The story of Europe’s historical relationships to Africa cannot accurately be told in the stark contrasts of black and white or good and evil. In this present moment in which many statues of dead white male Christian capitalists, traders, generals, royals, and politicians are literally being decapitated all around us, it seems all the more important to defiantly sing the praises of those few white men in former imperial centers of power who have helped African and third world nations through their ingenuity, charity, and innovative mastery of the market mechanism.
Let us be clear, over the centuries and at present, some white male titans of industry and politics have made their fortunes oppressing others, exploiting their labor, or preventing competitors’ access to lucrative markets. Yet, to paint all titans of the extractive industries with the same brush due to the color of their skin would be racist.
Amidst the virus, the protests, and all the mayhem in the Middle East, a founding father of modern oil trading, Ian Taylor of Vitol, passed away on Monday, June 8. Mr. Taylor has been widely lauded as a major philanthropist bringing largess not only to the usual places like the ballet and the opera – but also to the Scottish Tweed industry, the National Health Service (NHS), and the Libyan people. To understand Taylor’s lasting professional contribution, it is necessary to have a grasp of what oil trading firms do.
Ian Taylor brought consumer-use solar panels to Mali and cheaper ways to generate electricity to many parts of the globe.
Oil traders are specialized commodities traders. They neither produce oil, nor generally own the terminals that load it, the vessels that ship it, or the petrol stations that dispense it. Their role is in creating new markets or correcting inefficiencies in the ones that already exist. A lot of popular culture loves to denigrate people who make money merely with money. Yet this is to misunderstand the importance of a man like Ian Taylor; he made money with relationships, insights, risk, and innovation. In doing so, he did things like bringing consumer-use solar panels to Mali and cheaper ways to generate electricity to many parts of the globe.
The services that oil traders provide are especially crucial for countries outside of the mainstream of the global capitalist system. Be they producers or consumers, countries that exist outside of the normal world of credit and finance, require the services of oil traders to securitize their sales (i.e. production) or purchases (import) of hydrocarbons. Sometimes the same country needs both services. Under the old system, the domination of the oil producing firm over the producing country was fairly total. Over the last 50 years, this has been eviscerated by the wave of nationalizations and then the ensuing rise of the oil trader.
Libya, where Taylor left an indelible mark and is deeply respected by senior oil sector officials, is a case in point. Many of the stories of Taylor’s charitable largess and brilliant deals have been told elsewhere. The perspective, I wish to share is what they have done – and can continue to do – for a country like Libya.
Despite all its oil reserves Libya lacks the capacity to produce enough refined petrol for its own needs.
It is not widely appreciated that despite all its oil reserves Libya lacks the capacity to produce enough refined petrol for its own needs and does not always obtain a fair market price for its crude. There have been many moments where the traditional market would not have worked for the country to import sufficient quantities of refined petrol, or the margins would not have made the lifting of its crude attractive. At many of those moments Taylor leveraged his moral compass, capital, and access to help the Libyan people.
Two key instances jump immediately to mind: 1) During the spring of 2011 when the rebels controlled the East of the country, Vitol provided them with refined petrol in exchange for future delivery of crude. This “invented” a new market bridging upstream and downstream components of the industry. In so doing, Vitol kept civilian life functioning and sustaining the military efforts against Qadhafi. At that crucial moment existing market structures and traditional channels would not have sufficed to get the National Transitional Council (NTC)-controlled areas the petrol they needed. 2) During the extended oil blockades – 2014 to 2016 and January 2020 to present – Libyan warlords, either Jadhran or Haftar, shut down the Libyan oil industry to blackmail the central government. Yet, the Libyan people did not run out of petrol (although they frequently had to wait on long lines due to the militias) because Vitol provided the mechanism for the sufficient importation of refined products.
In short, the oil trading industry, which Taylor was instrumental in forming, provides a “service” to the Libyan National Oil Corporation (NOC) to sell its crude or import refined petrol in innovative ways that were not available to it when the majority of Libyan production was first nationalized in the 1970s or when the country was under sanctions. Oil traders occupy a unique market niche.
The Seven Sisters were essentially a cartel of American, British, and Dutch oil companies that set the global price of oil for both producers and consumers from the end of WWI until 1971. They boxed certain players out of the market, fixed prices and productions volumes, and prevented various nations from maximizing profits or from securitizing their payments for their crude. Today, the system is more open and the international oil companies (IOCs) have occasionally made bold bets that have brought whole countries out of poverty.
Yet in other instances, the distribution channels of the vertically integrated oil majors still grant them structural leverage over “mom and pop” small country national oil companies. Occasionally, the IOCs leverage these advantages of incumbency to block new entrants to the sector or to delay or withhold Capex in certain markets that could benefit from it. Some countries like Guyana (in South America) have been big winners, while others (usually in Africa) have been left out. The IOCs mix business and politics in their determinations of where to invest and where to block. And doing so is their prerogative and completely fair game. Capital is scarce and oil investments are long-term and risky.
International oil companies mix business and politics in their determinations of where to invest and where to block.
Bizarre as it may sound, the oil field services firms also have to pick winners and losers – but for different reasons. Of course, if the security or political conditions are not right, it can be impossible to get Halliburton or Bechtel to fix the pipeline or upgrade the oil storage tankers. Still, sometimes a subtle form of mixing politics and precedent is involved in the decisions of whose pipelines are “worth” repairing. In the Libyan case, back payments are owed from the Qadhafi period to both Halliburton and Bechtel and at different times those firms have refused to work on new projects in post-Qadhafi Libya.
This, of course, is their right – and it is generally good business to not get stiffed twice. Yet as a result, the NOC lacks the ability to conduct certain upgrades to its pipeline networks and storage tankers – not because it lacks the money to pay for them (although at certain times this has been the case) – but because certain oil field services firms simply “will not service” Libya in specific ways due to legacy issues. Again, totally fair for the oil field service companies to choose where they want to work and not – and under what conditions. Oil field services is a risky business that requires working in dangerous parts of the world and incurring huge payment risks.
Ian Taylor invented a service which “serves” African countries when they need it and doesn’t limit their freedom when they don’t.
Yet, oil traders are different. They don’t pick winners and losers, they seek to undo certain bottle necks. There services are truly available wherever the market for them makes sense morally and legally. Although there are only three major firms – all based in Geneva and London, they form an anti-cartel. The oil traders, of which Ian Taylor was a key pioneer, provide a “service” which allows Nigerian, Libyan, South Sudanese, and Malaysian producers to access the markets with their wares while allowing various consuming countries new ways of accessing energy within their budgets. In short, Ian Taylor invented and perfected a service which “serves” African countries when they need it and doesn’t limit their freedom of action when they don’t. This sounds like an industrialist whose praises we should be singing.
Do most African countries use these possibilities wisely? Of course not. Libya is a serial abuser of imported petrol. Libya desperately needs to reform the subsidies that exist on the sale of refined petrol products in the country. Yet the way to best achieve this is not through manufacturing an artificial shortage or cutting the country off from international markets due to structural factors decided by corporate CEOs.
Reform of the entire Libyan economy is needed in concert with allied governments and international organizations. This can only be achieved when major governments are willing to invest the political capital to work with Libyan reformers. When that long hoped for moment comes, the Libyan reformers and international stakeholders will want to sagely contract the services of the oil trading industry to fully reap the benefits for the Libyan people that the securitized and freer market can afford them.
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