Oil and fuel theft: The $133 billion a year scandal

Yousuf Malik

Why doesn’t a criminal enterprise that annually deprives governments of billions of dollars in tax revenues, causes rampant environmental devastation, while also funding some of the most dangerous terrorist and criminal organizations on earth not make the top-100 list of global public-interest stories?

From end to end in the supply chain, hydrocarbons are in a global criminal crisis. Annually $133 billion worth of oil and fuel is stolen, adulterated, or fraudulently transferred at some point in its supply chain.

This is a crime that invisibly touches every facet of our lives but which virtually nobody beyond a small circle knows much about. There is better public awareness about crimes worth far less; sex trafficking is reportedly worth $90 billion a year. Yet oil and fuel theft, smuggling and adulteration is hardly a “victimless” crime that dents the hefty profits of Big Oil . Oil and fuel theft impacts everything—from the environment and public health; business, the economy and jobs; terrorism and organised crime and corruption—not to mention the sheer scale of it.

Annually $133 billion worth of oil and fuel is stolen, adulterated, or fraudulently transferred at some point in its supply chain.

The Cost

Not much is known about the scale of oil and fuel theft from Brazil’s state-owned oil company. PETROBRAS, but 2017 estimates from PEMEX, Mexico’s state-owned oil company, show it loses $1.3 billion a year due to theft. Government revenue loss in the EU due to smuggled fuel is worth anything between €5-10 billion a year. A Turkish police report alone pegs lost tax revenues at $2.5 billion annually. The Irish government claims revenue losses of €250 million a year due to fuel fraud.

The Corruption

In many countries hydrocarbon theft is so widespread that politicians, government officials, military personnel and the police are complicit in organised oil and fuel theft. This makes combating this pervasive criminal activity more difficult; those in a position to curb hydrocarbons crime are the ones benefiting from it. In addition to the billions it loses in stolen crude each year, is estimated that Nigeria loses 30 per cent of refined petroleum products to theft. That said, this is not an issue limited to Africa or the developing world. In 2015 alone hydrocarbons fraud cost the European Union €4 billion in lost revenue, and several countries in Europe have fuel smuggling and adulteration problems that rival those of any developing state.

For the super majors, the theft of oil and fuel and the vast criminal enterprise that underpins this global crime is merely a cost of doing business with unsavoury regimes that govern the nations where much of the world’s oil riches lie buried under the ground or in the depths of the seas. It is an open secret for those in the know. At the global conference in April 2018 on Oil and Fuel Theft in Geneva—a conference attended by 150 senior government representatives from 25 countries—Big Oil was particularly conspicuous by their absence.

When asked why and whether Big Oil was invited, the organisers shrugged, with one staff member saying “we went to great lengths to involve the oil majors—they own the entire supply chain from well to fuel tank—and when we found unexplained resistance we used trusted intermediaries to reassure them that we weren’t leading them into an ambush by Greenpeace activists."

One major Geneva based commodities trading firm said they would only attend “if their names don’t appear on any publicly available attendee list”, he added.

Is it possible, as it seemed, that Big Oil may be complicit? Are they afraid that the extent of their complicity may be questioned or exposed? Their unused badges resting by their lonesome on the registration desk offered no answers.

The Oil & Fuel Theft conference series jointly organised by Defence IQ and Energy IQ is designed to help governments, oil majors, energy industry companies and national security stakeholders understand the scale of the problem and examine ways to combat this menace together. The first conference took place in Geneva on the 18th and 19th of April 2018. The views expressed in this article are those of the author alone and do not necessarily represent those of Defence IQ, Energy IQ or IQPC.