Where does the revenue go?

William Divine
President
Petroleum Foundation of America
San Ramon, California

Some time ago, I was speaking with an oil operator who had just obtained a concession in a country where there was increasing anti-American tension among the citizens. The operator was afraid for his safety in that country.

We oil companies strike concession contracts with the government, giving them considerable revenues, but where does the money go? How often have you heard of secret bank accounts for government officials? How often are we approached for bribes? Most international operators will agree that most of the wealth of free market economies in developing countries goes to a select few, generally people who are associated with government officials.

Please know that I am not implicating all governments, but even the best of governments have great difficulty in serving their poor, who often comprise the vast majority.

With oil companies paying the government officials, and those officials often paying themselves, who is looking out for the masses? History has shown that when all the resources go to a select few, the people eventually revolt. Both the government and the oil companies become expendable because they have given little back to the people.

History has also shown the pendulum swings one way and then another: To counter the right wing, the left wing rebels seek to overthrow the government - what do they have to lose? So they take power and throw out the "exploiters." They nationalize and bring the state in control of everything. Yes, right now, we are in a free market revival in the world, but how long can this last if we just take what we can while the opportunity presents itself?

Instead of riding the swinging right wing, left wing political pendulum, it's time we try for the center. Yes, we want to get a return on our investment, but everyone must benefit. Opportunities must be made available for the people at the bottom as well as the top. Unless we become more socially responsible - if we are just exploiters - then we are expendable.

A similar parallel can be drawn regarding environmentalism. We oil companies sit on one fence and sling mud at the environmentalists and they do likewise. Oil companies have to endure excessive environmental regulations and deal with the constant harassment and opposition from citizens as well as local and federal governments, not to mention constant litigation from environmental attorneys. How did this situation get so divisive? Why are all these people trying to do in the "big bad oil companies?"

It is my belief that it's the old pendulum again. For decades, some oil companies developed oilfields with little regard to the environment because there were no regulations. Now we are suffering the backlash. Many of us have gone overseas in reaction to these problems. This is a mistake. Can't we learn from history? If we repeat the mistakes of the past we will get the same results.

It does not take a great deal of intelligence to realize that unless international operators moderate the environmental effects of their operations, what has happened here will happen there. The writing is on the wall. Look at the growing opposition to oil developments and the lawsuits such as in Ecuador with Texaco. We cannot wait for the government to impose regulations on us - we need to take measures to regulate ourselves.

Now don't get me wrong; I am no socialist or radical environmentalist. I am all for self-interest, free markets, making money, and the like. But it is in our interests to look beyond our own noses. What goes around comes around: If we exploit, then we ourselves will eventually suffer the consequences.

Let's stop the pendulum. Let's do something really radical. Let's work together in the development of resources in a responsible way, working with all parties concerned, and sharing the proceeds fairly. We, at the Petroleum Foundation of America, want to forge a bridge between the forces of opposition. We want to get people to meet in the middle and work together for the benefit of all.

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