Big Oil and the Trillion-Dollar War Bonus

Greg Palast

excerpted from, “Armed Madhouse” (Penguin 2006)

It has been a very good war for Big Oil — courtesy of OPEC price hikes. The five oil giants saw profits rise from $34 billion in 2002 to $81 billion in 2004, year two of Iraq’s “transition to democracy.”

But this tsunami of black ink was nothing compared to the wave of $113 billion in profits to come in 2005: $13.6 billion for Conoco, $14.1 billion for Chevron and the Mother of All Earnings, Exxon’s $36.1 billion.

For these record-busting earnings, the industry could thank General Tommy Franks and the troops in Baghdad, the insurgents and their oil-supply-cutting explosives. But, most of all, they had to thank OPEC and the Saudis for keeping the lid on supply even as the planet screamed in pain for crude.

When OPEC raises the price of crude, Big Oil makes out big time. The oil majors are not simply passive resellers of OPEC production. In OPEC nations, they have “profit sharing agreements” (PSAs) that give the companies a direct slice of the higher price charged.

More important, the industry has its own reserves whose value is attached, like a suckerfish, to OPEC’s price targets. Here’s a statistic you won’t see on Army recruitment posters: The rise in the price of oil after the first three years of the war boosted the value of the reserves of ExxonMobil Oil alone by just over $666 billion. (The devil is in the details.)

Smaller Chevron Oil, where Condoleezza Rice had served as a director, gained a quarter trillion dollars in value. Chevron named a tanker after Rice, but given the firm’s change in fortunes once she became National Security Advisor and then Secretary of State, they should rename the whole fleet in her honor. Altogether, I calculate that the top five oil operators saw their reserves rise in value by over $2.363 trillion.

 40940177 greg palast2 byl5855Greg Palast is the author of the New York Times bestseller, “ARMED MADHOUSE: Who’s Afraid of Osama Wolf?, China Floats Bush Sinks, the Scheme to Steal ’08, No Child’s Behind Left and other Dispatches from the Front Lines of the Class War” – from which the above excerpt is taken.

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