Edited by Emily Schwartzman Greco

Editor’s Note: This is an excerpt from the introduction to The Tyranny of Oil: the World’s Most Powerful Industry, and What We Must Do To Stop It (William Morrow 2008).

Within days of the New Year, 2008 began with three landmark events. Oil reached $100 per barrel for only the second time in history as gasoline prices began an ascent toward the highest prices in a generation. And on January 3, Senator Barack Obama became the first African American to win the Iowa Caucus. Voter turnout broke records as well, with four times more registered Democrats voting than had turned out in 2000. Obama was reserved yet purposeful as he delivered his historic victory speech. He chose to highlight just a handful of policy issues in the 15-minute address, making his focus on oil all the more significant. Obama forcefully declared that he would free the United States once and for all from “the tyranny of oil” and then pledged to be the president “who ends the war in Iraq and finally brings our troops home.” An already raucous crowd met these pronouncements with thunderous applause and waves of cheers.

“The tyranny of oil” powerfully encapsulates the feelings not only of Americans, but of people the world over. Without viable and accessible alternatives, entire economies suffer when increasing proportions of national budgets must be used to purchase oil. And on an individual level, families, facing the same lack of alternatives, forgo basic necessities when gasoline prices skyrocket. Communities that live where oil is found — from Ecuador to Nigeria to Iraq — experience the tyranny of daily human rights abuses, violence, and war. The tyranny of environmental pollution, public health risks, and climate destruction is created at every stage of oil use, from exploration to production, from transport to refining, from consumption to disposal. And the political tyranny exercised by the masters of the oil industry corrupts democracy and destroys our ability to choose how much we will sacrifice in oil’s name.

Standard Oil, ‘Seven Sisters’

The masters of the oil industry, the companies known as “Big Oil,” exercise their influence throughout this chain of events: through rapidly and ever-increasing oil and gasoline prices, a lack of viable alternatives, the erosion of democracy, environmental destruction, global warming, violence, and war. The American public is fed up with Big Oil. In 2006 Gallup published its annual rating of public perceptions of U.S. industry. The oil industry is always a poor performer, but this time it came in dead last — earning the lowest rating for any industry in the history of the poll.

As the 2008 election progressed, both Obama and his leading Democratic challenger Senator Hillary Clinton went increasingly on the attack against Big Oil, and each was eventually called a “Populist candidate,” their words sounding an alarm similar to one made over 100 years earlier by the Populist movement against corporate trusts generally and Standard Oil in particular, the company from which many of today’s oil giants descend.

John D. Rockefeller founded the Standard Oil Company in 1870. By the 1880s, Standard Oil controlled 90% of all refining in the United States, 80% of the marketing of oil products, a quarter of the country’s total crude output, and, in this pre-automobile era, produced more than a quarter of the world’s total supply of kerosene. Standard Oil was renowned for both the ruthlessness and the illegality of its business methods. Dozens of court cases were brought against the company, and Standard Oil was broken up by three separate state-level injunctions.

In 1911 the federal government used the Sherman Antitrust Act to break up Standard Oil into 34 separate companies. Standard Oil would not regain its singular dominance and consolidation of the industry, or the political control it held at the height of its power in the late 1800s.

The 1911 breakup largely failed over the course of the next decade, however, due to the absence of effective government oversight. Primarily to address these failings, new antitrust laws and, most importantly, a new government agency — the Federal Trade Commission (FTC) — were later introduced to tighten the government’s control over antitrust violations by U.S. corporations. The FTC remains the most important government agency in charge of regulating corporate consolidation and collusion. Still, while the nation’s antitrust laws were fairly well applied to domestic oil operations, the largest oil companies functioned in the international arena as a cartel. From approximately World War I to 1970, the three largest post-breakup companies, Standard Oil of New Jersey (Exxon), Standard Oil of New York (Mobil), and Standard Oil of California (Chevron), joined with Gulf, Texaco, BP, and Shell to form a cartel, earning them the nickname the “Seven Sisters.” These seven companies owned the vast majority of the world’s oil and controlled the economic fate of entire nations.

Over the decades, many strategies to rein in the power of the Seven Sisters were proposed, debated, and even attempted in the United States. These included reducing the flow of oil the companies could bring into the United States, state-owned refineries, a national oil company, and massive antitrust action against the oil companies. Some of these efforts were successful, but most were not. It was the oil-rich nations operating as their own cartel, the Organization of Petroleum Exporting Countries (OPEC), which ultimately brought down the corporate cartel. By the mid-1980s, the OPEC governments had taken back full ownership of their oil. The Seven Sisters, which in 1973 earned two-thirds of their profits abroad, turned their attention back to the U.S. market that they had largely abdicated to the smaller “independent” oil companies. Big Oil’s new mantra was “Merge or die,” as the companies first bought up the independents and then each other.

2,600 Mergers

Since 1991, government regulators, under the direct and heavy influence of the nation’s largest oil companies and their lawyers, have allowed more than 2,600 mergers to take place in the U.S. oil industry. The mergers have resulted in the near demise of the independent oil company, refiner, and gas station in the United States.

The mergers of the mega-giant oil companies have all taken place since 1999 and remain the largest mergers in corporate history. Exxon merged with Mobil, Chevron with Texaco, Conoco with Phillips, and BP with Amoco and then Arco to create the largest corporations the world has ever seen. Shell also participated in the merger wave by purchasing several “baby-Standard” oil companies.

While nowhere near its Seven Sisters “glory years,” Big Oil’s oil reserves are impressive nonetheless. Were the five largest oil companies operating in the United States one country instead of five corporations, their combined crude oil holdings would today rank within the top 10 of the world’s largest oil-rich nations. ExxonMobil, Chevron, ConocoPhillips, Shell, and BP exercise their control over the price of oil today through these individual holdings and through participation in the crude oil futures market. The futures market has replaced OPEC as the principal determinant of the price of crude oil. It is largely unregulated and prone to excessive speculation and manipulation.

The mergers also allowed the oil companies to take control of the refining and selling of gasoline in the United States in the style of Standard Oil. They have forged a mass consolidation of these sectors, yielding rapid increases in the price of gasoline and oil company profits.

Most Profitable Industry

Riding on high oil and gasoline prices, the oil industry is far and away the most profitable industry in the world. Six of the ten largest corporations in the world are oil companies. They are, in order, ExxonMobil, Royal Dutch Shell (Shell), BP, Chevron, ConocoPhillips, and Total. (The others are Wal-Mart, General Motors, Toyota Motor, and Daimler-Chrysler.) According to Fortune’s 2007 Global 500 listing, the 10 largest global oil companies took in over $167 billion in profits in 2006 alone — nearly $50 billion more than the top 10 companies in the second most profitable industry, commercial and savings banks.

The largest publicly traded oil companies operating in the United States and those with the greatest influence on U.S. policy- making are ExxonMobil, Shell, BP, Chevron, Conoco-Phillips, Valero, and Marathon. Each is either a direct descendant or has purchased direct descendants of Standard Oil. They are among the most powerful corporations in the world. These companies are Big Oil.

Big Oil is experiencing a level of power that has only one historical precedent: that of the Standard Oil era. And like Standard Oil, the companies appear willing to do anything to maintain their position. With over $40 billion in pure 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.

Wal-Mart edged out ExxonMobil as the world’s largest corporation in 2007 by just barely surpassing its sales — $379 billion compared with ExxonMobil’s $373 billion. Wal-Mart’s $12.7 billion in profits, however, were a mere one-third of ExxonMobil’s. In fact, ExxonMobil’s profi ts were more than twice those of the next three U.S. 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 profi ts were nearly twice those of the next two U.S. 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.

What does $133 billion in profits buy an industry? It bought the oil industry at least eight years of a U.S. “oiligarchy”: a government ruled by a small number of oil interests. The oil industry spent more money to get the George W. Bush administration into office in 2000 than it has spent on any election before or since. In return it received, for the first time in American history, a president, vice president, and secretary of state who are all former oil company officials. In fact, in 2000 both George W. Bush and Condoleezza Rice had more experience running oil companies than they did working for the government. Every agency and every level of bureaucracy was filled with former oil industry lobbyists, lawyers, staff, board members, and executives, or those on their way to work for the oil industry after a brief stint of government service. The oil industry got what it paid for: an administration that has arguably gone further than just about any other in American history to serve Big Oil’s interests through deregulation, lax enforcement, new access to America’s public lands and oceans, subsidies, tax breaks, and even war.

Democrats Failed to Deliver

Americans tried to change course in 2006 by replacing the Republican Congress with a Democratic-controlled House and Senate. Democrats pledged in their election campaigns to take action against the oil industry, climate change, and the war in Iraq — all three of which are intimately and rightly connected in the public’s mind. The Democrats failed to deliver. Far too often, Big Oil’s money appeared to be the reason why. In one particularly glaring example, the Center for American Progress investigated the relationship between votes and campaign contributions in connection with HR 2776, the Renewable Energy and Energy Conservation Tax Act of 2007. The bill would have eliminated $16 billion in oil and gas industry tax breaks to fund clean energy alternatives. Between 1989 and 2006, members of Congress who voted against the bill received on average four times more money in campaign contributions from the oil and gas industry (approximately $100,000) than those who voted for the bill (approximately $26,000). The bill ultimately died.

Similarly, Oil Change International compiled voting records for the five most important bills on the Iraq War: the initial 2003 vote authorizing the use of force in Iraq and the subsequent supplemental war funding bills in 2003, 2004, 2005, and 2006. From 1989 to 2006, members of Congress who voted for all five bills received on average eight times more money from the oil and gas industry (approximately $116,000) than those who voted against the war (approximately $14,000). And the war rages on.

Big Oil does not only wield its financial purse at election time, it impacts daily policy- making through its unprecedented spending on lobbyists. In fact, the millions of dollars it spends on elections is small potatoes compared with the tens of millions it spends lobbying the federal government. From 1998 to 2006, ExxonMobil alone spent more than $80 million lobbying the federal government, over 14 times more money than it spent on political campaigns. Combined, ExxonMobil, Chevron, Shell, BP, Marathon, and ConocoPhillips spent $240 million lobbying the federal government from 1998 to 2006 — more than the entire oil and gas industry spent on federal election campaigns from 1990 to 2006.

There is simply no comparison between the financial reach of the oil industry and that of organizations working on behalf of consumers, the environment, public health, communities living near oil production or gasoline refining facilities, and groups working in support of alternative energy, antitrust enforcement, or the protection of human rights. Through lawyers, lobbyists, elected officials, government regulators, conservative think tanks, industry front groups, and full-force media saturation, the oil industry uses its wealth to change the public debate and, more often than not, achieve its desired policy outcomes.

Running Out

Yet for all its enduring power, Big Oil finds itself in a precarious position today. While it is at its financial and political pinnacle, it faces the greatest threat to its existence in its 150-plus-year history: oil, the resource on which it depends, is growing far more difficult to come by.

Today the Earth is just about tapped out of conventional oil. There are no new vast, untouched reserves sitting close to the earth’s surface just waiting to be discovered. In fact, even with phenomenal advances in technology, no one has made such a discovery in more than 45 years. This, of course, is not for lack of trying. From Canada to China, Mexico to Brazil, Nigeria to Iraq, Malaysia to Greenland, California to Florida, through ice, sand, silt, and rock, over the course of the past 150 years and at an incalculable cost, we have scoured the globe in search of oil.

Oil is a nonrenewable natural resource: when a reservoir of oil is depleted, no new oil emerges to take its place. Since about 1960, the rate at which the world has consumed oil has outpaced the rate at which we have discovered new fields. Today we find only about one new barrel of oil for roughly every four that we consume. Meanwhile, it is estimated that the world will consume 120 million barrels of oil a day by 2025, over 50% more than we consumed in 2001. We are therefore forced to confront a bitter reality: the world is fast approaching the point at which conventional sources of oil will decline until they are forever gone.

More than 50% of the world’s remaining conventional oil is found in just five countries: Saudi Arabia, Iran, Iraq, Kuwait, and the United Arab Emirates. In 2003 the Bush administration, composed of former and future oil company executives, led the United States into war against Iraq on the pretense that Saddam Hussein had weapons of mass destruction. The same administration is now threatening war against Iran while establishing permanent U.S. military facilities across the region, including in Kuwait and the UAE. The administration supplies arms to Saudi Arabia while negotiating for greater access to that nation’s oil for U.S. oil companies.

The rest of the world’s conventional oil is found in comparatively small amounts in 14 other countries: Venezuela, Russia, Libya, Nigeria, Kazakhstan, the United States, China, Qatar, Mexico, Algeria, Brazil, Angola, Norway, and Azerbaijan. If you map the massive increase in construction of U.S. military bases and installations and military deployments around the world under the Bush administration, you will see that they directly follow oil locations and oil transit routes. New U.S. military installations in Central and South America, West Africa, and elsewhere raise the threat of new military action in those regions. The costs to people who live in those countries and along those routes are mounting, from human rights abuses, environmental destruction, military occupation, and war.

Oil production in most of the world has reached or is nearing its peak. Production in most Middle Eastern countries, on the other hand, is not expected to peak until 2025. This means that an even greater percentage of the world’s remaining oil will be consolidated in just a few Middle Eastern nations.

The realization that oil is being concentrated in the Middle East has led many to argue that the United States should become more “energy independent.” In response to this sort of view, Sarah Emerson of Energy Security Analysis Inc. explained in 2002, “The trouble with diversifying outside the Middle East . . . is that it is not where the oil is. One of the best things for our supply security would be to liberate Iraq.”

Climate Change

Outside of the Middle East, the oil that is left is becoming more technologically difficult, expensive, and environmentally destructive to acquire. Conventional oil is found offshore below the world’s ocean waters, making its production risky, environmentally harmful, and destructive to coastal communities. Among the largest unconventional sources of oil are the tar sands of Canada and the shale regions of the midwestern United States. In addition to the problems just listed, the process of removing the tar and shale from the earth, extracting the oil, converting it into liquid, and refining it into gasoline is far more energy-intensive and ozone-depleting than traditional methods of oil production and thus contributes more to climate change.

Climate change and global warming are increasingly critical issues. Including 2007, seven of the eight warmest years since records began in 1880 have occurred since 2001, and the ten warmest years have all occurred since 1997. Burning fossil fuels, primarily oil, natural gas, and coal, increases atmospheric concentrations of carbon dioxide (CO2), the principal greenhouse gas. The more greenhouse gas there is in the earth’s atmosphere, the more of the sun’s heat is trapped near the earth’s surface; the more heat that is trapped, the higher the planet’s temperature; the higher the earth’s temperature, the more ice melts, oceans rise, and extreme weather results. All of which would be better described as “climate chaos” rather than mere “climate change” or “global warming.” Just to stabilize current green house gas concentrations in the atmosphere, it is estimated that the world must reduce emissions of these gases by 50 to 80% by 2050 or even sooner.

The United States is by far the largest per capita contributor to global warming — releasing 30% of all energy-related CO2 emissions in 2004 (the most recent date for which data is available) — primarily from our cars and trucks. The United States is also the largest consumer of oil. With just 5% of the world’s population, the United States uses almost 25% of the world’s oil every year. In fact, Americans consume as much oil every year as the next five countries — China, Japan, Russia, Germany, and India — combined. On average, each American uses nearly 3 gallons of oil per day. Products made from petroleum, such as plastics, linoleum, nylon, and polyester, fill our lives, but it is the car that dominates our oil consumption.

One out of every seven barrels of oil in the world is consumed on America’s highways alone. In fact, the population growth of cars in the United States is greater than that of people: a new car rolls onto the street every three seconds, whereas a baby is born only every eight seconds. Americans are increasingly aware that this consumption is unsustainable. Many of us would like to see fewer cars on the road, cleaner-burning renewable alternative fuels, more and better public transportation, more pedestrian-friendly downtowns, better rail systems, and electric cars. This is where we collide head-on with the economic clout of the oil industry.

Big Oil would like us to believe that it is part of the solution, that it has seen the writing on the wall and knows that the future is clean energy. The companies’ advertising campaigns would have us believe that they are in fact using their vast resources to embrace a clean, green, sustainable, and renewable energy future. Do not believe the hype. None of the companies invests more than 4% of its entire annual expenditures on clean, renewable, alternative forms of energy. Big Oil is deeply committed to remaining Big Oil and is putting all its considerable resources behind this effort.

And Big Oil thrives on secrecy, a lack of transparency, and control over information. We can only address its power by pulling back its veil. This is what The Tyranny of Oil: the World’s Most Powerful Industry—And What We Must Do To Stop It, seeks to achieve.