The Oil Trap in Brazil

Brazil is the 9th oil producer in the World. In this feature we look at three traps of oil production: War, Corruption and Climate.

Oil and War 

Why is Brazil still so vulnerable to the ups and downs of the international oil market? 

? Faced with the war between Russia and Ukraine, the increase in the value of the oil barrel became a frequent subject in the Brazilian press. The country led by Putin is the second largest exporter of the commodity in the world, accounting for about 12% of global supply. And the impact of economic sanctions imposed on Russia in rejection of the invasion of Ukraine had immediate repercussion on the international supply of oil.

? However, while discussing the price of oil, an important question should be asked more often: why does the Brazilian economy STILL depend so much on imported fuel, from a non-renewable and EXTREMELY POLLUTANT source? In the midst of a CLIMATE EMERGENCY, oil is the commodity with the greatest impact on the growth of inflation in Brazil, according to an analysis by the Brazilian Central Bank released last year.

? Focusing efforts on the so-called “Brazilian self-sufficiency” in relation to the oil supply, as some sectors of society claim, is simply not strategic in the long term. It goes against the grain of global efforts to contain the devastating effects of climate change. Furthermore, the strategy could cost dearly not only to Petrobras, the Brazilian state owned oil company, but also to Brazil, which runs the risk of seeing its largest company miss the energy transition bandwagon to a planet that is less and less dependent on fossil fuels, as the BBC analyzes in an article on the future of the state owned company.

? In the third part of its 6th report, the United Nations Intergovernmental Panel on Climate Change (IPCC) was categorical: it is necessary to act immediately to avoid the climate impacts caused by oil and natural gas extraction activities. And what did the Brazilian government do? In the same week, it opened an auction, via the National Agency of Petroleum, Gas and Biofuels, for the concession of contracts for 379 blocks of exploration or rehabilitation and production of oil and natural gas, located in ten Brazilian states. ?

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Oil and Corruption

It’s no surprise that the main geopolitical currency between countries is also recognized as a major vector of corruption, is it?

To ensure control of new resources and markets, anything goes: coups d’etat, starting wars, corrupting rulers, politicians, executives, judges, prosecutors and whoever is necessary.

?? In Brazil, the most recent is the fateful Operation Lava-Jato (Car Wash), launched by the Federal Police in 2014, which targeted fraudulent schemes involving contractors and contracts with Petrobras. The impact of the cascade of events started with the investigation  by the Federal Police is still felt today in Brazil. It dramatically shook the population’s confidence in relation to state institutions, it sparked an economic crisis, and helped advancing the polarization and political intolerance in Brazilian politics.

Around the world, there are other emblematic cases of the trail of corruption left by oil.

?? In Nigeria, a corruption scandal starring Anglo-Dutch and Italian oil companies Eni involved top-tier politicians and the then president of the African country, Goodluck Jonathan. In 2018, the companies were accused in a Milan court of paying bribes to gain access to Nigerian oil fields. The lawsuit dates back to 2011, when both companies allegedly transferred more than €1 billion to a Nigerian government account to secure the exploration of an oil field.

?? Mexico is another case that reached the courts. In 2020, former director of state oil company Penex, Emilio Lozoya, claimed that, at the behest of former president Enrique Peña Nieto and former finance secretary and former foreign minister, Luis Videgaray, he bribed lawmakers to pass structural reforms, including energy, which opened the oil sector to the private sector. Loyola’s allegations also reached Braskem Idesa, a petrochemical company owned by Brazil’s Braskem.

And this is just the tip of the melting iceberg… when we remember the intimate relationship between the oil market and the war industry, things get even uglier.

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Oil and Climate

In the midst of a climate emergency, Brazil’s GDP is still linked to the country’s sufficiency of one of the biggest pollution vectors in the world: oil.

According to a study by the Climate Accountability Institute, a group of just 20 companies producing oil, natural gas and coal are responsible for more than a third of the emissions of greenhouse gasses worldwide since 1965 – and Brazil’s Petrobras appears in 20th position on this list.

The types of socio-environmental impacts caused by oil are diverse along its production and use chain: leakings, seismic shakings, numerous accidents in the maritime extraction platforms and in the transportation lines. 

In Brazil, the biggest oil spill environmental tragedy in the country’s history still has an immeasurable impact. On August 30, 2019, the first crude oil slicks were seen off the Northeastern coast. It ended up reaching 11 states in the Brazilian coast, totaling an area of ​​more than 4 thousand kilometers. After a year, more than 5,000 tons of crude oil were removed from the Brazilian coast, according to the Navy. The investigation was closed without naming those responsible for the environmental crime. As an aggravating factor, it cannot be said that the leaked oil disappeared, experts say. “These smaller fragments [oil slicks] will continue to appear for a long time. And we don’t know exactly how much has been deposited at the bottom of the seas and oceans, nor when or how this material will surface”, declared Clemente Coelho Júnior, a biologist, oceanographer and adjunct professor at the Institute of Biological Sciences of the University of Pernambuco (UPE), in an interview to WWF Brazil.

The bottom line is that oil feeds corruption, propels wars, and accelerates the climate crisis, in addition to threatening the oceans. 

The question that remains, is when will Brazil embark in the energy transition?

Written by Julia Alves, adapted to english by Marianna Olinger. Art by Gabriel Pasin.