Here’s an interesting story, well told, about an industrial process that takes refinery waste from the United States (derived from high-sulfur Mexican crude oil), cycles it through Europe, then dumps the result in West Africa.
The company running this racket (or “innovative commodity exchange”, as they call it) is Trafigura.
Learn more here:
- Coker gasoline
- A small pawn in the game
- Vast Tank sweetens gasoline
- BBC Newsnight on Trafigura’s dumping
Here’s a quick summary:
- An arbitrage opportunity exists for energy traders based on differing regulatory frameworks in rich countries and poor ones.
- A chemical process can turn a waste product in one jurisdiction into two outputs, gasoline usable in a lenient jurisdiction (West Africa), and the waste extracted from the original product.
- If you buy one ship of high quality gas, you can dissolve the waste stream from several other tankers of coke gasoline into it, meaning that you can dispose of the waste stream by getting your customers to burn it for you in their cars.
- A clever and immoral company can take advantage to squeeze profits where others just saw costs. The profits come from the externalities of burning high-sulfur gasoline (decreased longevity due to sulfur-rich smog)
- None of this is precisely against the law. Tanfigura and it’s contractors made minor infractions here and there, playing fast and loose with the rules. But what they are doing is fundamentally not illegal — though it should be.
- Trafigura was working towards, or achieved, the ability to reprocess this stuff at sea, likely to further reduce the power of regulators over their work.
How much other stuff like this is going on? Who are the people that organize and operate this kind of thing? How do they sleep at night?