It’s one of the more ironic twists to the Deepwater Horizon tale. Just a few hours before the US Attorney General announced that a criminal investigation was to be brought against British Petroleum, Transoceana, and Halliburton for their roles in the Deepwater Horizon oil spillage, President Barack Obama met with his Peruvian counterpart, Alan Garcia.
Ironic, because, while the world´s eyes were focused on what Obama has called ‘the worst environmental disaster of its kind in our history’, Garcia was busy opening up an additional 25 ‘lots’ in the Peruvian Amazon for oil and gas exploration.
Even more ironic, because these events are occurring approximately one year to the day since indigenous protests against oil exploitation in Peru boiled over in the town of Bagua, leading to the deaths of some 34 people. Apparently, any possible link between the events in the Gulf of Mexico and the Peruvian Amazon was not discussed.
Currently, 75 per cent of the Peruvian Amazon has been licensed for oil and gas exploration and drilling, and 41 per cent is covered by active concessions. The majority of these concessions have been made in the last few years, and the amount of leased land is now six times greater than it was in 2003.
The rising cost of oil
This rapid extension of the oil frontier has thrown the Peruvian state, and foreign oil companies, into direct confrontation with the indigenous inhabitants of the Amazon, many of whom oppose oil extraction on their land. Although such opposition is frequently assumed to be ‘anti-development´, it is often motivated by well-justified fears that oil extraction will undermine local livelihoods and attempts by indigenous people to frame development on their own terms.
Despite the violence last year, President Garcia remains determined that the revenue from oil extraction is gained to fund national development: his vehemence is shown by his description of indigenous opponents of oil extraction as ‘confused savages’, ‘second-class citizens’, ‘criminals’ and ‘ignorant’.
But the clashes in the Peruvian Amazon are not just a Peruvian problem. Neither is the Deepwater Horizon disaster an ‘American’ problem, and the same could be said of other regions where fossil fuel exploitation has caused disastrous environmental and social consequences, such as Alberta, or the Niger delta.
All these problems are, quite simply, the inevitable consequences of a global economy which is totally dependent on the ever-increasing consumption of oil. The issue is not that such unsustainable consumption poses the immediate threat of exhausting global supplies: as any industry expert will tell you, higher prices will only make new areas profitable to exploit.
The real issue, according to economist Frank Ackerman, is that the oil industry is fast running out of conventional low-risk supplies.
In the 21st century, continuing to expand the extraction frontier will either mean engaging in high-risk exploitation (like at Deepwater Horizon), exploitation in areas of high environmental and social sensitivity (like in Peru), or exploiting unconventional sources which leads to even greater amounts of greenhouse gas emissions than conventional drilling oil (like Canada´s tar sands and Venezuela´s extra-heavy crude oil).
Not only that, such risk is rarely entirely borne by the oil companies themselves. Similarly to the large banks which were deemed ‘too big to fail’ prior to the global economic downturn, large oil companies operate in the knowledge that governments effectively socialise the risks.
In the US, for example, the Oil Pollution Act limits industry liability to the costs of clean-up, plus US$75 million for non-clean-up liability damages: a small amount for a company that earned US$6 billion in the first quarter of 2010, and far below the likely costs of a spill like Deepwater Horizon. Just like with the global financial sector, the effect of this is to encourage risk-taking.
The conventional response to these problems is to focus on regulations, technological standards and, if necessary, community relations programmes with local people. In developing countries, extraction is frequently justified on the grounds that ‘best standards’ will be employed to ensure against high environmental and social costs. Yet the Deepwater Horizon debacle has demonstrated that there are limits to best standards even in the most developed of countries. The body attributed with the task of monitoring drilling standards, the Minerals Management Service, has been accused of falling under the influence of the oil industry, and failing to mandate the required standards for offshore drilling as a result.
Kicking an addiction
Better community relations programmes can certainly lessen the negative social effects of oil exploitation, but even the best ones are often degenerate into paternalism and dependency, do not extend as far as offering local people the right to actually veto unwanted projects. Finally, simply improving standards does nothing to mitigate against the greatest risk of all: that posed by climate change.
Given the global nature of the problem, focusing solely on local issues misses the point. Even if Barack Obama does (as he should), extend the recently announced freeze on offshore drilling and exploration, in the absence of comprehensive moves away from oil dependence, this would only have the effect of encouraging oil demand in other areas of the world, where the risks involved may be ever greater. Therefore, the environmental disaster in the Gulf of Mexico should not be viewed simplistically as an ‘American’ problem, or even a ‘BP’ problem: rather it should be seen as a wake-up call to the developed world to kick its oil addiction.