COLUMN LEFT : War Is a Gusher for Big Oil : What’s $1.1 billion for the Alaska spill, when you rake in $2.2 billion in one quarter?
Springtime always brings a mix of good news and bad news for the corporate world. Take Exxon, for example, the United States’ biggest oil company.
First, the (moderately) bad news: A civil and criminal settlement has been proposed that would make Exxon pay $100 million in punitive damages and a further $1 billion, payable over the next 14 years, to compensate for the catastrophic 11-million-gallon oil spill that gushed from the Exxon Valdez on March 14, 1989.
Now, the (extremely) good news: Even as environmental groups, Alaskan villagers and a handful of elected officials voice their criticism of this settlement, Exxon has announced that its net income for the first quarter of 1991 soared to $2.24 billion--a fivefold increase over the corresponding period in 1990. These earnings yielded the highest quarterly profits since the company was set up by John D. Rockefeller more than a century ago.
Exxon was not alone in making a killing last quarter. Mobil, its nearest competitor, posted quarterly earnings that were up 77.5% from last year. Amoco, the fifth-biggest U.S. oil company, reported a similar increase.
War is invariably good for business, and all of this bounty is the direct consequence of the conflict in the Gulf. Viewed from Exxon’s point of view, there is even a certain poetic symmetry in how these windfall profits came about.
The systematic destruction of Iraq by allied aircraft meant that the anticipated surge in world crude oil prices never materialized ($50 a barrel had been a frequently predicted figure). This was disappointing news for the oil business, one might suppose. Quite the opposite, in fact, for every one of those thousands of bombing sorties meant a soaring demand for jet fuel, causing prices for refined petroleum products to jump by $7 a barrel.
To anyone inquiring about these happy figures, Exxon’s public-affairs department exudes openness and goodwill. It retreats behind a veil of secrecy, however, when the questions turn to corporate responsibility for that messy business in Prince William Sound.
Economic and scientific studies of the damage from the Exxon Valdez spill have been kept secret. In effect, Alaskans are being asked to take Exxon’s word, and that of the state and federal authorities, that $1 billion is enough to compensate for all the dead otters and cormorants, the devastated shorelines and tidal patterns--even though the economists who conducted the surveys on government contract will privately tell you that the real costs could run as high as $5 billion.
Of course, where environmental catastrophe is concerned, it would be unjust to say that Western private enterprise had any monopoly on secrecy. The explosion of the No. 4 reactor at Chernobyl, five years ago last Friday, brought to light the same contempt for public accountability, the same desire to wrap the corporate interest in a protective shell. Just a week after the disaster, Communist Party officials told the inhabitants of nearby Kiev that everything was normal, and packed them into the streets to celebrate May Day.
Five years later, the Chernobyl reactor sits silent, encased in concrete, with heroic statues of Prometheus and Lenin standing guard over the sarcophagus. The concrete tomb will have to be replaced with something else, but no one knows what, or where the money will come from.
Yet even here there are signs that the future lies with the private sector. Multi Entertainment Holdings Inc., a one-year-old company based in Sherman Oaks, Calif., closed a deal with Soviet authorities in January that gives it exclusive media rights for all foreigners entering the 30-kilometer restricted zone around Chernobyl.
I called the company’s president, Thomas J. Davis Jr., to find out what that meant. It turns out that foreign visitors can purchase a package deal that consists of an overnight stay in a nearby visitors’ center, an entry permit, a car and driver, a guided tour, lunch and a souvenir photograph taken in front of the crippled reactor. Rates start at $500. Multi Entertainment Holdings, which started life as the U.S. distributor for Soviet live-action fairy-tale movies, has also won sole broadcast rights to any commercial filming done in the forbidden zone.
In the corporate world, it’s an ill wind that blows nobody good. The gods of war smile on big oil; the Bechtel Corp. will make a fortune from contracts to rebuild Kuwait, and environmental disasters like the Exxon Valdez are quickly reduced to the status of mild collateral damage.
From the chilly wilderness of Alaska to the radioactive earth of the Ukraine, there’s always a new way to make a buck.
