In her new book Frackopoly, Food & Water Watch executive director Wenonah Hauter exposes the influence peddling and corruption that enabled the growth of fracking. This excerpt tells a little-known part of that story: the surprising connections between the powerful companies formed in the breakup of Standard Oil.
Despite the 1911 Supreme Court decision that ruled Standard Oil was violating the Sherman Antitrust Act, the companies that splintered off from Standard Oil still coordinated their activity and kept all their old business connections. And thanks to the close relationship between industry heads and politicians, we’ve entered the twenty-first century with an energy industry that’s been deregulated to ridiculous levels and possess more wealth and influence than ever before. Perhaps nothing illustrates this more starkly than how the seven companies Standard Oil eventually split into have consolidated into four of the most powerful oil companies in the world: Shell, BP, Chevron and Exxon.
Exxon—originally Standard Oil of New Jersey—has always been the largest of the Baby Standards. Created from the 1911 breakup of John D. Rockefeller’s Standard Oil, the company historically has followed an aggressive strategy of growth through acquisition. In 1959 it jumped in size when its notoriously arrogant CEO, Monroe “Jack” Rathbone, finalized a buyout of Humble Oil Company, itself one of the largest petroleum corporations at the time. Within six years of the merger, the much larger company’s profits had nearly doubled. A chemical engineer, “Mr. Jack” spent forty-four years with the company he called “Jersey.” Credited with revolutionizing the refining process for oil during World War II, Rathbone increased the company’s international reach dramatically, raising its profits to more than $1 billion in 1964.
Known for his overconfidence and unwillingness to listen to his colleagues or staff, Rathbone, a West Virginia native and a descendant of Confederate Civil War general Stonewall Jackson, played a major role in prompting the formation of the Organization of the Petroleum Exporting Countries (OPEC). In 1960 he unilaterally reduced the posted price of oil, a move that lowered the monies paid to the oil-producing nations. Taking this action against the advice of the company’s Middle East negotiator and the other members of the Seven Sisters, he also failed t comply with his board’s direction on the matter. In 1972 Humble merged with its parent, Standard Oil of New Jersey absorbed its long-standing “independent” subsidiaries such as Humble, and Esso became Exxon....
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[Former Exxon CEO Lee] Raymond’s worldview is similar to that of his longtime friend, former U.S. vice president Dick Cheney. Former neighbors in Dallas, the men and their wives began socializing when Cheney was CEO of Haliburton, the oil and gas services company. The two couples also met at retreats and meetings of the Koch-funded American Enterprise Institute, where Raymond was on the board and Lynne Cheney was a senior fellow. During the Bush presidency, Raymond met two or three times a year with Cheney on energy policy.
Raymond summed up his attitude about Washington this way: “Presidents come and go; Exxon doesn’t come and go.” And his easy access to Cheney and the White House was nothing new. Raymond also had access when Democrats were in the White House. He said that Exxon’s access to the Clinton administration was similar to what the company enjoyed in the Reagan years.
Raymond successfully merged Exxon with Mobil, then the third-largest petroleum company. AT the time BP, the second-largest company, had already merged with Amoco and was pursuing a merger with Atlantic Richfield (ARC). President Clinton’s Federal Trade Commission had barely blinked in approving the reunion of these various offspring of Standard Oil. The merged entity ExxonMobil had assets of $135 billon, becoming twice as large as the merged BP/Amoco/ARCO.
Although the petroleum industry has changed with the rising dominance of several large, state-owned companies, Exxon’s power and influence have not diminished. While Saudi Arabia’s Aramco, Russia’s Gazprom, and Iran’s National Iranian Oil Company surpassed Exxon in output during 2014, Exxon is still the largest and most profitable publicly traded oil company in the world, and among the largest corporations worldwide. State-owned oil companies often depend on Exxon to provide assistance with new technologies, such as those used for fracking. Exxon invests in the operations of these companies, partnering in joint ventures and strategic alliances.
Since Rex Tillerson replaced Lee Raymond in 2006, Exxon has continued to use its political muscle not only domestically but also internationally. For instance, in 2010, ExxonMobil and Haliburton were among the twenty companies lobbying to stop tightened sanctions against Iran, a move that they said would cost the United States $25 billion in lost exports. In 2013 the oil minister of Iran named Exxon as one of the companies that Iran would like toe engage with in the future. Exxon bridled at limitations on investment and business with Iran because that country has the fourth-largest reserves of oil and the second-largest reserves of natural gas. On January 20, 2014, after some sanctions were eased, Bloomberg reported that shipments of crude oil and condensate from Iran increased 28 percent.