To end fossil fuels, we need to take on monopoly power

To end fossil fuels, we need to take on monopoly power

By: Daisy Pearson
Date: 6 August 2024
Campaigns: Climate

Monopoly power in our energy markets is a threat to democracy and our path to a green transition. Left unchecked, it will lead to climate catastrophe. We need global coordination to tackle it, and a Fossil Fuel Treaty is the perfect tool.

Last week, fossil fuel giants announced yet more billions in profits, with BP and Shell’s combined total for the last year exceeding the combined GDP of six of the Caribbean countries worst impacted by Hurricane Beryl.

Climate change is making such extreme weather events both more frequent and more deadly. Global temperature increases have exceeded the Paris limit of 1.5C for the last 12 consecutive months, making 2024 highly likely to be the hottest year on record.

It is well-documented that fossil fuels are the single largest driver of the climate crisis, and 89% of people around the world want to see more political action on climate change.

So why do fossil fuel companies still have such a stranglehold on our economy, and how do we weaken their grasp?

Driving the divide

One of the first places we should start is dismantling monopoly power. In our recent report, Taken, Not Earned, produced with Balanced Economy Project, SOMO and LobbyControl, we looked at how monopolists are driving the world’s power and wealth divide. Our economy is dominated by monopolies, with just a handful of companies dominating in most sectors, from tech to pharma, agriculture and energy.

These vast monopoly corporations are wealth extraction machines: squeezing suppliers, overcharging consumers, evading tax, exploiting workers, destroying the environment and funnelling the money into the pockets (or tax havens) of billionaires. Monopoly wealth is both exploitative and unjust, and it is destroying society and the planet along the way.

The energy sector is dominated by massive corporations. Oil giants are particularly well known: think Shell, BP, Exxon, Chevron and Total. These five conglomerates alone made $281 billion in the two years following Russia’s invasion of Ukraine, at precisely the time so many people were hit by vastly inflated energy bills. They paid out over $200 billion of this directly to enrich their already wealthy shareholders, rather than investing it into any form of energy transition. In fact, what funds they did invest were overwhelmingly in further fossil fuel production, not in renewables. Despite many PR and advertising campaigns suggesting otherwise, major energy companies’ investment in renewables is actually decreasing, as corporations like Shell and BP roll back on their plans to curb fossil fuel extraction. In 2019, more than two-thirds of all energy was produced by the largest six companies.

In 2021 dozens of smaller energy companies failed, further concentrating energy giants’ hold on the market. While geopolitical conditions at the time put a strain on all energy companies, high market concentration makes it near impossible for small businesses to emerge and survive. Dominant corporations squeeze out smaller competitors, enabled by public policies that favour big firms.

Such extreme market concentration gives these few corporations (and their billionaire owners) unprecedented power and influence over our political institutions, eroding democracy, and enabling them to circumvent labour and environmental regulations with little accountability.

A history of collusion

For the energy sector, this isn’t a new thing. Monopolistic practices have long been the norm in the oil market, with secret collaboration and price-fixing designed to keep prices – and profits – artificially high. In 1928 the bosses of the world’s biggest oil companies met in secret at Achnacarry Castle in the Scottish Highlands, ostensibly for some grouse hunting. The real business, which would stay secret for 30 years, was a deal to fix global oil markets between the Anglo-Persian Oil Company (later BP), Royal Dutch Shell, Standard Oil of New Jersey (later ExxonMobil,) and Gulf (now Chevron).

Henri Deterding, then head of Shell, reasoned that “co-operation means power.” This was an illegal cartel, the very kind that laws such as the US’s Sherman Antitrust Act of 1890, or modern EU competition policy, are designed to stamp out. And yet such dealings still shape world energy markets and global diplomacy; governments, in part influenced by the fossil fuel lobby, are unwilling to act and really enforce these laws – after all, economic power is political power.

Oil companies, despite ostensibly being in competition with each other, regularly band together to push back against government intervention and regulation. Private cartels – agreements between companies to fix prices, to limit production, or to share markets or customers between them, or otherwise collude against the public interest – are rightly outlawed around the world. But collusion can take other forms.

Fossil fuel giants have used multiple mergers between smaller firms in recent decades to build awesome economic and political power. See for example the recent $65 billion deal by ExxonMobil to buy Pioneer Natural Resources, and Chevron’s $60 billion deal to buy Hess. Mergers and acquisitions (M&As) are often, in effect, like formalising and legalising cartels – and regulators should intervene to stop them, for the greater good. These mergers make corporate giants even bigger, boosting their political power, including their potential to oppose efforts to tackle climate change.

From monopoly to denial

Take, as an example, Charles Koch of Koch Industries, which largely trades in fossil fuels, and fossil fuel-based agricultural products. Koch is one of the richest men in the world. He and his sister Julia rank 25 and 23 respectively on the Forbes 2024 billionaires list and have a combined wealth of over $122 billion. Charles’s business strategy is very explicitly about building monopolies: Chris Leonard, author of the 2019 book Kochland, writes that “Koch Industries expands, almost exclusively, into businesses that are uncompetitive, dominated by monopolistic firms.”

Charles then uses his profits to meddle in politics across the board, fighting all sorts of libertarian causes: opposing government and central planning, attacking taxes, defeating trade unions, funding tax haven lobby groups, killing off social programmes, and perhaps most significantly funding initiatives that fight climate action and proliferate climate denialism and misinformation.

Between 1997 and 2018 Koch-funded foundations spent over $145 million in traceable dollars on a network of groups that attack climate science, the scientists doing the research, the potential policy solutions and the champions of those policies. And that’s just in funds that can be traced. Koch-funded groups are also leading a relentless campaign to slash renewable energy support and investment across the US, while fossil fuel subsidies remain immense, and rising.

Fossil fuels are by far the largest contributor to climate change, but despite the obvious conflict of interest, fossil fuel lobbying has become commonplace in climate negotiations and politics. At last year’s UN climate talks, a record 2,456 fossil fuel representatives were in attendance in Dubai, more than the total attendees from the 10 countries most vulnerable to climate change. This is a massive uptick from the 636 fossil fuel lobbyists granted access to the COP27, and 503 at COP26 the year before.

Koch Industries is one glaring example of how dangerous monopoly power can be and the threat it poses to our hopes for a sustainable future. It inflicts a broad array of harms, ranging from devastating impacts on workers’ pay and conditions, to manipulating public discourse and feeding toxic misinformation, to throttling vast numbers of small and medium-sized businesses. The consequence is that it seriously jeopardises the efforts that the vast majority of the global population are making to enable a just transition to renewables.

Tackling big oil

So what can we do about it?

While big oil keeps building its monopolies, the climate crisis deepens. If we are to secure a liveable future and halt increasing climate disasters in the global south, we must focus on demands that tackle the fossil fuel industry – and the monopolies it enjoys – head on.

The campaign for a Fossil Fuel Treaty is seeking to do just that. By getting governments around the world to agree to an end to fossil fuel expansion, a fair phase-out of fossil fuels, and a globally just transition, it is carving a path for governments to act together and step in to dismantle these climate-wrecking corporate monopolies.

Our response to the climate crisis must not simply focus on environmental protection, but also on reorganising a global economy that allows a privileged few to act with impunity, amassing enormous monopolies that churn out profit for the super-rich, wrecking the climate in the process. With its demand for a globally just transition, the Fossil Fuel Treaty can help to do just that.

If we can learn anything from these monopolies, it’s that a collective is many, many times stronger than the sum of its parts. The movement for a Fossil Fuel Treaty is growing in front of our eyes. If we work together as a movement, and demand our governments push back against the monopolists, we can end fossil fuels and build a sustainable economy in which wealth and power are shared fairly. Another world is possible.

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Photo: Dmitry Pichugin/Shutterstock