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A rock about the size of a fist sits on the bookshelf above my desk. It’s ridged and bumpy and covered in oil. I’ve been carrying it with me for over a decade now after picking it up on a beach in Galicia, in Northwest Spain—my own talisman to recall and understand the story behind the story of the central energy commodity of our time.

I’ve been reminded of that rock and that beach lately as Rex Tillerson, former CEO of ExxonMobil, assumes his new position as U.S. Secretary of State in the Trump administration. Tillerson was for 10 years the CEO of America’s largest oil company (the world’s fourth largest)—a testament, said his fan Donald Trump, to his global savvy and sharp business instincts. We’ve been told that Tillerson is an ideal pick because he understands how to pull the levers of the free market to turn investments around the world into jobs and steady profits.

“The energy business is not a get-rich-quick scheme,” extolled the Wall Street Journal about Tillerson shortly after he was nominated. “To succeed requires integrating technical, political and financial acumen over a long period.” Let’s grant Tillerson the first two—a lifelong engineer at the company, he clearly knows how to extract fossils from under the earth. And cutting deals to extract hundreds of millions of barrels of oil from, say, Russia, Nigeria, Equatorial Guinea and other authoritarian or fragile states does suggest a certain political facility. When it comes to ‘financial’ skills however, Tillerson is more like an artist of the sleight of hand:. Like every other oil CEO, he benefits from unparalleled distortions of the free market which he claims to master.

The business model that Tillerson perfected involves hiding your costs, and getting the rest of us, taxpayers, to pay them – which makes it a lot easier to make it appear that you’re making a profit. Business savvy? More like tricks of accounting, tucking costs onto a ledger outside the company that nobody inside has to face. But the rest of us do—as that rock reminds me.

The beach where I found that rock is about 80 kilometers north of the border with Portugal, an isolated place with a sharp cold wind even in the spring when I visited. Six months before I slipped the rock into my overcoat pocket, on the night of November 22, 2002, a ferocious storm off that coast tossed a 245-meter-long single-hull oil tanker called the Prestige around in the waves like a toy boat. As she lurched in the violent waters, a wave smashed into the right forward hull and the three-foot-thick steel frame blew open — “like a sardine can,” a rescue worker later recalled. After the captain’s SOS, the Spanish Coast Guard sent a helicopter to pick up the nineteen crew members, and towed the ailing tanker out to sea.

A local oil clean-up volunteer holds a badly oiled Comoran, victim of the oil spill from the sunken ‘Prestige’ oil tanker off the Galicia coast, Spain.
(�2002-GREENPEACE/Pedro Armestre)

One of the worst environmental disasters in history

The Prestige sank about 50 kilometers offshore. Out from the hull came viscous cascades of oil: Seventy-nine million gallons of crude washed onto a thousand miles of coast, all the way up to the beaches of southwest France. Satellite photos taken by the French research agency CIDRE show the oil spreading from the Prestige like spindly black veins in the circulatory system of the Atlantic. Its sinking unleashed one of the worst environmental disasters in history, at least until the Deepwater Horizon, BP’s oil derrick, exploded in the Gulf of Mexico in April 2010. I didn’t go to the Louisiana coast to watch, nor did I make it to Prince William Sound in Alaska back in 1989, when the tanker plying the Pacific for Tillerson’s company, the Exxon Valdez, sank off the coast of Alaska. Like many, I watched those other two oil-soaked nightmares unfold from afar.

Tillerson was a mid-level Exxon engineer when that tanker sank. Shortly thereafter, ExxonMobil spun off its ship division to an affiliate and took the company’s name off the tankers it used in an effort to delink itself, in the public imagination anyway, from the actual ships carrying its products. By the time Tillerson became CEO in 2006, he attempted to distance the company further from the consequences of the catastrophe when he refused billions of dollars in persistent damage claims by Alaskan fishermen and coastal communities, and pursuing a challenge to a $5 billion punitive damage penalty assessed by the federal government all the way to the Supreme Court, which reduced it by 90 per cent to $500 million.


Standing on that perch in the Atlantic, it became clear that oil spills are not very different. Spills are the Esperanto of the oil business. They occur in similar ways, and they speak the same language no matter the shores they happen to contaminate. The Prestige and the ExxonValdez were carrying a refined version of what the Deepwater Horizon was pumping directly from under the ocean. By way of contrast in the fossil-fuel-catastrophe sweepstakes, the Prestige spill was far bigger than the Exxon Valdez crack-up in 1989, which spilled some 15-30 million gallons of oil (the exact figure is still in dispute) along the coast of southeast Alaska, less than half of the Prestige’s toxic load.

The Deepwater Horizon blew them both away — unleashing over its excruciatingly public effusion some 210 million gallons of oil. That cold spring day I was standing on the Atlantic coast of Spain, but I might as well have been standing on the coast of the Gulf of Mexico, or off Prince William Sound in Alaska. Each of these catastrophes provide us a glimpse into the many ways in which oil company accounting is very different from the accounting practiced by honest practitioners of the free market. In fact, if we gas guzzlers were not so complicit in the scheme, they’d be arrested for cooking the books.

Even in the brisk wind, the air on that isolated beach had the sickening smell of a gasoline station. All I could see in either direction—to the south, toward Africa and to the north, toward Ireland—were thousands of rocks, millions of them, stretching into infinity, covered in the black gooey crud that had been carried in the cargo holds of the Prestige. An assortment of volunteers from as far away as Italy and the Czech Republic were still scraping rocks and boulders with spoons in a quixotic effort to remove the vile substance.

The closest town was Corcubión, about 15 kilometers away, which for hundreds of years has been sustained by the abundant fish of the North Atlantic. The town is renowned as the source of a marine delicacy unique to this area called percebes, a barnacle that clings to the side of the rocks and is a prized feature of Galician cuisine. The waves that crashed upon those rocks were tainted with oil. There would be no percebes that season, nor any other fish caught along the Galician coast. The marine environment was severely damaged, and tens of thousands of fishermen suddenly lost their source of livelihood all along the coast. Tourists who normally crowd this area in the spring and summer stayed away.

Prestige clean-up by volunteers.

An act of terror

The economy of Corcubión was devastated. I met the town’s mayor, Rafael Mouzo, who with his trim beard and bushy mustache looked like a character out of Cervantes. We walked along the stone balustrade overlooking the town’s port, lined with idle fishing boats stranded by the blacklist on Galician fish. Mouzo could barely contain his rage at the disaster that had befallen his town. He told me that the oil spill was like an act of war. “This,” he exclaimed, “was an act of terror, a criminal act! We need an international tribunal to judge . . . all those responsible for the spill.”

Currents carried the Prestige’s vile contents northward, and in fishing communities along its path there was a similar sense of having been besieged by an evil, destructive force that seemed to come from nowhere and let loose its demons upon their shores. Some of Spain’s most pristine beaches were plunged into a scene out of science fiction. The Spanish government sent out hazardous materials crews in insulated white suits to power-spray the beaches with high-pressure hoses. The cleanup costs quickly mounted into multiple billions of dollars.

I’ve held on to that rock for all these years so I would not forget the image and feel of the environmental and economic destruction wrought by that sunken tanker, and the price that is paid for our reliance on a fuel that at every turn wreaks collateral damage while it powers our economic might. That Galician rock is perhaps the only physical legacy remaining of the sunken Prestige here in the United States. It tells a story of the acute effects of oil unleashed upon the sea and upon the land—and the ways in which the players in the oil business, including America’s new Secretary of State, have dodged responsibility for the costs of their key product. The same principles of shunting costs onto others, as it happens, apply to climate change—which is now going to be the purview of Rex Tillerson.


I pull my car into an ExxonMobil station near my house in Oakland, California. The prices at my local station are not much different from anywhere else in town. The people who run the station are friendly, stuck behind their Plexiglas booth, immigrants from Ethiopia. They’re charging $2.98 a gallon (3.78 liters – 1.25 CHF per liter). This is less than a couple of years ago, but it still bites.

Alas, that’s another fake price in the economic hall of mirrors—in which the price reflects not actual costs but the reflected glare of the margins necessary for oil companies to sustain hefty profits. Perhaps this is the harshest news in the struggle to shift our habits away from fossil fuels: Gasoline should be a lot more expensive than the “expensive” gasoline we’ve been paying for—at least in the United States, which has been suspended in an economic illusion around oil’s costs that Tillerson and his oil industry counterparts have been expert in shaping. Nor are the true costs hard to find; they’re hiding in plain sight. A team of engineers at Carnegie Mellon University and Arizona State University concluded in the Proceedings of the National Academy of Sciences that conventional cars over their life span come with an average of two thousand dollars in greenhouse-gas-related costs that are “paid by the overall population rather than only by those releasing the emissions and consuming the oil.”

Acute impacts on public health

Consider two devastating and costly events, the duration and intensity of which have been linked by scientists to climate change: the $50 billion in public money apportioned by Congress to the East Coast for recovery from Superstorm Sandy; and the $11 billion in reimbursements, apportioned through the federal crop insurance system, to farmers for their severe losses during the Midwestern drought of 2012-2015, the severity of which the USDA ascribes to the impacts of climate change. Then, there’s the $160 billion that Secretary of State John Kerry cited at the 2015 Paris climate talks as the cost to the United States of extreme weather events over just the previous two and a half years.

And that’s just a cursory look—such examples abound as climate change puts pressure on physical infrastructure, food supply chains, water-delivery systems, contributes to migration among people’s displaced by the altered conditions for growing food, pushes disease vectors northward, and on and on. In addition to those chronic consequences of accumulating greenhouse gases in the atmosphere, there are also the acute impacts on the public’s health from respiratory diseases and premature death due to automobile-induced air pollution—amounting to about $80 billion a year, according to the American Public Health Association.

Taxpayers bear the burden

As America’s biggest oil company, and the world’s third largest greenhouse gas emitter among global corporations, according to a 2014 study in the scientific journal Climatic Change, Exxon-Mobil is responsible for at least a portion of those costs. But it doesn’t have to pay them because the government bears that burden, which means us, the taxpayers. Oil-fueled transportation, according to the EPA, is the second most significant contributor, after industrial sources, to greenhouse gases in the United States. Including all the costs on Exxon’s ledger sheet would give us a very different view into Rex Tillerson’s business wizardry. To some degree, we in the United States have bought into the illusion, because we like the idea of inexpensive gasoline. But the fact that Americans might like their gasoline cheap does not soften the harsh reality that Tillerson, like many oilmen, are actually more like artists of economic illusion than artful capitalists: Their rates of profit, for which they’re richly rewarded, would likely collapse without the props provided by the government that Rex Tillerson now represents.


Of the top twenty-five industrialized countries, the United States has the lowest price for gasoline. In Britain, for example, in 2016 the average price of gasoline was about $6 per gallon; in Norway, about $7; that range is shared across most European countries. And it’s not because the gas is cheaper to access in the United States. Britain and Norway have a huge supply of oil just offshore, in the North Sea.

The difference is that a tax has been slapped onto gasoline in those countries to help compensate for its immense ecological and economic costs. The Organisation for Economic Co-operation and Development (OECD) has concluded that environmental taxes account for approximately 2.4 per cent of GDP in Europe, compared with 0.8 per cent in the United States. Jason Scorse, an associate professor of environmental economics at the Middlebury Institute of International Studies in Monterey, California calculates that the 1.6 per cent difference between the two figures—given the roughly comparable sizes of the European and American economies (Europe’s is actually slightly larger) — would provide the US government with $240 billion annually in extra revenue. Even a portion of those funds, he said, “could be applied to the monumental costs of climate change and associated environmental problems associated with gasoline.”

Greenpeace diver explores the impact of pollution. 10-12-02. PHOTO: JORGE J. CANDAN-GREENPEACE

The federal gasoline tax in the United States now stands at 18.4 cents per gallon—a figure that has not changed since 1993, when President Clinton, egged on by his vice president, Al Gore, jammed it through a reluctant Congress. The average price of gas was roughly $1.75 to $2.00 in the mid-1990s—so what was a roughly 9 per cent tax then is now a fraction of that as the price of gas rises.

Keeping the costs of the oil business secret

Over his years as chief executive, Tillerson joined with his oil industry counterparts to vigorously oppose any addition to the already minimal tax on US gasoline, which could contribute toward covering those costs. As CEO, he even personally lobbied Congress to repeal a provision of the Dodd-Frank reforms which requires oil and other publicly traded extractive companies to publicly report how much money they’re paying out to foreign governments to obtain access to their resources. In mid February Trump signed an executive order rolling back precisely that requirement–which means that payments made to, say, Russian or other political leaders by oil companies may remain secret. In 2015 and 2016, he aggressively beat back shareholder resolutions asking that the company more accurately account for the risks it faces from climate change and to reduce its greenhouse gas emissions.

And there’s yet another twist to the perverse economics of oil—major subsidies from the federal government. These are an expensive phantom limb left from the days early in the last century when oil companies had to actually be encouraged to seek out ever more exotic locales for their oil prospecting. The subsidies are a thicket of gifts large and small, from tax breaks to outright R&D support.

The OECD documents about $3.5 billion of such props annually in the United States. The Democratic Party staff at the House Committee on Natural Resources estimated that the oil and gas industries will, over the decade between 2012 and 2022 be receiving a total of some $43.6 billion in subsidies. The subsidies buttress oil companies’ bottom line every year, and enable a major contributor of greenhouse gases to be sold more cheaply than its actual cost—adding to the perceived price advantage of fossil fuels over renewables. Members of Congress, who have collectively received more than $365 million in contributions from the oil and gas industry since 1990, according to Open Secrets, have been loath to repeal the subsidies. That includes $2 million in contributions and another $8.8 million in lobbying expenses from ExxonMobil in 2016, in what would turn out to be Tillerson’s last year at the company. President Obama tried several times to repeal the most significant subsidies, but was rebuffed by the Republican-controlled House of Representatives, the dominant recipients of that largesse.

Globally, the London-based Overseas Development Institute (ODI) estimates that, together, the United States, China, Russia, Canada, Australia and the UK collectively spent $63 billion in taxpayer funds on fossil fuel subsidies in 2014. The International Monetary Fund lambasts fossil fuel subsidies for violating free-market principles and creating a favored status for fossil fuels. Removing fossil fuel subsidies globally, says the IMF, would not only reduce CO2 emissions worldwide by 13 percent, it would produce “major gains” in economic growth by freeing the funds to be used more productively in the economy.

Exxon Valdez clean-up in 1989.

Though Tillerson is one of the few members of the current administration—including the President—who concedes to the overwhelming evidence that climate change is occurring and is significantly due to human causes, he made no moves to reduce the company’s reliance on oil or shift the company in a more renewable direction. During his tenure, ExxonMobil did impose an ‘internal’ price for carbon, ranging from $60-$80/ton (as I reported in Yale 360).

But that price has nothing to do with reimbursing the public for oil’s climate costs. Rather, company spokesperson Alan Jeffers told me, it’s based on the probabilities that such a charge might be imposed on a national or international scale—a hedge on where the world may stand on carbon’s externalized costs in five or ten years when new wells start delivering oil to the market. In a letter to dissident shareholders represented by the environmental ngo As You Sow, the company stated that its commitment to fossil fuels would not be impacted at anything less than a mandatory price of $150 or more per ton—an extremely unlikely event, to put it mildly. In fact, Tillerson shepherded investments by the company in the Canadian tar sands, which are major contributors to our atmospheric load of greenhouse gases and to climate disruption.

When six of Europe’s biggest oil companies signed a letter to the United Nations’ top climate negotiator in 2015 endorsing a call for a mandated carbon price, ExxonMobil and other U.S. companies refused to sign it. Tillerson actually denounced his European colleagues for doing so. In effect, this is the brilliance of oil company economics: We the public pay them three times. We buy their product; we pay for the product’s collateral damage to the ecological balance of the earth; and we subsidize them with our tax dollars to facilitate their generation of those costs.

I didn’t realize it at the time but when I picked up that rock in Galicia, it would resonate not only with the story of the Prestige, but some years later with the backstory of an American Secretary of State whose company might as well have written the script for what followed with the forsaken tanker that sank off the Spanish coast–tales, still ongoing, of dodging responsibility.

During my reporting for the PBS newsmagazine show FRONTLINE/World about the Prestige, I was able to determine why the tanker sank and why no one was held accountable for the series of shortsighted decisions that led it to sea and the massive amounts of oil it spilled onto the Spanish coast. I spoke with the man who captained the ship immediately before the captain who had command that fateful night when the ship went down in an Atlantic storm off the coast of Galicia. Efraizos Kostazos had been working as a tanker captain for a quarter century, he told me one afternoon in the Greek port city of Piraeus, and had never before seen a ship in such bad shape as the Prestige. He had command of the Prestige as it sat for six months in the Russian port of St. Petersburg as a lightering vessel—a stationary gas station for outbound ships.

The American Bureau of Shipping in Houston, Texas, had recently conducted an inspection and signed off on the vessel’s seaworthiness. But Kostazos was concerned about the tanker ever being taken out to sea again. He sent a fax to the owners back in Athens, as well as to the ship’s inspectors. In his urgent communiqué, Kostazos expressed serious reservations about the ship’s condition and identified a litany of serious structural flaws in the Prestige’s aging steel hulls. He recommended they be repaired before she was taken on another voyage. Rather than fixing them, however, the owners fired Kostazos—and sent another captain, Apostolos Mangouras, to replace him. The Prestige’s owners were a Greek family, the Coulouthroses, who owned six ships at the time.

Clean-up costs: at least $5 billion

At 26-years old, the Prestige was one year past the age that even the International Association of Tanker Owners considers safe. But there were no laws to prevent the aging tanker from being taken out to sea again. The Coulouthros family’s maritime business in Piraeus sent word to Mangouras that a shipment of oil awaited in the Lithuanian port of Vilnius. The tanker’s days as an immobile ship were over. Mangouras steered the Prestige out of St. Petersburg, picked up its cargo of Russian oil in Vilnius, and headed toward a buyer in Singapore. The tanker passed through the Baltic and North Seas and into the Atlantic Ocean, where it hit the storm off Galicia. The waves blew holes in the areas of the right forward hull that had been identified as vulnerable by Efraizos Kostazos.

The cleanup of the beaches and compensation to fishermen cost at least $5 billion dollars, paid for primarily by the European Union and Spain. The owners’ insurance policy contributed $25 million, not even 1 per cent of the total. It turned out that the trapdoors of the maritime system ensured that there would be no further responsibility for the damages.

When the Spanish government filed suit in the United States against ABS to reclaim the damages, the inspection company argued that responsibility lay first with the flag state, the Bahamas. Stuck in a catch-22 of maritime law, a federal judge in New York agreed and dismissed the case. The Bahamas has minimal resources to inspect the hundreds of ships flying under its flag and no legal authority to impose its will on international shippers had it even been inclined to do so; it claimed, as ABS did, that final responsibility lay with the owners. The owners had ensured they would have no financial liability because they registered the Prestige as a “one-ship company” with the maritime authority in Liberia—the legal home of more than half the world’s oil tankers. The company’s sole property, the Prestige itself, was at the bottom of the sea—and thus no longer had any value. There were no assets to be claimed. It was as if the entire maritime system conspired to ensure that the Prestige had never existed.

But the Prestige had existed—as the residents of Corcubión and the entire Galician coast know very well. The bill was passed onto the citizens of Spain and Europe, who paid for the monumental damages caused by that one ship on that one night in November.

The Prestige sank about 13 years after the Exxon Valdez. Yet it’s as if the ship’s Greek owners read the playbook provided by ExxonMobil: Hide behind the trap doors of the international maritime system, never admit culpability, and shunt the costs onto the public. In 2015, the last of the multiple lawsuits seeking to obtain compensation were finally resolved after an exhaustive run through multiple ExxonMobil appeals of damage verdicts. The company ultimately paid $2.5 billion in direct clean-up costs, out of an estimated total of more than $5 billion in damages to the fishery industry and coastal economies around Prince William Sound.

According to news stories as late as last fall, the ExxonValdez’s oil can still be seen lapping at the shorelines of otherwise pristine inlets and fjords in and around the Sound. The residents of the Alaskan coast, like the residents of the Galician coast in Spain, or coastal residents off the Gulf of Mexico continue to live with and pay for the contamination those oil enterprises delivered to their coasts—just as we pay for the consequences of all those greenhouse gases that come from burning their oil. That art of deflection is, perhaps, Rex Tillerson’s particular kind of genius.

One of the great ironies of Tillerson’s elevation to the top position at the State Department, which has responsibility for ensuring U.S. compliance with the Paris Climate Accord, is the legacy he now leaves behind. A multi-state investigation is underway into whether ExxonMobil misled shareholders, under successive CEO’s including Rex Tillerson, about the risks that its very own scientists were identifying from the impacts of climate change. The charges arise out of an investigation by Inside Climate News, a finalist for the Pulitzer Prize, which revealed that while company scientists probed into the impacts of accumulating greenhouse gases, the company poured millions of dollars into denying the existence of what its own scientists were documenting. Suggesting to the public that climate change is not real may be untruthful, but it is not illegal; misleading shareholders that there are no risks when those risks are being identified by your own scientists is illegal according to U.S. securities laws.

During Tillerson’s tenure we may find ourselves witness to an extraordinary spectacle in which a company he recently led faces charges for keeping information secret about the defining phenomenon of our time that, in his new job, he is supposed to be tackling on behalf of the United States. It would be a jarring ju-jitsu sort of ending to the company’s effort to avoid liability for the impacts of climate change.

And now even yet a further  twist: Rex Tillerson appears to be the only member of President Trump’s cabinet to support the United States hewing to the commitments of the Paris Climate Accord. Perhaps Tillerson is starting to see that the costs his company created when he was CEO now look very different when they are borne by the country he represents as Secretary of State.

Contributing editor Mark Schapiro is a California-based journalist and author. His latest book is THE END OF STATIONARITY: Searching for the New Normal in the Age of Carbon Shock. (Chelsea Green). – Twitter: @schapiro & website

Journalist and author Mark Schapiro.

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