How can you turn $3.2 billion into $500 billion in a day? If you are Vladimir Putin, the prime minister of Russia, and Rex Tillerson, the chief executive of Exxon, you announce a deal that allows Exxon to explore for oil in Russia’s Arctic waters. According to Putin, who last week said, “It’s scary to utter such huge figures,” the deal could reach $500 billion. According to Exxon’s news release, all that’s been agreed so far is an investment of $3.2 billion. The only certainty is that the energy industry’s numbers game sometimes resembles the magical calculations the financial industry relied on before the 2008 crash.
Take natural gas. There has been a flood of recent investment in the effort to extract gas from the Marcellus shale, a geological formation that runs underground from Virginia to New York. Drilling rights have been snapped up as everyone tries to get a piece of the hazardous action. Few seem concerned that it involves an extraction technique, known as hydraulic fracturing—it uses chemicals and explosives to release deposits of oil or gas that are trapped in rock formations—that can poison water tables.
The anniversary of the largest oil spill in American history passed with little notice this summer. Yet the reports of the past year and anniversary-themed books on the disaster provide a trove of data that reveals how the oil and gas industry is as reckless and unaccountable as the too-big-to-fail banks that brought on the financial crisis of 2008. The BP disaster revealed the same problems—lax government regulation, corporate profits despite the risks, a fawning press—that characterized the financial meltdown. Big banks and big oil have more in common than their size.