The Squeeze: Oil, Money and Greed in the 21st Century. Tom Bower
oil through refineries, while others squeeze governments and rival corporations. Oil is not a business for fools or the faint-hearted.
To chart for the first time what has occurred over the past 20 years, I have followed the careers of some of the principal personalities who have determined oil’s fate as its price rose from $7 to $147 a barrel. As I interviewed nearly 250 people across the world, I gradually came to understand the perpetual conflict between the oil companies and the nations that control the reserves, the arguments between consumers and the proponents of the end of oil and climate change, the overwhelming influence of the oil traders, the ingenuity of the explorers, the ambitions and frustrations of the chieftains who manage the world’s biggest corporations, and the agendas of politicians anxious to control the world’s lifeblood.
The story of oil over the last two decades is fascinating, but to understand all the disparate elements – the personalities, the corporations, the governments, the traders and the geologists – requires gradual introduction. Unlike the straightforward structure of a standard history or the description of a particular event, this book takes the reader on a journey through the lives and eyes of the major characters who have dominated the industry. As readers become familiar with the labyrinthine complexity of the subject, I hope that, like myself, they will become excited by the discovery of an epic story at the heart of all our lives.
After interviewing nearly 250 key people, I selected a handful to reflect the turbulent era. Over the 20 years, John Browne of BP was undoubtedly the dominant personality in America and Britain. His rival chief executives, including Lee Raymond of Exxon, Phil Watts of Shell and David O’Reilly of Chevron, were similarly robust, but were begrudgingly compelled to follow his course. In a parallel universe are the oil engineers like Dave Rainey, challenging scientific boundaries to discover oil six miles beneath the sea bed. Understanding the technology might seem challenging, but I believe that even laymen will be gripped by the saga. Unknown to the engineers are the oil traders, churning billions of dollars every day in speculation about unpredictable prices. After speaking to dozens of traders and reporters, I chose to follow Andy Hall, an understated multi-millionaire hailed by his generation as a genius. Of all the oil-producing countries, events in Russia became far more interesting than in the OPEC countries. Fortunately, as oil prices rose from $30 a barrel towards $147, I hitched myself to Mikhail Fridman, an oil oligarch in the midst of a fierce battle with BP as President Putin and other politicians, government officials and lifelong experts all sought to influence oil’s fate. Challenging their assumptions and decisions are committed environmentalists. All those personalities and interests found their place in a narrative which makes no attempt to be encyclopaedic, but simply to tell an astonishing story.
This is my eighteenth book, and I have found that a career charting the lives of politicians, tycoons, murderers and charlatans was the perfect background to grappling with the intricacies of the oil industry. Fortunately, I encountered few refusals to my requests for help. Across the world, many key players offered me their insights. What has emerged, I believe, reveals how we are all simultaneously both the victims and the beneficiaries of The Squeeze.
In Vienna in May 2009, Ali al-Naimi was gambling against a squeeze by those speculating that prices would fall. One week after his prediction during his Ringstrasse run, the price of oil had risen from $62 to $68 a barrel. His gamble had been rewarded. Those who had speculated on falling prices had been squeezed by a counter-squeeze, talking up prices. Markets, like the subterranean rocks where oil is found, are unpredictable. Squeezes are often followed by bursts, and there are always casualties. Oil is a uniquely human story.
Tom BowerJuly 2009
NEW YORK, 25 SEPTEMBER 2003
Lee Raymond did not conceal his impatience. The Russian president was 30 minutes late. Speaking in muted voices, the three other men and one woman waiting with Raymond in the Waldorf Astoria suite speculated whether Vladimir Putin had abandoned the meeting. ‘I’m sure he’ll come,’ suggested one. Raymond’s irritation was not assuaged.
Dealing with dictators was usual for Exxon’s 65-year-old chairman and chief executive. In his experience, oil was mostly controlled by feudalists, kleptocrats, zealots and fanatics. ‘Go to the top, do the deal and the rest follows,’ was Raymond’s way. Over recent years the chemical engineer born in South Dakota had encountered many of the world’s oil-rich despots. Renowned for his reserved, focused and analytical manner, he had run all those negotiations just the way he ran ExxonMobil itself – with clockwork efficiency. Oil, according to ExxonMobil’s textbook, never surprises; principles never changed, only the circumstances. Vladimir Putin, Raymond believed, was no different from other authoritarians except that he had nuclear weapons and controlled the world’s biggest oil and gas reserves. That justified the flight from Dallas and the unpleasantness of meeting another stranger.
Although outspoken and prone to steamroller those he disdained by the sheer weight of his intelligence, Raymond was awkward in the limelight. No concessions were offered to friends or opponents. Unglamorous and conscious of his harelip, he personified the arrogance which united the oil world in hatred, envy and admiration of ExxonMobil. Imbued with ExxonMobil’s genes, Raymond’s sense of the world was insular. Most non-Americans, in his opinion, especially those from the Third World, were disagreeable.
Today, however, was not the moment to betray his prejudices. Other heads of state had been exposed to his scorn, but, nearing the end of his 40-year career, Raymond ached to clinch this deal. If, as expected, Putin agreed in principle to ExxonMobil’s $45 billion offer, the company’s status as the world’s biggest oil corporation would remain unchallenged. Merit and the odds, Raymond calculated, were tilted in his favour.
For 18 months a small team under Rex Tillerson, Raymond’s deputy and heir apparent, had secretly vetted Yukos, a private Russian company which produced 20 per cent of the country’s oil. During his negotiations with Mikhail Khodorkovsky, the billionaire Jewish oligarch who controlled Yukos with a 44 per cent stake, Tillerson, a well-dressed Texan who despite appearances was just as tough as his boss, reassured himself that the company would be an outstanding purchase. With oilfields stretching across western Siberia, Yukos was a gem.
During the last weeks, the proposition had improved beyond Tillerson’s original imagination. Putin had approved Yukos’s merger with Sibneft, another private Russian oil company. Together, they would rank fourth in the world league, controlling one third of Russia’s oil production and growing at 20 per cent every year, three times faster than Russia’s state-owned oil industries – and beyond Putin’s control. The marriage of the two companies had been blessed by Mikhail Kasyanov, the prime minister, as ‘a flagship for the Russian economy.’ Combining Yukos’s production of 2.16 million barrels a day – no less than 2 per cent of the world’s output – with ExxonMobil’s similar production would eclipse all ExxonMobil’s rivals. Tillerson’s main concern remained the Kremlin’s reaction. In mid-2003 he had asked Khodorkovsky if the deal was politically acceptable. Khodorkovsky had replied emphatically, ‘Let me take care of this. I’ve spoken to Putin and it’s OK.’ Nothing, Tillerson believed, had changed in the last three months. On the contrary – the meeting with Putin was intended to seal the deal.
Khodorkovsky’s self-confidence was reassuring to the inflexibly direct Tillerson, who would be described by Dave Godfrey, a New York lawyer representing Yukos, as a ‘caricature of the top arrogant Czar giving out that it was an honour for me to negotiate with ExxonMobil’. Having successfully established an oilfield on Sakhalin, a Russian island in the Pacific, as ExxonMobil’s most profitable operation, Tillerson felt comfortable navigating through Russia’s political and economic turbulence. Khodorkovsky, he reassured Raymond, could deliver. Naturally, Raymond did not entirely rely on Tillerson. He had met Khodorkovsky in Dallas and Moscow, and got on well with him. Money cemented their mutual respect. Raymond, like Tiller-son, was inclined to accept Khodorkovsky’s good faith. But while Raymond acknowledged that there were events he could not control, Tillerson lacked awareness