Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)


Page added on May 13, 2017

Bookmark and Share

Corruption, Terrorism, And Mafia: The Global Black Market For Oil

General Ideas

The value of the crude oil production alone is worth a staggering $1.7 trillion each year. Add downstream fuels and other services to that, and oil is a money-making machine. As VisualCapitalist’s Jeff Desjardins notes, both companies and governments take advantage of this resource wealth. More of the world’s largest companies work in the oil patch than any other industry. At the same, entire government regimes are kept intact thanks to oil revenues.

The only problem when an industry becomes this lucrative? Eventually, everybody wants a piece of the pie – and they’ll do anything to get their share.

The Black Market In Fuel Theft

Today’s infographic comes from Eurocontrol Technics Group, and it highlights the global problem of fuel theft.

(Click to enlarge)

Courtesy of: Visual Capitalist

While pipeline theft in places like Nigeria and Mexico are the most famous images associated with the theft of hydrocarbons, the problem is actually far more broad and systematic in nature.

Fuel theft impacts operations at the upstream, midstream, and downstream levels, and it is so entrenched that even politicians, military personnel, and police are complicit in illegal activities. Sometimes, involvement can be traced all the way up to top government officials.

E&Y estimates this to be a $133 billion issue, but it’s also likely that numbers around fuel theft are understated due to deep-rooted corruption and government involvement.

How Fuel Theft Actually Happens

Billions of dollars per year of government and corporate revenues are lost due to the following activities:

Tapping Pipelines: By installing illicit taps, thieves can divert oil or other refined products from pipelines. Mexican drug gangs, for example, can earn $90,000 in just seven minutes from illegal pipeline tapping.

Illegal Bunkering: Oil acquired by thieves is pumped to small barges, which are then sent to sea to deliver the product to tankers. In Nigeria, for example, the Niger Delta’s infamous labyrinth of creeks is the perfect place for bunkering to go undetected.

Ship-to-Ship Transfers: This involves the transfer of illegal fuel to a more reputable ship, which can be passed off as legitimate imports. For example, refined crude from Libya gets transferred from ship-to-ship in the middle of the Mediterranean, to be illegally imported into the EU.

Armed Theft (Piracy): This involves using the threat of violence to command a truck or ship and steal its cargo. Even though Hollywood has made Somalia famous for its pirates, it is the Gulf of Guinea near Nigeria that ships need to be worried about. In the last few years, there have been hundreds of attacks.

Bribing Corrupt Officials: In some countries – as long as the right person gets a cut of profits, authorities will turn a blind eye to hydrocarbon theft. In fact, E&Y says an astonishing 57.1 percent of all fraud in the oil and gas sector relates to corruption schemes.

Smuggling and Laundering: Smuggling oil products into another jurisdiction can help to enable a profitable and less traceable sale. ISIS is famous for this – they can’t sell oil to international markets directly, so they smuggle oil to Turkey, where it sells it at a discount.

Adulteration: Adulteration is a sneaky process in which unwanted additives are put in oil or refined products, but sold at full price. In Tanzania, for example, adding cheap kerosene and lubricants to gasoline or diesel is an easy way to increase profit margins, while remaining undetected.

The Implications Of Fuel Theft

The impact of fuel theft on people and the economy is significant and wide-ranging:

Loss of corporate profits: Companies in oil and gas can lose billions of dollars from fuel theft. Case in point: Mexico’s national oil company (Pemex) is estimated to lose $1.3 billion per year as a result of illegal pipeline tapping by gangs.

Loss of government revenues: Governments receive royalties from oil production, as well as tax money from finished products like gasoline. In Ireland, the government claims it loses €150 to €250 million in revenues per year from fuel adulteration. Meanwhile, one World Bank official pegged the Nigerian government’s total losses from oil revenues stolen (or misspent) at $400 billion since 1960.

Funds terrorism: ISIS and other terrorist groups have used hydrocarbon theft and sales as a means to sustain operations. At one point, ISIS was making $50 million per month from selling oil. Related: Why Goldman Thinks You Should Go Long On Oil

Funds cartels and organized crime: The Zetas cartel in Mexico controls nearly 40 percent of the fuel theft market, raking in millions each year.

Environmental damage: Not only does fuel theft cost corporations and governments severely, but there is also an environmental impact to be considered. Fuel spills, blown pipelines, and engine damage (from adulterated fuel) are all huge issues.

Leads to higher gas prices: Unfortunately, all of the above losses eventually translate into higher prices for end-customers.

How To Stop Fuel Theft?

There are two methods that authorities have been using to slow down and eventually eliminate fuel theft.

Fuel dyes are used to color petroleum products a specific tint, so as to allow for easy identification and prevent fraud. However, some dyes can be replicated by criminals – such as those in Ireland who “launder” the fuel.

Molecular markers, which are used in tiny concentrations of just a few parts per million, are invisible and can also be used to identify fuels.

In Tanzania, the initiation of a fuel marking program using molecular markers led to significant increases of imported petrol and diesel for the local market, and a decrease of kerosene.

At the retail level, product meeting quality standards increased from 19 percent in 2007 to 91 percent in 2013. Ultimately, this resulted in an increase of tax revenue of $300 million between 2010 and 2014.

By Zerohedge

Oilprice.com



2 Comments on "Corruption, Terrorism, And Mafia: The Global Black Market For Oil"

  1. Anonymouse on Sat, 13th May 2017 4:42 pm 

    Yes, one of the world largest, and most influential organized crime rackets, the uS oil cartel, is visibly upset that other
    free-lance criminals are trying to get a piece of the action for themselves.

    But as rockerman tells us, big oil is a victim of its own success.

  2. Theedrich on Mon, 15th May 2017 6:38 pm 

    Is the Demonic Party behind WannaCry? After all, it was under the Dems’ regime that the United States National Security Agency developed the “tool” (or infection vector, EternalBlue) to exploit a Microsoft Windows vulnerability so that the NSA could spy on people (like, maybe, Michael T. Flynn, the short-time director of the Defense Intelligence Agency?).  Black marketeers in fuel are not the only criminals in business.  The Dems are responsible for all kinds of mafia-like activities in order to line their pockets and enhance their power.

    The latest ploy is to blame that beast of all burdens, North Korea, for the WannaCry virus.  The English used in the virus is slightly stilted, indicating perhaps a foreign source for whom English is not the native tongue.  However, that modification would be no problem for the Dems, who in any case can certainly use the money.  Since they cannot tap into the oil black market so easily, why not use a technique developed under their own supervision?  They can count on the fact that the FBI (especially under Comey) would never investigate them.  And given that they are whipping up a fake frenzy about non-existent “collusion” of presidential candidate Trump with the Russians for “stealing” (so the NY Times) the presidential election from kleptomaniac Hillary Clinton in November 2016, a foreign scapegoat would divert attention from the true source.

    A brilliant tactic!

Leave a Reply

Your email address will not be published. Required fields are marked *