Forget about profiteering—there are dirtier realities still behind today’s rising fuel prices. Forbes reports on “thug capitalists” abroad who are making life miserable for major energy players like ExxonMobil, Chevron and other U.S. extractors besides.

The phenomenon known as the “resource curse” describes the inverse relationship between resource-rich countries and public welfare, with inextricable links between wealth, poverty, conflict and corruption. Organizations like the NY-based Revenue Watch Institute are working hard to create more transparency, security and investment stability in resource-rich countries, getting behind such bills as the Extractive Industries Transparency Act currently before the House.

As governments get rich and the people get nothing, corporations are getting ensnared in corruption, too. Shakedowns, exorbitant taxes, lawsuits and other hassles are increasingly driving U.S. companies out of resource centers including Venezuela, Ecuador and Russia.

Take the case of Arlington, VA-based power supplier AES Corp., a $14 billion firm long experienced in dealing with regimes in developing countries. Setting up mining operations in Kazakhstan started off swimmingly enough, but soon descended into trouble, culminating with an armed assault by local troops. AES got the message—and got out—but the case revealed how extortion can raise the price of energy—which gets passed onto oil clients—and then on to consumers.

The impact in the U.S. continues, with Continental Airlines now retrenching to survive. Chairman and CEO Larry Kellner and president Jeff Smisek just announced cuts of 3,000 jobs, 67 planes—and the rest of their 2008 salaries and incentives—in response to a “business model does not work with the current price of fuel and the existing level of capacity in the marketplace.”

Jeff Heilman

6/6/08