Oil on the Brain

The other day I finished Oil on the Brain: Adventures From the Pump to the Pipeline by Lisa Margonelli. This journalistic survey of the worldwide oil industry attempts to make two points.

The first concerns the ogres who rip us off at the pump.

Ms. Margonelli begins her book at a local gas station. Gas stations are simple places, right? Well, if you don't know anything about them (I can't say I know much) they certainly seem to be. Learn something, though, (as the author took the trouble to do) and you find that running a gas station is not just hard work but also a remarkably risky and complex job. So, for that matter, is being a distributor who sells gasoline to gas stations or running the refinery that sells its gasoline to distributors. Drilling for oil isn't a piece of cake either. Unhappily, for the people who love to believe that we are victims of vast conspiracies, all too many of the oil industry employees Ms. Margonelli portrays in her book seem to be over-worked and under-paid. As for their, mostly small, businesses they function in such a ferociously risky and competitive environment that they are poorly cast in the role of ogre.

How about the big oil companies? They're still evil, right? Well in some ways maybe but, mostly, no. They too are caught between customers who want the world for a dollar a gallon and scapegoating by third world governments who themselves are characterized by a mix of corruption, incompetence and greed.

So where's the villain? Doesn't a good story need a villain? Yes it does and this leads to Lisa Margonelli's second point. It's not the people and it's not even the companies. It's the product.

Basically, oil is different than other commodity. There is something about its current indispensability that makes dealing with it at all, on virtually any level, a deal with the devil. To hammer home her point the author focuses on the oil state. She looks at four dreadful examples in particular - Venezuela, Chad, Iran and Nigeria.

Absent oil, none of these countries has ever had a lot going for it economically. Chad, in particular, is and always has been an economic basket case. The discovery of oil, then, should be economic salvation, shouldn't it?

That's the problem. It rarely seems to be. Indeed, it is often the exact opposite. Petroleum has the power to distort governments and economies to such an extent that, instead of creating wealth, oil often ends up creating conflict, corruption, environmental degradation and even more poverty.

As she does with the various players in the oil industry itself, the author's portrayal of the people caught in the web of the oil state is extremely sympathetic. Actually, in fact, I thought she was a little too sympathetic in her portrayal of the Iranians but, in terms of the overall point she is making about the oil state, that's neither here nor there.

It's easy to blame oil companies for every evil relating to oil. However, it is governments who are responsible for the well being of their people, not oil companies. So, if you want scapegoats, by all means blame the oil companies. If you want explanations, though, things turn out to be more complicated.

Basically, when oil is discovered in a poor country no government can refuse to give in to the temptation to exploit the discovery. Neither can oil companies fail to do what it takes to produce oil wherever they find it. After all, they cannot live without new supplies of oil. As for the population, naturally they expect to benefit from the windfall brought by oil. How could they not? So people innocently put up with the depredations necessary to extract the stuff.

Somehow, though, the ending is rarely happy. Local industries cannot compete with the salaries paid by the oil companies. So they die. Governments don't need to tax their populations to raise revenue. Sounds great but this also means that they do not need the cooperation and support of their populations in order to raise tax revenues. The result is usually autocracy - "no representation without taxation," as the saying goes. However, flush with money but lacking the institutions capable of handling their newfound wealth, the spending of oil state governments is often irresponsible and invariably corrupt. The result is tragedy.

So what's the solution to the dilemmas presented by oil? In the author's eyes there is only one solution. The world must wean itself off the stuff. Fair enough. It's not a particularly original conclusion but, given that she has done her homework, Ms. Margonelli can make it with some authority.

She uses alternative fuel developments in China to illustrate the direction she believes we should move in. My own sense is that her choice of location is interesting but a bit problematical. Yet, the direction the author clearly feels we should move in - to transition from an oil to a hydrogen based economy - is very probably (if it is technically possible) our best long term option.

Oil on the Brain was an easy and enjoyable read. Whoever knew that a chapter on gas station operations could be so interesting? Still, it deals with serious problems and draws serious conclusions.

The universal craving for endless quantities of petroleum in a world of limited supply has turned oil into the economic equivalent of an addictive drug. We need to get beyond scapegoating people and industries and start to deal with the reality of our addiction.

The problem is that, however destructive oil may have become, there are no panaceas. So going cold turkey is not really an option. Yet we do need to develop other fuels. This is hardly an original argument but Oil on the Brain does make it a persuasive one.