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The Toxic Trail of our Oil Addiction

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Forty years after the ‘clean up’ of the Amoco Cadiz oil spill, the shores of Brittany that have been forever blighted by the spill attest to our collective failure to manage the consequences of our addiction to oil. Clean-ups or compensation are not enough to address the permanent damage caused, writes Maryse Helbert—we need to find other ways to fix the zones that have been sacrificed during decades of oil exploitation.

The Amoco Cadiz spilling oil (1978) (Le Parisien)

Over recent decades, civil society actors in many countries running on oil, so to speak, have pushed oil companies to halt their activities and clean up the mess they’ve made. In Peru, Ecuador, and Nigeria, indigenous communities have engaged or sued oil companies to try to force them to either clean up oil spills or to provide compensation for the damage to their territory. Long-term lessons learned from the cleaning up the 1978 oil spill in Brittany, France can help us anticipate the challenges that lie ahead as the number of incidents increase. As this oil spill that took place over 40 years ago shows, it is next to impossible to return an environment destroyed by oil to its original state. Alternatives, then, should be found to compensate communities that have been affected by our oil addiction, and the long-term rehabilitation of the affected areas should be a top priority.

It has been estimated that, over the last five decades, approximately 9 to 13 million barrels of oil have been spilled in the Niger Delta region in Nigeria. For the northeastern Ecuadorian Amazon alone, between 2011 and 2014, the equivalent of around seven million barrels of crude oil was spilled in 464 events.  And in a report by Oxfam and Coordinadora Nacional de Derechos Humanos published last year, it was estimated that 474 oil spills had occurred between 2019 and 2020 along the Norperuano pipeline in Peru. It has also been estimated that over the course of eight years, between 1972 and 2017, around three billion barrels of toxic waste associated with oil production were leaked into the Amazon in northern Peru.

Impacted oil communities worldwide have sought compensation for the damage caused to their environment by oil extraction and transport processes and to force the cleaning up of spills. In 2012, in the Niger Delta, the Bodo community filed a lawsuit against Shell in a London high court. Following this lawsuit, in 2015 Shell agreed to a £55 million settlement to compensate the community for the harm incurred. Similarly, in 2008, three Nigerian villages sued Shell as a Dutch company in a Dutch court of law, while in 2014 the Peruvian government was forced by a Peruvian court to respond to the oil spill health crisis. And in Ecuador, early last year indigenous people living along the Ecuador’s northern Amazon pipeline launched a lawsuit against the Ecuadorian government and private and state oil companies operating in the area to provide compensation. This increase in lawsuits filed by indigenous communities against large companies that extract oil in countries in the Global South is a welcome first step. Yet compensation is too little, too late. Once the damage has been done, it is irreversible.

Walking along the northern coasts of Brittany reminds me of the impossibility of ever fully cleaning up oil spills. A story is told in my family of my uncle and aunt opening the shutters of their house at Portsall in Brittany early in the morning of the 17 March 1978 when the smell of oil hit them, immediately telling them that what they had feared for decades had finally happened. The Amoco Cadiz, on its way to Rotterdam, had run aground the previous day. In the following days, it spilled 223,000 litres of light crude oil and an additional 4,000 litres of bunker oil on a stretch of coastline of more than 300 kilometres. To this date it is the fifth-largest oil tanker accident in history. And the worst of all is that the tragedy could have been avoided: during its construction, it was known that the tanker had a leak that needed to be fixed, but the repair was postponed several times as delivering oil was prioritized and costs cut. The storm on the English Channel on the 16 March 1978 got the better of it, and environmental destruction ensued.

In the days following the spill, coastal communities themselves began the arduous process of cleaning up, scraping up the ‘chocolate mousse’ that the emulsification of oil and water was forming on the beaches. The scale of the disaster required the army to be recruited to help the local population clean up, and 300 students volunteered to collect the dead birds, which numbered in their thousands.

Fourteen years after the spill, in 1992, a US court ordered Amoco and Shell, who were responsible for the spill, to pay US$200 million in damages to the French government. The damages covered some of the economic costs of the clean-up, but the court denied claims for compensation for ecological destruction and losses. It has been estimated that these damages covered only 19% of the total environmental and economic costs of the oil spill. Half of the money simply helped pay for the trial in the US. The damage was far worse than anticipated, and the compensation helped get the oil off the tip of the iceberg, leaving the rest of it submerged.

Walking along these beaches since the spill occurred many years ago shows that the word ‘clean-up’ is a misnomer. In the first decades, it was impossible to go even a short distance on the beaches without coming across balls of oil in the sand and patches of oil slicking the rocks or a layer of oily residue thirty centimetres deep in the sand along the whole length of the beach. Nowadays, these obvious signs of the spills have only partly disappeared. The spill has had long-term consequences. It resulted in the largest loss of marine life ever recorded. Even today, sea life has still not entirely recovered from the long-term consequences of the toxicity of the oil, but also from products such as dissolvents that were used to disperse and sink the oil during the cleaning process. Sightings of oil have also not disappeared. On the more remote islands, there are still layers of oil residue under the sand and oil still slicks the rocks and pebbles on some beaches. The oil can be traced back to the Amoco Cadiz by DNA testing.

The most controversial topic though is the fate of the ‘chocolate mousse’. In the initial rush to clean up the oil slick, the oil recovered was buried in landfills, particularly in dunes along the coast. Forty years later and with erosion due to climate change, there is a fear that oil could again leak from these sites into the coastal environment. This secondary oil spill could be equally devastating.

The Amoco Cadiz spill gives us a small-scale snapshot of the titanic challenges of cleaning up oil spills. But the spill in Brittany is dwarfed by the scale of oil pollution in the Niger Delta, Ecuador, Peru and many other oil extraction sites. Every year since oil extraction began in the Niger Delta, an average of four times more oil than the Brittany oil spill has been spilled from terminals, pipes, pumping stations and oil platforms in the area. The scale of oil spills is thus only increasing, and companies are still not taking responsibility.

While clean-up initiatives are absolutely needed, they fall short in meeting the challenges of repairing the damage caused. Forty years after the ‘clean up’ of the Amoco Cadiz oil spill, the shores of Brittany attest to our collective failure to manage the consequences of our addiction to oil: they remain polluted and may be considered permanently damaged. There is arguably a lack of capacity, whether financial or technological, to fully restore polluted sites. We need to find other ways to fix the zones that have been sacrificed during decades of oil exploitation, and financial compensation is just the start.

About the author:

Maryse Helbert

Maryse Helbert is a Post-doctoral Research Fellow at the ISS. Prior to that, she was a Post-doctoral Research Fellow at the Rachel Carson Center for Environment and Society. She has been an advocate for women’s rights for decades, having worked for AWID (Association for Women in Development), DIPD (Danish Institute for Parties and Democracies), and she is a gender-based violence research expert to achieve the Sustainable Development Goals for the United Nations Development Programme. Taking an ecofeminist approach, her PhD looked at oil industry and its economic, social and environmental impacts on women in three countries. In her latest work, she takes on the lessons learnt from the fossil fuels industry to explore the challenges of a post-carbon society.

 

 

 

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COVID-19 | The COVID-19 pandemic and oil spills in the Ecuadorian Amazon: the confluence of two crises

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Oil Spill Amazon

How can we reframe the current planetary crisis to find ways for decisive and life-changing collective action? The Amazon region of Ecuador, at the center of two crises—COVID-19 and a major oil spill—but also home to a long history of indigenous resistance, offers some answers.

Oil Spill Amazon

Navigating two crises

In Ecuador, the intensification of resource extraction and pollution, floods and weather disturbances have hit marginalized populations hardest. Indigenous peoples and people living in the Amazon have continuously suffered an enormous political and economic disadvantage when confronting extractive industries and allied state bodies. The vulnerability of the peoples and territory of the Ecuadorian Amazon region has been even more severely exposed during the COVID-19 lockdown period starting 16 March 2020.

On 7 April 2020, the Trans-Ecuadorian Oil Pipeline System and the Heavy Crude Oil Pipeline, which transport Ecuador’s oil, collapsed. The pipelines were built along the banks of the Coca River and the collapse resulted in the spillage of an enormous quantity of crude oil into its waters. The Coca river is a key artery in the regional Amazon system. It runs through three national parks that form one of the richest biodiverse areas on Earth, which has been historically preserved by the ways of life of the indigenous peoples who inhabit it.

The breakage of the pipelines impacted kilometers of rainforest riverways and tens of thousands of people. Indigenous populations living in surrounding areas are more at risk than non-indigenous populations because they rely on locally harvested food and water, which can become contaminated. Indigenous peoples find it difficult to comply with lockdown mobility restrictions since their subsistence depends on agriculture, hunting and fishing, which in turn have been severely impacted by the oil spills. The exposure to the virus due to the entry of technicians to repair the pipelines is another threat. These conditions have led the Confederation of indigenous nationalities of the Ecuadorian Amazon (CONFENIAE) warning of an impending genocide.

The Coca river valley before the erosion. Photo credit: Luisa Andrade

Despite the constitutional mandate to provide free and high-quality public healthcare for all citizens, the Ecuadorian national health system is fraught with problems. Health coverage in the Amazon region is precarious with a lack of medical facilities, doctors, and not enough COVID-19 tests and ventilators required to treat an outbreak. While elderly and people with comorbidities have been identified globally as most vulnerable to infection, the Inter-American Commission on Human Rights identifies indigenous people as a risk group. Indeed, historically, pathogens have been one of the most powerful factors in decimating indigenous peoples in South America.

Depending on how an issue is framed, different responses can be expected, including why something is considered or not a problem, who is responsible, and what needs to be done about it. Environmental problems derived from the extraction of natural resources such as oil are mainly framed as localized problems. Thus, the burden is placed onto affected communities and local and national governments, while their global and systematic character is disowned. What we aim to say with this is that while there are companies and governmental entities that are directly responsible, their actions respond to a global system that is based and sustained on extractivism.

As the COVID-19 pandemic shows, it is only when a crisis is understood as part of a global web of relations derived from complex power dynamics that we can imagine possibilities of globally coordinated and integrated efforts required for effective resolution. We are now living under global restrictions, which were once unimaginable, politically and economically.  The rapid adaptation of quarantine and travel restrictions reveals that when the message of ‘human life is in danger’ is embraced, societies as a whole are able to perform the collective drastic changes required in a short period of time.

For Ecuadorian grassroots organizations and scholars, the COVID-19 pandemic is a reminder of our interconnectedness, our collective vulnerability, and therefore our mutual obligations to our planet. The pandemic is just one aspect of the human-made planetary crisis along with biodiversity loss and climate change. We are interested in how to reframe the current planetary crisis that encompasses increasingly visible global diseases in order to find ways for decisive and life-changing collective action. We ask these questions by looking at the Amazon region of Ecuador, which is bearing the brunt of two crises: COVID-19 and environmental destruction through a major oil spill.

“In the name of development”

To understand the complexity of this human and ecological disaster, it is necessary to retrace some historical steps. On February 2, 2020, the San Rafael waterfall, the highest in Ecuador, collapsed. At that time, hydrologists warned that a phenomenon known as ‘regressive erosion’ could affect upstream infrastructure. On April 7, 2020 the Ministry of Energy and Non-Renewable Natural Resources announced that the pipelines broke due to landslides that occurred in the San Rafael sector. Hydrologists associate the landslides with the construction and operation of the Coca-Codo Sinclair hydroelectric dam (CCSHD).

Location of the most relevant events generated by the regressive erosion phenomenon of the Coca River. Infographic credit: Luisa Andrade

According to Carolina Bernal, PhD in Geomorphology and Hydrosedimentology, the CCSHD caused a serious imbalance in the transport of sediments and water through the river flow which produced a  regressive erosion phenomenon which was responsible for causing sinkholes along the banks of the river. One of these sinkholes broke the oil pipelines. This risk had been mentioned in the earlier preliminary environmental impact study of the hydroelectric project.

CCSHD was inaugurated as part of Ecuador’s hydraulic mission during the presidency of Rafael Correa. The dam, like other hydroelectric projects carried out during his mandate, was politically legitimatized as “provider of clean energy and ‘good living’ for Ecuadorians and the world”. The rhetoric concerning the sustainable energy transition to renewable sources in the national energy matrix has been notably inconsistent with the dam’s high impacts on people and the environment.

The socio-environmental impacts associated with CCSHD and the oil spill were foreseen by the scientific community and civil society who were dismissed as “antidevelopmentalists” by Correa’s government. Some anticipated that the dam would a be major disruption of downstream sediment for the Napo River and would require extensive road-building and line construction in the primary forest. Others have questioned the true purpose of the dam, arguing that it was not about sustainable development for local people, but rather to provide electricity to the oil fields.

One of several sinkholes caused by the regressive erosion of the Coca River. The sinkhole captured in this picture is close to the town of San Luis. Photo credit: Carlos Sanchez (August 2020)

Going beyond business as usual

Even if the world is still embroiled in the COVID-19 pandemic, the responses to this crisis have revealed stark unequal, racial, and geopolitical differences. The indigenous populations affected by the spill and the pandemic have denounced the failure of the state to attend to these two emergencies. The many commentators on the current changes in the social and economic constellation of the world are urging for the re-evaluation of our way of life and the possibility of a radical change. For Ecuadorian indigenous organizations and the environmental justice movement, the pandemic and the environmental crises call for a radical rethinking of economic growth and our current model of development.

Scholars like Maurie Cohen see COVID-19 as “a public health emergency and a real-time experiment in downsizing the consumer economy”. Accordingly, the outbreak could potentially contribute to a sustainable consumption transition. For Phoebe Everingham and Natasha Chassagne the crisis is an opportunity to challenge the atomized individualism that underlies overconsumption. For them, Buen Vivir, a central concept to Ecuador’s development planning, drawn from the historical experience of indigenous communities that have lived in harmony with nature, is a post-pandemic alternative for moving away from capitalist growth and re-imagining a new form of traveling and tourism.

We cannot return to ‘a normal’ that ignores the global environmental crisis which led to the inequitable and polluted societies that enabled the spread of COVID-19. The extractive vision of the living world is endangering humanity’s very existence. Is there space for a greater appreciation of the complexity of these intertwined crises? When will we see, as Bayo Akomalafe states, “Earth’s interconnected geological and political processes”?.

The extractive environmental activities that underpin capitalist development and a planetary-mass consumption culture are jeopardizing the very existence of humanity. Though environmental disasters have decimated and violated the rights of indigenous peoples in the Ecuadorian Amazon for years, they continue to resist. Before the COVID-19 pandemic, groups of Amazonian indigenous organizations promoted a model of autonomous governance of the Amazon region of Ecuador and Peru through the “Sacred Basins Territories of Life” initiative.

The proposal has been developed by an alliance of indigenous peoples and nationalities of Ecuador and Peru to forge a new post-carbon, post-extractive model by leaving fossil fuels and mineral resources underground, retaining around 3.8 billion metric tons of carbon, to protect our planet and the well-being of future generations. The proposal would cover around 30 million hectares of land between Ecuador and Peru, home to almost 500,000 indigenous people of 20 different nationalities. Can these counter-hegemonic proposals which claim the interconnectivity of all species in this world be critically revisited in the times of the pandemic?

COVID-19 brought the world to a halt. This ‘portal to a new era’, as Arundhati Roy proclaimed, offers us a chance to question deeply our social and economic relations. Perhaps this could be the moment in history where we also can finally reframe localized environmental disasters as global concerns and act accordingly. This is the opportunity to politically and socially rethink how to transition to a different kind of development that acknowledges and changes the damaging way global lifestyles directly impact the indigenous peoples and natures of the world.

This blog article was first published on Undisciplined Environments.

About the authors:

Jacqueline Gaybor is a Research Associate at the International Institute of Social Studies of Erasmus University, in The Hague and lecturer at Erasmus University College in Rotterdam. Email: gaybortobar@iss.nl.

Wendy HarcourtWendy Harcourt is a Professor of Gender, Diversity and Sustainable Development at the International Institute of Social Studies of the Erasmus University, in The Hague. She is a member of the Editorial Collective of Undisciplined Environments. Email: harcourt@iss.nl.

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Development Dialogue 2018 | Social acceptance of oil activities in the Ecuadorian Amazon: a long way to go by Alberto Diantini

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Oil companies are coming to realise that they need a ‘Social Licence to Operate’—the acceptance of locals—to reduce social risk associated with their activities. But how do they achieve this community acceptance, especially in areas of the Amazon forest inhabited by indigenous peoples?

Extractive companies are usually unpopular and mistrusted. For them, it is increasingly evident that a legal, formal licence of operation from governments is not enough. To avoid costly protests, they need a Social Licence to Operate (SLO), generally defined as the acceptance of local communities of their activities. It is a kind of social, unwritten contract that ensures an enterprise’s social risk is reduced as long as priorities and expectations of the local communities are satisfied: the higher the SLO, the lower the risk (Prno & Slocombe, 2012).

Although the SLO concept was developed in Western contexts, it has been increasingly adopted in developing regions as well. In Latin America, for example, in the case of projects affecting indigenous peoples, the main common issues are power imbalances, conflicting worldviews, and informed consent, but these SLO key elements are largely overlooked (Ehrnström-Fuentes & Kröger, 2017).

As a contribution to filling this gap, my research aims to critically analyse the usability of the SLO concept as indicator of community acceptability in Latin America. In particular, I am focusing on the oil context of Block 10, in the Ecuadorian Amazon, managed by the Italian company Eni-Agip. The area is inhabited by indigenous groups, which are mostly Kichwa. Eni-Agip’s good reputation at the national level, its community investments (medical assistance and education programmes), and the apparent low level of conflicts in the block could suggest that the company has obtained an SLO from the locals. But is this the case?

To answer this question, I went to Ecuador and got in touch with researchers from the local university, the Estatal Amazónica of Puyo. Together, we planned a household survey in the villages of the affected area, examining people’s perceptions of positive and negative effects related to Eni-Agip’s operations. We also investigated whether locals perceive that the ‘Free, Prior, Informed Consent’ (FPIC) principle has been applied in this context. FPIC establishes that indigenous communities have the right to participate in the decision-making process pertaining to the activities that affect their territories. Before beginning oil operations, communities should have a full understanding of project’s risks and benefits and freely give informed consent (Hanna & Vanclay, 2013).

In order to facilitate interactions with the community members who don’t speak Spanish at all, a group of Kichwa students attending the university was included in our research team. This enabled me to be more easily accepted inside the communities: since I am Italian, people initially saw me as a potential spy of the Italian government or of the enterprise.

A total number of 346 questionnaires were completed and all villages of the influence area were surveyed. Preliminary results show that most respondents think the presence of the company is compromising the environment and irreversibly changing their culture. On the other hand, people rely on the social programmes previously offered by the oil company which Eni-Agip now claims are the duty of the State.

In effect, the most recent national oil contract stipulates that the government shall now provide these social services, but the State has been unable to meet this responsibility, in part due to the remoteness of these communities.

Almost 87% of the population doesn’t know what FPIC is. In addition, some of the interviewees reported cases in which they have been forced to accept the decisions of the company, with attempts of coercion.

It is noteworthy that during the survey, many people told us they fear that if they criticise Eni-Agip in any way, the company would cut social programs altogether.

In conclusion, despite the low level of conflicts and the good reputation of the company, interviewees reported the same impacts found in many other oil contexts of Ecuador and Latin America, such as cultural changes, dependence on the company, and lack of respect of FPIC procedures. Overall, the evidence of Eni-Agip’s high control of community consent, the absence of the State, and the vulnerability of indigenous communities are elements that seem to limit the genuine achievement of balanced power relationships, the core elements of a social licence. Therefore, caution is necessary prior to claim that a company has achieved an SLO in such a complex and conflicted territory. Much has to be done by the State to meet its responsibilities and by the company for a full respect of indigenous populations’ rights.

References:
Ehrnström-Fuentes, M., & Kröger, M. (2017). In the shadows of social licence to operate: untold investment grievances in latin America. Journal of Cleaner Production, 141, 346–358.
Hanna, P., & Vanclay, F. (2013). Human rights, Indigenous peoples and the concept of Free, Prior and Informed Consent. Impact Assessment and Project Appraisal, 31(2), 146–157.
Prno, J., & Slocombe, D. (2012). Exploring the origins of “social license to operate” in the mining sector: Perspectives from governance and sustainability theories. Resources Policy, 37(3), 346–357.

This blog article is part of a series related to the Development Dialogue 2018 Conference that was recently held at the ISS. Other articles forming part of the series can be read here,  here , here, here here, and here.

About the author:

Diantini_Alberto

Alberto Diantini is a PhD researcher in Geographical Studies at the University of Padua, Italy, supervised by prof. Massimo De Marchi, coordinator of the “Territories of ecological and cultural diversity” research group. The main objective of Diantini’s research is investigating the usability of the concept of Social Licence to Operate in the oil contexts of the Ecuadorian Amazon.

 

How oil rent contributes to Venezuela’s economic crisis by Blas Regnault

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The ‘Paradox of Plenty’, the ‘Dutch Disease’ or the ‘Resource Curse’ are often cited as reasons for Venezuela’s economic crisis. However, economic processes in such oil-exporting economies deserve deeper theoretical investigation to overcome the misunderstanding of oil rent as their main source of income. In Venezuela, declining oil rent alone may not explain the economic crisis of this oil-exporting economy—the mismanagement of oil rent due to the ambiguous conception of oil rents into the GDP strongly contributes.

 

The Venezuelan economy is experiencing a very complex crisis. Misguided economic policies have created profound distortions throughout the whole economy. Exchange rate parity has led to drastic reductions in foreign currency and a deterioration of the productive sectors, with damaging effects on the ability to import. This has resulted in crises in production and distribution of goods. The common sense view is to focus on the so-called resource curse and conclude that the high oil prices “feast” is over. But declining oil rent alone may not explain the economic crisis of this oil-exporting economy. As I will argue, oil rents are neither a blessing nor a curse. Oil rent is just a peculiar income stream that deserves a specific status in the GDP of oil-exporting economies[1].

What are oil rents?

The extraordinary profit observed in the global oil sector is due to the presence of very significant rents in the international oil market. These rents reflect fundamental differences in geological endowment of each oil producer, showing significant and systematic divergence from the average cost of production between countries. Table 1 shows that in 2016 the productivity of 463,305 wells located in the USA was 18.9 barrels per day. This was significantly less than the productivity in Saudi Arabia of 2,876.3 barrels per day.

Screen Shot 2018-04-18 at 14.37.22In addition, the price of oil is not determined by the average of production costs between all wells in the world. On the contrary, the price of a barrel is determined in 80% of cases by the production cost of the least productive region. This means wells located in the US determine world prices. Enormous differences between regional productivities allow the most productive regions to take advantage of their low production costs in the form of rents. This is what economic theory has called Differential or Ricardian rents. However, since 2014 the emergence of “shale oil” in US is also playing a key role in the oil price determination, transforming its productivity pattern.

Thus, oil rent is widely accepted as an inevitable and specific remuneration from any oil business. In historical terms, national oil companies, major oil companies, national states and private owners have struggled for control of oil rents. Whether in Texas, Alaska, Saudi Arabia, Kuwait, Norway, UK, Nigeria or Venezuela, the property rights regime represents the main legal tool used to keep part of the rent.

What is the problem with oil rent in the Venezuelan economy?

Ever since 1912, when Venezuela started to export crude, oil rents have historically provided recurrent income for Venezuela. However, oil rents remain absent in accounting for the national GDP. This invisibility is perhaps one of the main reasons for historic mismanagement of oil rents in the past. Indeed, the absence of the specific account for this income makes impossible the control by citizens and policy-makers of the way in which this rent is being spent. The problem becomes bigger when the entire economy bases its plans and policies (both in the oil and non-oil sectors) on oil rents as if these resources were a stable and more or less inexhaustible part of national income.

Why do falling oil rents create a crisis for the Venezuelan economy?

Crisis occurs in an oil rent-dependent economy when oil prices fall below the commitments made in the national budget. If the government and private sectors did not set funds aside in the form of savings as protection against episodes of decreases in oil prices, and if the economic system is not prepared for such fluctuations in oil rents, the crisis will always have the size of the commitment acquired.

However, the current Venezuelan crisis has three additional characteristics:

  • The national oil industry has suffered a significant deterioration in its productive capacity[2];
  • The non-oil sector, also dependent on oil rents, has suffered very serious damage to its productive capacity; and
  • The inefficiency in internal fiscal accounts and unsustainable exchange rate parity create profound distortions throughout the economy (non-official estimates indicate that inflation was near 2,616 per cent in 2017).

Non-productive solutions for the massive economic crisis.

The national government is still far from initiating a plan of national economic recovery that could boost production. On the contrary, the fall in oil rents has led the government to look for other sources of rents, exacerbating the extractive condition of the economy. At present, the government is trying to recover revenues through further indebtedness using a cryptocurrency called Petro. This only commits further, future barrels of oil into private hands and reverses rights obtained in 2001 with the Hydrocarbons Law. In addition, the government has created the Orinoco Mining Arc as a new source of rent for the exploitation of gold and other minerals, placing more than half of the southern province of Guayana at the disposal of large transnational mining corporations.

How to prevent mismanagement of oil rents? Build oil rents accountability.

In Venezuela, the public discussion about the uses of oil rents in national development started in 1934 and is still ongoing. However, the ambiguous conception of oil rents into the GDP has prevented a consensus on the uses of oil rents, leading to indebtedness and mismanagement of this income. Given the fact that the Venezuelan economy has to deal with oil rents as recurrent and fluctuating income, it is important to prevent further mismanagement and to build an institutional framework based on solid political interest to given this issue public visibility. This public visibility will allow for greater accountability for uses of oil rents, and will certainly prevent the historical mismanagement that this country has witnessed.

[1]Baptista (2008), Mommer (1989) and Regnault (2013) have developed an alternative GDP methodology for the oil exporting economies.
[2] According to the OPEC, the Venezuelan Oil production losses 604,000 barrels per day since 2016 (2.373 MBD 2016/ 1.769 MBD Jan 2018).

References
  1. Baptista, Asdrúbal. (2008). Bases Cuantitativas de la Economía Venezolana: 1830-2008, Fundación Polar, 2008.
  2. Mommer, Bernard (1989). ¿Es posible una política petrolera no rentista? In Revista BCV: Caracas, Volumen 4 – No. 3 – 1989; pp. 56-107.
  3. Murshed, S. Mansoob (2018) Revisiting the Resource Curse. Book Manuscript.
  4. OPEC (2018) Monthly Oil Market Report, 12th February 2018. Available in http://www.opec.org/opec_web/en/
  5. Regnault, Blas (2013). Neither a blessing nor a curse: National Accounts for oil-exporting economies (The Venezuelan case). International Institute of Social Studies, Erasmus University of Rotterdam http://iippe.org/wp/wp-content/uploads/2013/06/Blas-Regnault-Neither-a-Blessing-nor-a-curse-IIPPE.pdf

Photo credit: durdaneta

downloadAbout the author:

Blas Regnault is a Venezuelan sociologist and PhD researcher at the ISS, devoted to the study of global oil price cycles and its impact on the sustainable development in oil exporting economies.