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Crude Awakening: The Global Black Market for Oil

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A Crude Awakening: The Global Black Market for Oil

A Crude Awakening: The Global Black Market for Oil

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.

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.

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% of all fraud in the oil an 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.

Funds cartels and organized crime: The Zetas cartel in Mexico controls nearly 40% 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% in 2007 to 91% in 2013. Ultimately, this resulted in an increase of tax revenue of $300 million between 2010 and 2014.

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Energy

Tesla is Now the World’s Most Valuable Automaker

Thanks to a surging stock price, Tesla is now the world’s most valuable automaker – surpassing industry giants Toyota and Volkswagen.

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tesla most valuable automaker

Tesla is Now the World’s Most Valuable Automaker

Even in the midst of a pandemic, Tesla continues to reach new heights.

The company, which began as a problem-plagued upstart a little over 15 years ago, has now become the world’s most valuable automaker – surpassing industry giants such as Toyota and Volkswagen.

This milestone comes after a year of steady growth, which only hit a speed bump earlier this year due to COVID-19’s negative impact on new car sales. Despite these headwinds, Tesla’s valuation has jumped by an impressive 375% since this time last year.

How does Tesla’s value continue to balloon, despite repeated cries that the company is overvalued? Will shortsellers declare a long-awaited victory, or is there still open road ahead?

Tesla’s Race to the Top

Earlier this year, Tesla hit an impressive milestone, surpassing the value of GM and Ford combined. Since then, the automaker’s stock has continued it’s upward trajectory.

Thanks to the popularity of the Model 3, Tesla sold more cars in 2019 than it did in the previous two years combined:

tesla auto deliveries by quarter

As well, the company is taking big steps to up its production capacity.

Austin, Texas and Tulsa, Oklahoma are currently rolling out the incentives to attract Tesla’s new U.S.-based factory. The company is also increasing its global presence with the construction of Giga Berlin, it’s first European production facility, as well as completing the ongoing expansion of its Giga Shanghai facility in China.

Battle of the Namesakes

Tesla’s most recent price bump was fueled in part by a leaked internal memo from Tesla’s CEO, Elon Musk, urging the company’s staff to go “all out” on bringing electric semi trucks to the global market at scale.

It’s time to go all out and bring the Tesla Semi to volume production.

– Elon Musk

Of course, Musk’s enthusiasm for semi trucks isn’t coming from nowhere. Another company, Nikola (also named after famed inventor Nikola Tesla), is focused on electrifying the two million or so semi trucks in operation in the U.S. market.

Although Nikola has yet to produce a vehicle, its market cap has surged to $24 billion – which puts its valuation nearly on par with Ford. Much like Tesla, the company already has preorders from major companies looking to add electric-powered trucks to their delivery fleets.

For major brands looking to hit ESG targets, zero-emission heavy-duty trucks is an easy solution, particularly if the vehicles also live up to claims of being cheaper over the vehicle’s lifecycle. The big question is which automaker will capitalize on this mega market first?

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Energy

6 Ways Hydrogen and Fuel Cells Can Help Transition to Clean Energy

Here are six reasons why hydrogen and fuel cells can be a fit for helping with the transition to a lower-emission energy mix.

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Hydrogen and fuel cells

While fossil fuels offer an easily transportable, affordable, and energy-dense fuel for everyday use, the burning of this fuel creates pollutants, which can concentrate in city centers degrading the quality of air and life for residents.

The world is looking for alternative ways to ensure the mobility of people and goods with different power sources, and electric vehicles have high potential to fill this need.

But did you know that not all electric vehicles produce their electricity in the same way?

Hydrogen: An Alternative Vision for the EV

The world obsesses over battery technology and manufacturers such as Tesla, but there is an alternative fuel that powers rocket ships and is road-ready. Hydrogen is set to become an important fuel in the clean energy mix of the future.

Today’s infographic comes from the Canadian Hydrogen and Fuel Cell Association (CHFCA) and it outlines the case for hydrogen.

6 Ways Hydrogen and Fuel Cells Can Help Transition to Clean Energy

Hydrogen Supply and Demand

Some scientists have made the argument that it was not hydrogen that caused the infamous Hindenburg to burst into flames. Instead, the powdered aluminum coating of the zeppelin, which provided its silver look, was the culprit. Essentially, the chemical compound coating the dirigibles was a crude form of rocket fuel.

Industry and business have safely used, stored, and transported hydrogen for 50 years, while hydrogen-powered electric vehicles have a proven safety record with over 10 million miles of operation. In fact, hydrogen has several properties that make it safer than fossil fuels:

  • 14 times lighter than air and disperses quickly
  • Flames have low radiant heat
  • Less combustible
  • Non-toxic

Since hydrogen is the most abundant chemical element in the universe, it can be produced almost anywhere with a variety of methods, including from fuels such as natural gas, oil, or coal, and through electrolysis. Fossil fuels can be treated with extreme temperatures to break their hydrocarbon bonds, releasing hydrogen as a byproduct. The latter method uses electricity to split water into hydrogen and oxygen.

Both methods produce hydrogen for storage, and later consumption in an electric fuel cell.

Fuel Cell or Battery?

Battery and hydrogen-powered vehicles have the same goal: to reduce the environmental impact from oil consumption. There are two ways to measure the environmental impact of vehicles, from “Well to Wheels” and from “Cradle to Grave”.

Well to wheels refers to the total emissions from the production of fuel to its use in everyday life. Meanwhile, cradle to grave includes the vehicle’s production, operation, and eventual destruction.

According to one study, both of these measurements show that hydrogen-powered fuel cells significantly reduce greenhouse gas emissions and air pollutants. For every kilometer a hydrogen-powered vehicle drives it produces only 2.7 grams per kilometer (g/km) of carbon dioxide while a battery electric vehicle produces 20 g/km.

During everyday use, both options offer zero emissions, high efficiency, an electric drive, and low noise, but hydrogen offers weight-saving advantages that battery-powered vehicles do not.

In one comparison, Toyota’s Mirai had a maximum driving range of 312 miles, 41% further than Tesla’s Model 3 220-mile range. The Mirai can refuel in minutes, while the Model 3 has to recharge in 8.5 hours for only a 45% charge at a specially configured quick charge station not widely available.

However, the world still lacks the significant infrastructure to make this hydrogen-fueled future possible.

Hydrogen Infrastructure

Large scale production delivers economic amounts of hydrogen. In order to achieve this scale, an extensive infrastructure of pipelines and fueling stations are required. However to build this, the world needs global coordination and action.

Countries around the world are laying the foundations for a hydrogen future. In 2017, CEOs from around the word formed the Hydrogen Council with the mission to accelerate the investment in hydrogen.

Globally, countries have announced plans to build 2,800 hydrogen refueling stations by 2025. German pipeline operators presented a plan to create a 1,200-kilometer grid by 2030 to transport hydrogen across the country, which would be the world’s largest in planning.

Fuel cell technology is road-ready with hydrogen infrastructure rapidly catching up. Hydrogen can deliver the power for a new clear energy era.

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