On Monday, 20 April, for the first time on record, oil prices went negative. Futures contracts for May deliveries of West Texas intermediate grade crude oil changed hands for -$40 a barrel. In physical markets in the United States today, Oklahoma Sour and Wyoming Sweet are trading for -$5.75 and -$8.50 a barrel. Oil companies are extracting crude from the ground and paying people to take it away. The immediate cause is that oil storage facilities are almost full and oil, unlike bulk natural resources such as sand or gravel, cannot be piled up in fields. The storage tank farms in places like Cushing, Oklahoma will soon reach maximum capacity. The problem is not unique to the United States. The Covid-19 pandemic means global demand for oil has fallen by around 35 per cent. At the same time, a war is being waged using oil flows.
There was an emergency conference on North Sea oil in Aberdeen on Monday. More than a thousand jobs have been lost since the global oil price collapsed from $110 dollars a barrel to under $50. Two men I met in the lounge car of the Caledonian Sleeper on Sunday evening – strangers to each other – had both held senior positions at major oil companies. They had different axes to grind, but agreed that the North Sea was no longer a profitable option for the major firms, who would pull out altogether before long.
The UK fossil fuel extraction industry has always been dangerous for its workers, even if things are orders of magnitude safer today than they used to be. In 1938, 858 coal miners were killed in accidents, including 90 in explosions, 408 by roof falls, 194 in haulage and transport accidents underground, and 76 on the surface. Others died from Weil’s disease caught by contact with rat urine. Thousands developed pneumoconiosis, and paraplegia from roof falls was common.
Earlier this month, Providence Resources announced that an oil field at Barryroe, off the coast of Cork, is expected to yield 280 million barrels. The company’s CEO, Tony O’Reilly Jr, the son of the media mogul, told the Today programme that this was ‘very good news for Providence shareholders and the Irish economy’. The first part of his statement is undoubtedly true: Providence’s share price rose sharply on the back of the Barryroe news. That Ireland’s economy will benefit is much less likely.
The Obama administration has agreed to let BP resume dipping its beak in the waters of the Gulf of Mexico. The prospect is called Kaskida, situated a few hundred miles off the coast of Louisiana, at a depth of 6034 feet. In the event of another Macondo-style blowout, BP has a contract with the Marine Well Containment Company, a joint nonprofit established by BP’s competitors ExxonMobil, Chevron, ConocoPhillips and Shell in the wake of the Deepwater Horizon disaster. MWCC say they can quickly staunch the flow of oil with a 100-ton capping stack. They say this containment system can handle spills of up to 100,000 barrels per day at a maximum depth of 10,000 feet.
The sight of Obama haggling over his own ransom looked especially bizarre from across the northern border. In Canada the debt crisis seems to be happening on another planet. When I went home to visit this summer, oil-rich Albertans appeared hardly to have noticed the carnage unfolding everywhere else. Prudent regulation may have spared the Canadian banking system from the worst of the crash, but there are few signs of restraint at the malls and boat dealerships.
Ghana, only the third African team ever to reach the quarter-finals of a World Cup, were unlucky to lose to Uruguay last Friday. Beyond football, however, a bigger question looms: will oil-rich Ghana, perceived as West Africa’s poster child of political stability, be the first African country to kick the ‘resource curse’?
Since the explosion and sinking of the Deepwater Horizon oil rig, a stream of evidence has emerged suggesting that BP's attitude to risk may have contributed to the disaster. At Tony Hayward's congressional inquisition on 17 June, the CEO of BP was accused of choosing risky procedures in order to reduce costs and save time, and Anadarko Petroleum Corp, BP's former partner which owns a quarter of the blown-out well, went even further, accusing BP of 'behaviour and actions [that] likely represent gross negligence or wilful misconduct'. BP denies all charges.
It has become clear from the disaster in the Gulf of Mexico that oil companies tend to underestimate both the size of newly discovered reserves and the difficulty of the conditions they will face when drilling for them. There's nothing new about this. Here are two passages from a review by R.W. Johnson of Christopher Harvie's Fool's Gold: The Story of North Sea Oil (1995):
Children quickly master the idea of fairness. On my five-year-old son’s lips, ‘It’s not fair!’ covers an impressive variety of unwelcome contingencies, like his not getting as much ice-cream as he wants, or the fact that it isn’t snowing. Some optimistic political theorists think this shows that an instinct for fairness is hard-wired, or acculturated early on. Others suspect that it shows how fluently humans adapt principled talk to self-interest. On 22 February, Desire Petroleum, the UK firm set up to prospect for oil in the North Falkland Basin, began exploratory drilling, in the face of Argentine objections.