mainstream takes the posture of crusader against poverty. Profit fattens itself by pushing many to the world of poverty and deprivation. The sphere of energy is not free from this equation.
A comparison with the amount profit of the oil companies helps understand the inequality. The oil industry, Antonia Juhasz writes, is the most profitable industry in the world. Six of the ten largest corporations in the world are oil companies: ExxonMobil, Royal Dutch Shell (Shell), BP, Chevron, ConocoPhillips, and Total. With over $40 billion in profit in 2007, ExxonMobil is the most profitable corporation both in the world and in world history. Its profits are larger than the entire economies of 93 of the world’s nations ranked by GDP. ExxonMobil had the most profitable year of any corporation ever in 2003 and then proceeded to surpass its own record every year for the next five years. ExxonMobil’s profits were more than twice those of the next three US companies on the Fortune 500 list combined: Chevron with $18.7 billion; General Motors, which lost $38.7 billion; and ConocoPhillips with $11.9 billion. Similarly, in 2006 ExxonMobil’s profits were nearly twice those of the next two US companies combined: United Airlines with $23 billion and Citigroup with $21 billion. ExxonMobil is not alone. Each major American oil company — ExxonMobil, Chevron, ConocoPhillips, Valero, and Marathon — has surpassed its own record-breaking profits in almost every year for the last five years. Combined, they earned more than $80 billion in 2007 profits. There is simply no comparison with any other industry in the United States. The 10 largest global oil companies, according to the Fortune’s 2007 Global 500 listing, took in over $167 billion in profits in 2006 alone, about $50 billion more than the top 10 companies in the second most profitable industry, commercial and savings banks. (The Tyranny of Oil: the World's Most Powerful Industry and What We Must Do To Stop It, 2008)
Not only oil, other sources of energy also reap profit. These are lucrative. Reports on business, trade, investment in energy sector and its sub-sectors show the fact. Force, political, diplomatic and military power, manipulations and conspiracies, assassinations and murders, which are applied in areas of deals, labor, politics, geopolitics and regime change in countries and regions are indicators of power of profit in the area of energy. Identifying the source of profit helps locate source of poverty, and energy poverty is no exception. Section of political economics has long ago identified both the sources that have still not been possible to refute and nullify by the other section.
Any common person from a Fourth World country or from strife-torn Nigeria or from energy poor Bangladesh can ask: what the profit could have done in the lives of the billions living in dark, struggling daily with energy expenses, walking miles to collect biomass for cooking, in hospitals facing power outages? Even, many citizens in the US, in the low-income part of a municipality can raise similar questions. But, the true path of profit does not go along those outposts of life. Its survival and expansion depend on depriving many. Thus it creates crisis, crisis in the form of civil strife, violation of human rights, and ultimately for itself. This aggravates the energy poverty situation.
The energy poverty situation turns grave with the factor of corruption in the entire energy business, and corruption hurts the poor most. A World Bank study said: corruption “perpetuates or deepens inequality, as the few amass power and wealth at the expense of the many.” The study defined two types of corruption: petty corruption by petty employees and “grand corruption in the allocation of lucrative monopolies” by company managers and mid-level bureaucrats associated with energy purchase or sale contracts or debt instruments. Both types of corruption hurt the common people, but the later one hurts the country, the broader public interest, the economy.
Grand corruption, according to the study, involves political campaign contributions and the personal enrichment of political leaders. It mentioned election finance scandals in industrial countries, and politicians in “new” democracies acquiring illicit sources of campaign funding. As example the study mentioned that in a south Asian country losses of two organizations related to electricity amount to more than US $100 million each year. Corruption is more common in unsolicited bids, supplier’s credits, and crash program–type procurement initiatives.
The study cited a few examples of corruption: A former prime minister in Ukraine personally granted exclusive rights to a gas trader that was reportedly controlled by him and his associates. The trader imported gas from Russia at a price of US $50 per thousand cubic meters and sold it to captive industrial consumers for US $80. The prime minister used the financial wealth generated by this lucrative monopoly to establish a political party. Diversion of utility revenues had become such a problem in Pakistan that in 1999 the government mobilized the army to supervise meter reading and billing. The scale of theft surprised the authorities, especially the extent to which the affluent benefited. Industries, shopping centers, and large residences accounted for a large share of the stolen electricity. Subsidies in power sector in one country, the study mentioned, amount to more than US$100 million a year, more than expenditure on health. The beneficiaries of the subsidies are the relatively affluent 16 percent of households that have electricity service.
The World Bank study commented: “The poor lose from the budget subsidies to the power sector in two ways: lower rates of economic growth and less social expenditure from which they would benefit directly.” Corruption that grows along the modus operandi of the dominating classes contributes to energy poverty.
With intensified competition among capitals and accelerated and almost complete globalization by capitals, corruption is a tool in the hands of capitals. Each of competing capitals aspire and demand a fair game for all but self. Each of competing capitals
Political economy of the crisis should not be missed
The energy crisis is part of the world crises now overwhelming the planet. The fundamental aspect of the energy crisis will be missed if it is only viewed in terms of the prospect of dwindling oil supply and is viewed without connecting it to the world production and distribution system. The approach pushed by the donors in the poor countries in the name of development, part of the world production and distribution system, is contributing to the crisis. A major part of this approach is oil intensive. The life style the dominating segments in the poor countries have jealously adopted is contributing to the energy poverty, and widening the gap.
Plundering of public property is the lifeline for the dominating segments in many poor countries, and the process of plundering increases energy disparity. The plundering process and the plundering class/segment is part of the present world system while the plundering of the energy resources from poor countries is an act of the world system.
Metropolitan states with their all might stand by their owners: the energy giants. The world power structure stands by their compradors, the junior partners in appropriating/plundering and squandering of public resources including energy.
Increased energy poverty is the consequence of energy loot from the poor countries. The political economy of energy poverty is thus connected to class rule and the world system. Degradation in environment and changes in climate is worsening the energy poverty situation. All these are part of the energy crisis.
The energy poverty situation puts forth a few tasks: (1) Explain this disparity and deprivation to the masses so that the possibility of drying up of oil, a major source of profit, could not be depicted by the mainstream as the only aspect of energy crisis, so that the people at the bottom turn aware of the way they are being deprived, and so that the private sector could not make the pockets of the poor a big market. (2) Demands for energy equality, environment-friendly energy for the common people, affordable energy not harmful to health should be raised. An equitable distribution of energy will stop many of the luxuries that squander energy. (3) Cooperatives for energy could be organized at community level. This will provide people, through mistakes and failures, space for debating related issues, getting mobilized, practicing democracy, running organizations, fighting bureaucracy, and articulating greater demands. (4) The designs and attempts to take control of energy sources by external actors should be exposed. (5) Popularize the approaches: (a) the lower the more, and (b) no transparency no deal. The first one is for proportionately more subsidy in energy to the poorer, more participation from the bottom in planning and decision making while the next one is for demanding all energy related deals to be made public and to be debated. Debating the energy squandering life style of the energy rich and the “development” approach prescribed by the donors will create scope for broader space.
[This section, 4th in the series, modified and elaborated, is the last part of the chapter “Energy Inequality and Energy Poor” in The Age of Crisis (2009) by Farooque Chowdhury, a Dhaka-based freelancer.]
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