While a rising climate movement is demanding an end to the world economy’s dependence on hydrocarbons, oil consumption continues to increase, creating ever more dangerous conflicts.
Following the recent Yemeni attacks on Saudi Arabia’s Abqaiq oil facilities, Brian Parkin explains some of the contradictions of the energy markets and the process of US imperial decline in an era of climate catastrophe. He argues that we are now entering a new historical phase within late capitalism: an era fraught with barbaric danger, but one in which there is also still a world to win.
Oil: thicker than blood
On 14 September 2019, Houthi ‘rebels’ in Yemen launched drone attacks on the massive Abqaiq oil facilities in Saudi Arabia. The US supported Saudi claims that Iran was behind the attacks. The Saudi/UAE and US-sponsored war against Houthi ‘rebels’ in Yemen has gone on for five years. The famine caused by a land and sea blockade has been described by UN observers as, ‘the biggest human-made disaster in decades’. Five million people from a population of 22 million now endure malnutrition to the point of starvation. The most sophisticated and devastating weaponry available, supplied the US and UK, has been brought to bear on mainly undefended civilian centres.
For Saudi Arabia and its Gulf Cooperation Council allies, this is a war by proxy against Iran. Iran, in the view of the GCC represents an ever-present threat to its deeply conservative regimes. Sectarian divisions between the Shia Islamic republic of Iran and the Sunni monarchies of the Gulf are shaped by wider geopolitical rivalries. Since 1945, the US – and to a much lesser extent, the UK – have acted as guarantors for the Gulf states in exchange for almost exclusive access to the region’s vast hydro-carbon (oil and natural gas) resources. Meanwhile, ever since the Iranian revolution in late 1979, Iran has remained the one state in the wider Middle East beyond the influence and control of the US.
So much will be generally understood by readers of this webpage. But perhaps what is less understood is the formidable ranking of Iran in terms of its oil – and particularly gas – reserves which ensures its long-term presence as a big global player in the energy markets. As a radical republic amid a sea of despotic monarchies, this also marks it out as an ever-present threat. According to three major intelligence sources: the International Energy Agency (IEA), the Organisation of Petroleum Exporting Countries (OPEC) and the US Central Intelligence Agency (CIA), Iran has the fifth largest oil reserves and the biggest natural gas reserves in the world.
To further complicate the picture, Iran is a fully paid-up member of the OPEC cartel – and a neighbour of the oil-producing former Soviet republics on either side of the Caspian Sea, in the Caucasus and Central Asia. Furthermore, it is an open secret that Iran has long acted as a proxy for Russia on the OPEC council, in exchange for which Iran continued to obtain refinery technology support during the years of the international and later US unilateral economic embargo.
Since assuming office in February 2016, Donald Trump has talked tough about his intentions to isolate and eventually bring down the Iranian regime. However, US petro-imperialism is now faced with profound and dangerous contradictions. The most existential is the contradiction between the expanding consumption of hydrocarbons and the life-systems upon which the entire capitalist system and all of us, unlucky enough to live under capitalism, depend.
This article has three parts. The first deals with the apparent paradox of rising fossil fuel consumption in an era of climate catastrophe. The second explains the relationship between oil prices and the world economy, and the third charts the terrifying endgames of US petro-imperialism. The conclusion reasserts the need for an international socialist solution for humanity in which the metabolic rift can be healed and humanity freed to pursue its true fulfilment.
The contradictions of fossil capital
Industrial capitalism came into being via the motive energy mainly realised from the combustion of carbon fuels. Had not carbon fuels – initially in the form of coal – been available, then proto-capital would have destroyed all that was arboreal and combustible, and having destroyed the forests, that would have been that. But as a mode of production dedicated to the creation of value, capitalism is rather more complicated: it needs human labour power from which it can realise surplus value as profit.
In 1875 the German Social Democratic party produced its world view and manifesto in the Gotha Programme, which defined labour as the ‘source of all wealth and all culture’. Karl Marx regarded this founding comment as both vulgar and unscientific, and in his Critique of the Gotha Programme, he reminded his German comrades that capitalism and its realisation of value came from the exploitation of both nature and labour.
Throughout much of their lives Marx and Engels stressed how capitalism would ‘rob’ and would ‘work to death’ both the soil and the human sources of labour, were it purely confined to short-term gain. For both of them the degraded relationship between humankind and nature caused by capitalism’s ‘metabolic rift’ constituted an almost spiritual damnation on capital regarding the scale of its corrupting plunder.
Human industrial activity has created such profound change to the atmospheric and marine systems that make up our unique planet’s biosphere and its intricate eco-systems that a new geological era has now been recognised: the Anthropocene. Capitalism – a mode of production hitherto fuelled by a combination of sedimentary carbon, other natural resources and alienated and degraded human labour power – is now taking our planet to the limits of sustainability. We understand why, we understand how. And we also have the science that informs us how to stop it and with what we replace the present mode and methods of production.
144 years on, capitalism still displays the tendencies Marx and Engels decried. The system is well past its sale-by-date, yet it continues to rob nature and labour unabated. We are now within sight of the irreversible ruination of the planet’s intricate ecological balance. Yet capitalism, despite its many technological and organisational morphings, remains the contradictory entity it always was – pock-marked by crises. Its insatiable drive to accumulate and extract profit remains its sole imperative, while its prospective gravediggers have multiplied a billion-fold.
It is possible to conceive a significant decrease in fossil fuel consumption over the coming decade, but it is likely that the organic and symbiotic relationship between capitalism, the state and petro-imperialism will persist until challenged by massive social forces. It is important to emphasise that this is despite compelling evidence that both coal and natural gas – the fossil fuels most favoured in power generation – are about to lose their economic advantage over renewables. While oil offers little in the way of an electricity generation fuel, we are also beginning to witness the process by which falling costs of renewable sourced power will render petroleum fuels obsolete for all but aviation transport.
These trends are understood within the more enlightened echelons of energy-capital. A good deal of market analysis appreciates the risks of the carbon bubble. According to capitalism’s own logic, it would appear to make investment sense to adopt an aggressive renewables primary energy strategy now. Based on the speed at which zero-carbon energy technologies are currently advancing and the shorter rates of return they offer compared with large fossil-fuelled and nuclear power plant, the changes are already underway: massive energy plant manufacturers such as General Electric in the US are now falling behind retail corporates for investor choice.
In two reports intended to advise investment bankers and capital funds, the declining costs of renewables against longer and lower rates of return in fossil fuel power generation showed a rapidly approaching intersection whereby solar and other renewables would, on investment terms, become the technologies of choice.
The report 2020 Vision: Why You Should See the Fossil Peak Coming (Sept 2018), points to the historic example of nineteenth century Britain, when the newly developed canal system coincided with the entry of a new-fangled steam railway system, with the result that overnight, nobody retained their financial interests in canals anymore. Fast-forward to 2019, and the fall in renewables costs makes further investment in fossil (and nuclear) generation a bad bet.
Meanwhile, the report New World: The Geopolitics of Energy Transformation- a report by the Global Commission on the Geopolitics of Energy Transformation (January 2019) argues that a global shift from fossil fuels to renewables is already underway, with significant implications for geopolitics.
But if a global energy transformation is underway, it is a highly contradictory one. In the same period, Barack Obama has boasted that the opening of the environmentally disastrous Canadian-US tar sands pipeline made the US a bigger hydrocarbon producer than Saudi Arabia and Russia, only to be followed two years later by Donald Trump announcing federal funds to restore the fortunes of the US coal industry.
Meanwhile, Exxon/Mobil has announced that due to tundra thawing out in the Arctic Circle regions of Alaska and Canada, they have received government consents to commence year-round exploration drilling for oil. In the UK the North Sea offshore companies have announced an advanced West of Shetland drilling programme to run to and beyond 2030. Back in the US (according to analyst Rakesh Sharma) the lifting of the decades-long ban on US crude oil exports has seen (by October 2019) the US increase output by 10 million barrels per day – much of it from shale gas – and has consequently become a major oil exporter. Following the Yemen drone strike the US EIA in mid-October stated that it: ‘does not see any drop in demand for most fossil fuels between now and 2050.’
Of course, some policies of mitigation within capitalism, have been tried, tested and implemented with marked degrees of success. Combustion protocols regarding acid rain precursors have become more or less applied internationally – as have ozone-layer depleting CFC and HCFC bans. However, such remedial measures dealt with real-time, and often small-scale emissions sources, where mitigation was both affordable and well within the scope of available technologies. If we turn to the broader picture of fossil fuel consumption, we see something deeply perverse.
In terms of CO2 emissions by source, electricity production shows the greatest potential for fossil-fuel reduction, with petroleum taking up a very small share (see table 1).
Table 1: Electricity generation by energy input (2018). Source: International Energy Agency 2019.
|Energy/fuel input||World %||Carbon content %|
Natural gas is the only fuel showing a growth in power generation use. Coal remains static – with an increased application of carbon capture – particularly in China. Nuclear is in decline and renewables have shown an increase of some 35% over the past decade.
The relatively small role of oil in power generation is significant in that for many environmentalists, power stations are symbolic – often to the exclusion of all other energy activities – as the main source of CO2 emissions. In actual fact, this is the area in which renewable energy is making – and promises to make future major gains; at the moment filling the capacity gap as nuclear energy falters and fails. But what is also not realised is that although coal-derived power appears to remain static, it is another fossil fuel – natural gas, with its 65% carbon content that is filling capacity demand – and in the process giving apparent and climate-denying credibility to the argument for future rampant shale gas extraction.
Oil, with very little in the way of being a power generation fuel, is mainly refined into road transport fuels including distillates for diesel and ‘aromatics’ for aviation fuel. Table 2 shows current (US) petroleum products.
Table 2: Refined products from crude oil (2018 – US). Source: American Petroleum Institute 2018
|Product||% of barrel|
|Distillates (diesel, etc.)||20|
If we confine the projections for world oil demand to the 2019 IEA Central Demand Forecast we see almost irrespective of the state of the world economy, demand has increased annually at a rate of approximately 90 million barrels per day. This can be demonstrated by the sample data presented in table 3.
Table 3: World oil demand by selected year. Source: IEA World Energy Outlook 2019
|Year||Overall demand (million barrels per day)|
It is true that the IEA demand forecast to 2020 has adjusted demand slightly downwards from 1.4 million barrels per day to 1.1 million barrels per day due to anticipated slow-downs in the growth forecasts for India and China. But this small dent in oil demand growth aside, we should consider what the business-as-usual scenario is currently doing in terms of carbon release into the troposphere (table 4).
Table 4: Oil consumption and carbon released to atmosphere global 2019. Source: IEA 2019
|Oil consumed per year (2019)||36,719,000,000,000 barrels|
|As tonnes @ 7.33 barrels per tonne per year (2019)||5,009,413,369,700|
|Tonnes carbon emitted @ 85% carbon content||4,258,413,369,700|
This 4.3 Giga-tonnes (4.3 trillion tonnes) of carbon emissions from the present year of petroleum consumption alone will go to augment the accumulations from previous centuries which due to saturation levels, will take up to 200 years to decay through absorption into the oceans – oceans which by now are acidifying to levels destructive to hard, soft corals and phyto-planktons.
Yet, despite this damning and overwhelming evidence, the various energy intelligence sources – the IEA, OPEC, the American Petroleum Institute (API), the US Energy Information Administration (EIA) and others – all point to an expected rise in petroleum consumption within the economically viable horizons of current and anticipated reserves extraction.
Oil remains the imperative defining commodity within the world imperialist ‘project’. There is little – if any reason – to believe that the impulse to abandon hydrocarbon usage will come from within the power bases of carbon capitalism itself. That role will have to be played by the gravediggers of capitalism – the working class.
The next two sections of this article will explain first the machinations and intrigues of the global hydro-carbon markets, and then the role of US petro-imperialism, in prolonging – for now – our descent into climate chaos.
Madness, markets and manipulation
The global energy market can be divided into two parts: the upstream ‘hardware’ part of exploration, extraction, refining, distribution and delivery to the point of sale. Then there is the ‘software’ part of the politics of franchising, cartels, oligopolies, licencing, investment, speculation, risk assessment, insurance and market skulduggery. The two parts are symbiotic and they operate at a stratospheric level of an energy political economy far beyond the comprehension or control of many sovereign governments, let alone democratic accountability.
Both find expression and some degree of public visibility in the market. That visibility only ever manifests itself as an outcome in fuel prices, shortages or, at some point, wars. Oil, as the world’s primary commodity that no economy can do without, is both determined by world economic conditions and at the same time determines how that world economy can run. Output falls, and the price rises with energy costs impacting on national economies. Or demand exceeds production capacity, with similar effects. Conversely, if demand falls, then the producer states cut back on output to maintain the price irrespective of the impact on economic growth.
The International Energy Agency – the energy watchdog of the UN – tries to exercise some moderating influence over market movements by ensuring nation states maintain at least 90 days’ strategic petroleum stocks- as well as ensuring some uniformity of freight rates and reserve estimates transparency. But beyond these functions, it is powerless to influence what is essentially a speculative and rogue market.
All fossil fuels – oil, condensate, natural gas and coal – are pegged to $US denominated daily traded oil prices. The daily traded oil price is called the spot market price, which is determined by the slightest fluctuations of availability, shortages, freight charges, tanker maritime insurance rates, high seas weather conditions, political shifts within producer states and the general mood of the global political economy. And although the spot market accounts for less than 25% of globally traded oil (and gas), it forms the daily nervous reflex system controlled by trader speculation, cocaine mood and avarice.
The contract market for oil involves ‘long-term’ (i.e. usually one year plus contracts) struck between producer state oil companies or their designated contract producer (for instance Shell in Nigeria) and a refinery company and/or distributor in a consumer country. Although this market is usually regarded as stable, contract prices are inevitably influenced by sustained spot market volatility. For this reason, the main producer will enjoy a force majeure clause that allows for contract cancellation in the event of significant shifts in market conditions, or in-built escalator clauses, which allow for automatic price rises or base price guarantees and/or contract re-negotiations.
However, when major supply interruptions occur – usually at strategic ‘choke points’, mostly in the Middle East, Persian Gulf region – then all markets are subject to sudden upward price movements influenced by supply uncertainties. This is particularly true in the case of the present Yemeni drone attack situation where the sudden loss of 50% of Saudi processed oil, representing some 7% of total world traded oil is exerting an upwards oil price pressure across all oil grades and all market sectors.
In the meantime, traders were advised by market analysts Bloomberg on 19 September to sell shares in rising oil and divert profits from a risky oil market as a hedge in declining equity markets in order to realise even greater profits. As ever, the market dictum of sell high and buy low applies – for those with equity in the first place, of course.
So, the market conditions following the 14 September attack have seen an immediate increase in the prices of the two main ‘marker’, grades of oil: West Texas Intermediate (WTI) and Brent, but with most Middle East and other crude grades unaffected so far.
Table 5: Post-14 September major crude grade prices. Listed 20 September Nymex. Source: Oil.Price News/Bloomberg 20 Sept 2019.
|Grade||Price $US||$ change||% change|
|Bonny light (M East)||64.92||-0.23||+2.27|
What can be seen from table 5 is that the actual rise in crude prices after 14 September has been quite low, and what is more, more pronounced with non-OPEC grades. Also, the rise in crude generally across the wider market of some 120 crude grades has been less than 1%, with most OPEC- and former USSR producer prices actually falling.
Meanwhile, immediately after the attack, petroleum markets analyst Michael Kern put the output loss from Abqaiq at 5 million barrels per day, representing some 50% of Saudi processed crude. Assuming that the processing plant could be put back in order within about one week, Kern regarded the 20% oil price peak as a sign of ‘nervous’ and probably short-term speculative market reflexes.
However, he did make some back-of-a-fag-packet calculations regarding a longer-term outage of the Saudi plant (table 6), taking into account the ‘top-up’ quantity of strategic stocks stipulated by the IEA on the basis of a minimum 90 days of average consumption.
Table 6: Market scenario in the event of protracted Abqaiq capacity outage. Source: Michael Kern, ‘$100 oil? Drone strikes halt half of Saudi crude production’, Oil.Price News, 14 September 2019.
|Abqaiq capacity as % of world processed crude||7%|
|Abqaiq daily production||5 million barrels per day|
|Abqaiq monthly production||150 million barrels per month|
|Required global strategic stocks (IEA)||155 barrels per month (equivalent)|
So, while rises are currently minor, in the event of an outage, of say 6 weeks, then depending on global demand, marker price rises of WTI to $75 per barrel and Brent to $80 per barrel would be possible. On the basis of current world crude production an extended outage of 50% of Saudi capacity would run global strategic stock levels down to a margin of 5 million barrels per month well below the IEA strategic safety level. Of course, this is all speculative and other producer states would be all too willing to fill that gap. However, this would be at a price: a $100 per barrel scenario that Kern anticipates would be a real possibility within 3 months.
The Saudi outage – although seemingly small in comparison with overall global capacity, does show how market speculation, producer pressure, geopolitical events, supply margins and choke-points render global security of petroleum supply so vulnerable. Additionally, declining growth rates of most leading economies would suggest that even a moderate oil price shock could heighten the already visible signs of an impending world recession.
However, within two weeks of the drone strike and the 16 September 20% oil price peak rise, the ‘nervous’ market – so attuned to micro-seismic movements and political whispers – has resumed business-as-usual marker prices at pre-drone levels.
The doom-laden description of US Energy Secretary Rick Perry, of the drone strike as a declaration by Iran ‘on the world’s entire energy economy’ now sound as empty as they were bellicose. OPEC prices have remained stable, Saudi war-talk has become muted and Trumps wish-list of a US-led alliance with the Gulf Cooperation Council states and Israel against Iran remains on hold. Also, the previously arrested tankers of Gibraltar and the Hormuz Straits have now sailed on with tanker traffic capable of handling up to 23% of the world’s traded crude through the Straits of Hormuz back to normal.
So what might be happening? First of all, the Yemen Houthi drone attack on 14 September may in itself have revealed a deliberate attack on Saudi Arabia’s Achilles heel: its seriously deficit economy, which in 2016-17 was running at 20% of GDP.
Hence the much-vaunted Initial Public Offering of the Saudi state-owned oil corporation ARAMCO. The Financial Times front page on 20 September showed Pakistan’s prime minister Imram Khan in the embrace of a smirking Saudi crown prince Mohammed ben Salman as part of an IPO pressure campaign intended to effectively force selected buyers (and ‘favoured’ petroleum dependent states) into the $US trillion ‘floatation’. It now seems that the IPO – the biggest corporate ‘sale’ in history –might be completed by the end of November.
Also, by 27 September Oil.Price News – one of the most reliable petroleum intelligence sources, was anticipating a Yemen war ceasefire with a possible UN-brokered ceasing of hostilities within the year. Whatever the validity of such news, it was enough to stabilise oil marker prices downwards (table 7).
Table 7. Source: Oil.Price News, 27 September 2017
|Grade||Price per barrel||Price rise $US||Price rise %|
*Quoted Nymex close of trade 26 September 2019.
Obviously, despite the economic, political and historical factors driving the present crisis, it would be unwise to suggest that the drone strikes of 14 of September are going to form the pivot upon which a wider global conflict might hinge. But at the same time, it would be foolish to deny signs such as this that we are moving into a new and dangerous era: an era marked with hegemonic disintegration encircled by a potentially unstoppable climate crisis. The terrain on which the climate emergency unfolds, or is finally confronted, will be shaped by the unravelling of US petro-imperialism.
The endgames of US petro-imperialism?
Spheres of influence
Oil has been and largely remains the basis of contemporary and post-colonial imperialism. Prior to the oil age there had been imperialist energy wars over coal: between France and Germany over the reserves of the Alsace and Lorraine basin, and later over the western reserves of the Saar, to be followed by Nazi Germany’s coveting of the Silesian coalfields. In the same decade, there was Japan’s seizure of the Manchurian coalfields as part of its booty from the invasion of China. But in the background was the rise of the US as the world’s pre-eminent imperial power. The US had overtaken the UK in industrial output by 1903 and growth and by 1913, on the eve of World War One, it had overtaken Germany to become the worlds’ greatest industrial nation. The age of US imperial dominance was to be an era of petro-imperialism.
An early foray by the US into other people’s oil dates back to the Rockerfeller Standard Oil adventures in the early 1900s. The proximity of a fast-growing US market rendered Mexico an almost client state as Standard Oil virtually dictated its own exploration and extraction licence terms. But prior to Standard Oil’s Mexican franchise, vast reserves of oil under US soil had already been discovered: starting with the Titusville strike in Pennsylvania in 1859, reserve finds in Oklahoma and the western anticline of the Rockies in California sometime later. By the late 1890s, the US was already confirmed as an abundant oil self-sufficient economy.
But it was probably the 1901 Spindletop strike in West Texas that confirmed the US as a petroleum power. And until the emergence of an oil price structure, it was the oil-awash US that set the traded oil price by the daily freight rates of the Texas Railroad Commission.
US imperialism has not been a seamless, pre-ordained and ideologically coherent project. Just as people make history in circumstances beyond their choosing, so too must the smart-ass cabals of the ruling class. But it remains the case that across much of the twentieth century, US imperialism successfully exploited the accidents of uneven and combined geological distribution to extend and maintain its dominance over the world economy.
The Nazi invasion of the USSR in June 1941 did have as a key objective the oil-fields of the Caucasus, but it was only later with the terms of the post-war settlement, and the confirmation of US hegemony, that petroleum became a decisive factor in the determination of the fault-lines of future imperialist conflict. In June 1944 at the Mount Washington Hotel in Bretton Woods, New Hampshire, US, representatives of 44 ‘allied’ nations met to consider the terms and mechanisms on which the post-war western economy would be run. Arising from this conference- and mainly on the terms of its US host- was the decision to set up an International Monetary Fund, a proto-World Bank and establish the US dollar as the world’s reserve currency fixed against a gold standard of $25 per Troy ounce of gold.
Around the same time allied leaders of the US, the USSR, Britain and France had been meeting respectively in Casablanca, Yalta and Potsdam in order to divide the post-war world into what would be three ‘spheres of influence’. Put simply, the US would have its sphere of influence over the North and South American continents, plus a vassal-state in Japan. The USSR would have its own territories plus a ‘reasonable’ range of buffer states of the eastern Baltic and Eastern Europe. For the UK, its empire and dominions would eventually become members in a non-colonial ‘sterling zone’, although the US reserved the right to be antipathetic to even medium-term colonial empire.
Of course such a set of arrangements, by failing to take into account the desires and aspirations of the subject nations, was ultimately bound to fail – as the many post-colonial wars of national liberation were to prove. However, the US, and in a clearly subordinate position, Britain, remained determined to maintain a military protection racket over the world’s key energy hub. So the US, with its 1945 Saudi Bitter Lake agreement, and Britain, with its hi-jacked territories of Iran, Iraq and Kuwait, nonetheless awarded themselves the stewardship of much of the Middle East, along with the installation of a watch-dog Zionist Israel.
Axis of the awkward
The inherently unstable set of imperialist arrangements that the US set up for the post-war Middle East held with increasing degrees of uncertainty until Israel began a programme of outward armed expansion from 1967 onwards. With western sponsorship, the settler colonial state of Israel, up to a point, fulfilled its guard-dog role in the face of Arab nationalism and unresolved post-colonial conflict. At the same time, an underlying reality of the region was the growing importance of its oil reserves and the extent to which this sovereign wealth had fallen into the hands of seven US-UK oil corporations- the ‘Seven Sisters’ – Esso, Chevron, Gulf, Mobil, Texaco, BP and Shell. So irrespective of political differences and alliances, in 1960 the OPEC cartel came into being.
The economic and political influence of the petroleum giants should not be underestimated. In good times with high demand and low extraction costs, returns on capital for these companies can be as high as 25%. And even in those short low market spells, a return of 10-15% can be expected. Also, by acting as front-line energy brokers for national governments, their influence regarding foreign policy and military strategies can be awesome.
Originally four Gulf states (Iran, Iraq, Kuwait and Saudi Arabia), joined by Venezuela and later Ecuador, combined forces with the view to exerting influence over the oil corporations, while at the same time maintaining a sustainable revenue stream by controlling output in order to maintain the oil price. Subsequently, post-colonial settlements have seen Algeria, Angola, the United Arab Emirates, Libya, Qatar, Nigeria, and since 1990, Congo, Equatorial Guinea and Gabon, join to expand OPEC to 15 states. Indonesia is also an associate member. The principal condition of OPEC membership is overwhelming reliance on oil exports for overseas earnings, and thus maintenance of a balance of trade surplus.
In order to control rates of extraction and ensure licence oversight, the OPEC states set up their own oil corporations – such Saudi Arabia’s ARAMCO, whose Abqaiq subsidiary processing plant was the target of the recent drone attacks. It is these state oil and gas companies that have ensured the flow of revenues into state treasuries – or as often as not – colluded with the oil corporations in the real currency of the global carbon economy: corruption.
Despite continued US patronage, the Arab Gulf oil states have proved to be less than grateful at times of US need. The Israeli-initiated 1973 Yom Kippur war came at a time of US humiliation in Vietnam and amid an economic crisis which endangered $US pre-eminence on the world money markets. Yet a Saudi-Iran inspired OPEC oil-squeeze in revenge for Israeli aggression saw the world oil price rise five times over in as many days. The $US collapsed as the world reserve currency, forcing it to decouple from its denominated $25 per ounce gold standard, and as a balm to an overheating global economy, $US were poured on troubled oil waters to buy off OPEC with the creation of the Petro-dollar.
Already in 1960, the formation of OPEC had showed how fragile the balance of US influence over the Middle East producer states was. Subsequently, OPEC has continued to exact the maximum revenues for its oil insofar as demand conditions permit. The slenderness of the world’s daily maintained stocks mean that, depending on prevailing economic conditions, the withholding of production to raise prices can exert severe strains on the world economy (table 8).
Table 8: Global distribution of known oil reserves (2018)
|Region||known % resource||current production %|
|Middle East (including Iran)||42||33.3|
|South East Asia||3||8.7|
It should be noted in the above that All OPEC includes most of the Middle East producers plus Iran. Also Ecuador and Venezuela of S America, Indonesia of S East Asia and 6 African member states in ‘Others’.
The continued dominance of OPEC has seen the US attempt to play divide and rule with the cartel – most notably with its seven decades of bank-rolling, defence underwriting and unconditionally apologising for Saudi Arabia and its fellow Gulf despot states. At the same time, the US has attempted to strike a balancing act by combining its OPEC appeasement with continued support for its Zionist settler-state Israel.
Meanwhile, since 1979 and with the exception of the Obama years, Iran has featured to a greater or lesser degree as a member state in an ‘Axis of Evil’ for the US State Department and Pentagon. Iran has had a long and complicated association with petro-imperialism. Initially, this was at the hands of the British, with the establishment of the Anglo-Persian Oil Corporation (APOC) at the beginning of the twentieth century (later renamed British Petroleum).
When the democratically elected government of Mohammad Mossadegh nationalised the Iranian oil industry in 1952, the UK and US conspired to ensure his overthrow in 1953 and the installation of a hated client regime under the despotic Mohammed Reza Shah Pahlavi. After the latter was toppled in the revolution of 1979, during which the staff at the US embassy in Tehran were humiliatingly paraded through the streets of the city, US petro-imperialism was now confronted with a powerful state in the Middle East that was beyond its control.
After 1979, the US continued its divide-and-rule strategy within OPEC. It first backed Saddam Hussein’s Iraq in its brutal war with Iran, before invading Iraq twice, having imposed years of devastating sanctions on the country in between. It continued its backing for the reactionary monarchies of the Gulf, while continuing to support Israel’s wars on the Palestinian people and neighbouring Arab states.
But at the same time, US strategists looked for ways to displace OPEC altogether in its role as arbiter for the traded price of the world’s leading energy commodity. In recent years, the development of a domestic shale fracking industry has come to play an important part in that strategic vision.
In the late twentieth century, following the collapse of the Soviet Union, US dominance appeared beyond challenge. However, predictions of a new American century soon looked hubristic. The relative decline in US industrial production has been evident for more than two decades. Living standards have been falling and the marginal socio-economic gains and rights of the late 1970s won by people of colour have been in reverse gear for over 20 years.
A string of military defeats and stalemates in often wildly asymmetrical conflicts has weakened the US just as Chinese economic power has begun to be felt on a global scale. The US handling of the war in Syria, first allowing Russia and Iran to turn Assad’s brutal regime into a client state, and now abandoning its erstwhile Kurdish allies to Turkey underlines the extent to which US control of the Middle East has loosened.
Waning US military and diplomatic influence in the Middle East provides an important context for the strategic importance US state managers attached to the domestic shale fracking boom. Here it is worth noting that in stating that the US is not dependent on oil supplies from the Middle East energy hub, Donald Trump is probably for the first time, stating the truth.
The US itself has never had the strategic need to import crude oil. Nonetheless, it has suited some sections of the US petroleum industry to import cheap oil. Some US refineries on the Gulf of Mexico have for a long time imported low quality crude from Venezuela, and despite attempts by the Trump administration to isolate and overthrow the remnant Chavista regime, four refineries continue to take its cheap crude despite official sanctions. More fundamentally, US strategic control over the Middle East energy hub helped prevent other imperial rivals from taking its place. But the increasing difficulty the US was experiencing in the Middle East, and the coincident appearance of a native US fracking industry has opened up the opportunity for a strategic pivot in US petro-imperialism.
In late 2014 Saudi Arabia led OPEC into a huge over-production gamble with the naked attempt to destroy the economic rationale for the emergent high-cost US shale fracking industry. Bringing about the wrecking of over $3 trillion shale exploration and production investment, it partially succeeded. This short and bloody market tussle was no mere spat. Behind it is a long developing fight in which US strategists have sought to use US shale reserves, along with the ability of the US as the world’s biggest hydro-carbon market, to switch on and off its demand for imports of crude that it never had any strategic need for anyway.
The US fracking industry was able to bounce back quickly from the 2014 price crash – due in large part to the bigger oil companies buying up fracking ‘pads’ and other associated equipment at bankrupt stock sale prices. This allowed fracked oil (and gas) production to resume an upward level of production from early 2018 onwards. This, plus the end of the oil export embargo has seen the US rise almost overnight into the world export league to number 4 position (table 9).
Table 9: Top 10 exporting countries (Jan 2019). Source: US Energy Information Administration.
|Country||% world exports||million barrels per day|
|TOTAL TOP 10||70.2||34.79|
|Of which OPEC||45||23.11|
*Denotes OPEC membership.
The entry of the US and Canada into the top ten of exporters, though no mean development, hides two medium- to long-term factors. The first is that much of the new oil is derived from Canadian tar sands which has both a high mineral/heavy metal content. This leads to the second factor, which is that refinery and pipeline transit costs are high. Current reserve estimates also suggest North American petroleum reserves may be short-lived compared with those of the Persian Gulf, although oil and gas reserve estimates are notoriously unreliable, as well as often being matters of state secrecy.
However, Rakesh Sharma believes that the US by entering the export market is hoping to deny OPEC the role as the major arbiter regarding the international oil price-which it exerts either by cartel production cuts- or by Saudi Arabia using its vast reserves as a ‘swing’ factor in being able to withdraw production from any one of its three known vast ‘elephant’ fields. But although unable to exert an overall influence on traded oil prices, it is by operating at the market margins that the US hopes to drive a wedge between the smaller OPEC producers and Saudi Arabia.
So, while the US may not need to import crude oil, it is nevertheless a persistent fact in global energy economics that the US continues to be a major importer of crude oil (table 10).
Table 10: Top oil importers of crude oil by global % 2018. Source: Bloomberg.
|Country||% world imports|
*Imports to the Rotterdam Spot Market for refining and delivery to mainly EU member states.
Also, despite the anti-OPEC paranoia of post-1973 oil-shock administrations, imports from the cartel continue to make up a significant part of crude imports to the US (table 11).
Table 11: Crude oil imports to US by origin. Source: World Economic Forum 2018.
*Mostly tar sands bitumen for US refining
**Denotes OPEC membership
The increase in US oil production in combination with its entry into the major export league has had the effect of stabilising world traded prices via an overall over-production in relation to market demand. In turn, this has had the effect of maintaining global petroleum consumption at a time when growing climate-awareness could have been leading to a drop in demand. However, in order to maintain an optimum revenue flow via a higher oil price, OPEC has successfully reined in its two renegade members who had been breaking cartel sanctions in order to get revenues at any cost or price: Iraq and Nigeria.
For the time being, OPEC seems to have regained the upper-hand in dictating world oil prices. But due to emerging global economic trends this will only be for a short while. In July this year (2019) the IEA in considering a wide range of economic indicators, adjusted their global energy demand forecast. Previously and based on moderate growth within the international economy, oil output growth as of January 2019 was projected at 1.4 million barrels per day. However, with an economic review at the beginning of October (2019), the forecast was revised downwards to 1.1 million barrels per day a drop of around 19% by 2020 end.
The projection for 2019-20 was itself a downwards figure from a trend that had shown a growth of 1.8 million barrels per day and was largely based on sensitivities within the energy economy most likely to influence the price of traded fuels. Typically, these would be:
- A strong $US
- High OPEC production
- High US production
- High US inventories (stocks)
- High global stocks
- Weak global demand*
- High levels of speculation
In this scenario, weak global demand would mean marked rates of slowdown in the Chinese and Indian economies which throughout the previous decade accounted for around 20% of global oil demand increase.
From a Marxist standpoint, economic predictions are to be avoided. However, from the above it should be clear that the commodity upon which US global-reach imperialism has been predicated is becoming an increasingly degraded and precarious currency. In a context where Ecuador and Libya are the only OPEC members able to rely on other commodities for more than 50% of their export earnings, the rest of the petro-cartel will be fighting like hell to obtain a sustainable price for their only and very finite global commodity. Meanwhile, the US strategy to bypass OPEC through the expansion of domestic fracking is quite literally built on sand.
Given the unfolding climate catastrophe, this is clearly the moment to call time on US petro-imperialism altogether. But this won’t happen automatically.
Oil drums of war?
Trump’s populist-nationalist slogan of ‘Make America Great Again’ suggests that a significant section of US capital and its more plebeian electoral base has already accepted that America is no longer great. However, the seemingly endless number of ill-chosen military contests that have ended in messy score-draws or humiliating defeats, has done little to weaken the appetites of the military-industrial complex and its ever-intrusive but inept intelligence ‘community’.
With little or no external threat to justify it, the US military budget has long-since gone through the roof. Since the end of the Cold War, the US has failed to ratify – or has opted-out of treaties regarding landmines, cluster bombs, the Law of the Sea Treaty, the International Test ban, the International Criminal Court, the INF Treaty on intermediate range missiles, the Human Rights Council, the Iran Nuclear Deal – and of course, the Paris Accords on Climate.
During the same period, the US military budget had assumed a grotesque 60% of the entire US federal budget each year since 2014. Currently the US spends on defence more than China, Saudi Arabia, India, France, Russia, the UK, Germany and Japan combined. And within the near four-year span of Donald Trump’s presidency, arms-spending has increased by $100 billion.
At the present time, the US has more men and women under arms than at any time since the Korean War. Due to ‘pork-barrel’ procurement policies by which any Congress man or woman can be bribed with the promise of part orders for new aircraft carries, missiles, bombers or radar systems jobs in his or her particular state, the size and complexity of defence ‘goods’ has grown well beyond the actual needs of the armed services.
So, the new orders continue to roll in: battle tanks for the army, $13 billion President-class aircraft carriers for the US Navy, and hundreds of $100 million F35 fighters for the air-force. All are high radar signature and effectively obsolete ‘legacy systems’ in an age of smaller, cheaper, stealthier cyber-warfare technologies. Wars are increasingly fought via ground-air-satellite AI command software that direct mainly unmanned delivery platforms: this is a procurement programme for lubricating the sweaty political palms of today with orders for machines only fit for the battles of yesterday.
Simply put, the US, as a power of declining economic and diplomatic authority, is set to become an over-armed imperialist second-rate gas guzzling menace. The reality that hydrocarbon fossil fuels have to be eradicated from the worlds’ economy as a matter of the gravest ecological urgency is ignored or denied. Recognising it would be to deny the principal raison d’etre for the US’s military imperialist behemoth.
The insanity of the endgames of US petro-imperialism takes ever more extravagant forms. While the whole security establishment remains fixated on a post-9/11 Islamic threat centred on the worlds’ main energy hub, a president un-matched in vanity and bellicosity first gives the green light to Turkey’s war on the Kurds before then writing to tell him, ‘Don’t be a tough guy. Don’t be a fool!’ Meanwhile, Secretary of State Mike Pompeo, in embracing Israel and opposing Iran, believes he is acting as an instrument of God, ‘until delivering the Rapture’.
Dark humour aside, an initial deployment of over 150,000 US troops to even secure a foot-hold in Iran would make the failed bloody defeat and debacle of Iraq look like a picnic. In such a folly it is doubtful that an administration would gain the support of the US general public for what would be yet another ‘body gag’ war, and for which even the most supine UK Tory government would be reluctant to lend support. Furthermore, the risk of raising Arab Springs against the despotic monarchies of the Gulf Cooperation Council states would all but destroy whatever remains of US hegemony within and beyond the region.
However, the announcement on 11 October of the deployment of up to 15,000 US troops to Saudi Arabia plus two squadrons of F35 aircraft as well as beefed-up air defence squadrons, does show a determination to ratchet up the unilateral sabre-rattling propaganda offensive against Iran. At the same time Iranian government sources stress the unlikelihood of further attacks on the Saudi petroleum infrastructure and combined with the US Energy Information Administration’s update of 12 October of an expected oil price drop of another US$5 per barrel by the end of 2019, there would appear to be a market expectation of no forthcoming supply shocks.
The Stop the War Coalition is right to warn of the present crisis spilling over into a wider conflict with global ramifications. And while this paper has stressed the intersectional nature of the climate-imperialism-war nexus, it would be foolish to deny the potential of huge agencies for change that have not even been brought to bear against this unfolding nightmare. This is an intersectional nightmare of imperialist war and climate driven humanitarian catastrophe that can and must be exorcised.
Capitalism is vast and now globally integrated mode of production and exchange. It is a political economy that knows the market value of everything as commodities and the intrinsic value of nothing. It now also has the dubious honour of having brought about the Anthropocene: a carbon age within our planet’s geological record. Its essential quality is still a basic drive of heedless accumulation. As Marx described its logic in 1867: ‘Accumulate, accumulate, accumulate! That is Moses and the prophets!’
Over time, capitalism has become increasingly bound up with – and to an increasing itself directs – the global relations of states themselves. This ‘Imperialist’ phase of capitalism was first identified by the English economist John A. Hobson in 1902, and was later and more famously developed by Lenin in 1916. Lenin recognised a pattern of increasingly militarised competition for colonial possessions for forcible access to their raw materials – best exemplified by the ‘competition’ of the world war of 1914–18. To this day, the extraction and supply of petroleum is determined by imperialism, as a form of unequal exchange, enforced up to the point of military coercion if necessary.
Today however, save for a handful of tax haven bordellos, imperialism as colonial capitalism has all but ceased to exist. And although the US has attempted to police the boundaries of by now fictitious post-1945 spheres of influence, its reserve currency market might and its unrivalled military strength maintain spheres of influence defined by clientelism and state-corporate power. And it is in relation to the world’s virtual sole global commodity – petroleum – that the US state has asserted its dominance over the global energy economy for much of the twentieth century.
The set of arrangements the US established, in particular in the Middle East, to assure its dominance is now coming unstitched: this is now the stuff of daily news. In the process of coming unstitched, much of reason for US armed imperial reach is fraying. In this regard the imperialism of late capitalism has in common a psychotic tendency of all former empires: the delusion of permanence and a destiny underpinned with hubris and unshakable self-belief. Since 1956, the US ruling class has proclaimed its belief in its own ‘manifest destiny’ on every US dollar bill with the words: ‘In God We Trust’. Although Marxists should avoid seeing individuals – however charismatic – as the sole actors in the processes of historical development, it is nevertheless now tempting with Donald Trump as US president to suggest a more suitable Greenback motto as: ‘Those whom the Gods wish to destroy, they first make mad’.
Irrespective of the threat of the imminent threat of catastrophic climate change, daily life for many millions on our planet is unbearably miserable. In many developing economies subsistence, poverty, disease and war are all-too frequent visitors. For such zones, designated as extractive assets by big capital, tenuous and crippling interest-bearing credit with its pernicious entailed debt seems to be the only development route for already debtor governments. And interest defaults and deficit spending are punished with lashings of IMF malice.
In the ‘metropolitan’ economies, after nearly four decades of neoliberal market orthodoxy, capitalism continues to plunder nature and labour alike and wantonly accelerates the incidental carbonising of the troposphere in the name of accumulation and profit. Meanwhile, capital’s control over the means of ideological production has ensured that climate crisis, even when acknowledged, is played down, or worse, explained away as an exaggeration and a price worth paying in the name of growth and progress. Meanwhile, and with no end in sight, poverty, debt, squalor and the denial of the most basic services haunt the very hubs of global power.
From such a summary sketch it is all too easy to regard any nation state as defined by the historical impressions made by its ruling class. Yet even an apparent hegemon such as the US, on closer examination turns out to be a highly fractured set of rival capitals. It is at best a ‘band of warring brothers’, contingently united in their fear and loathing of the working class. For it is in fact the working class that constitutes the bulk of the social movements in North America who in their various ways are now undermining the legitimacy of capitalism and its sham democratic state.
For such a period of history so defined by global social injustice and the threat of war against the backdrop of impending climate disaster, we see consent by default for the continued and rising consumption of petroleum and its virtually unabated carbon emissions.
The warnings are not new: in 1976 the Venezuelan statesman and diplomat Perez Alfonso warned:
Ten, twenty years from now, you will see….oil will bring us ruin, waste, corruption, consumption … public services falling apart and debt. It is the devil’s excrement.
Yet, apologists for late, sclerotic and default-violence capitalism offer a business-as-usual process of adaptation in which drought, hunger, inundation, resource wars and human flight are ‘normalised’ as the possible lot for the majority of humankind. At the same time an authoritarian-derived austerity and Malthusian population control solution is touted as a permanent emergency measure.
Capitalist imperatives to accumulate, produce value and thus create profit are fundamentally incapable of providing a sustainable solution – and certainly not one in which the pursuit of an egalitarian, enlightened civilisation in harmony with nature would be the goal.
It is clear that capitalism, and not just in the form of US petro-imperialism, has long been a fundamental impediment to any form of human activity that is in harmony to the Earth’s ecological security. In place of the security and wellbeing of humanity it offers the prospect of mere barbaric subsistence. The early onset of those symptoms are now upon, us with mass flight from imperialist war zones and the progressive collapse of hitherto sustainable agricultural sub-regions.
…and in the end
The far left has often – and possibly deservedly – been ridiculed for its end of the world and death agony predictions of capitalism. But now at an advanced stage of what has only recently become recognised as an Anthropocene, the anticipation of our planet’s ecological balance being disabled – and with it the basis of civilisation – looks like a grim possibility.
Capitalism, which has long been seen as the source of all ills for socialists, has now been identified as the motor of climate crisis. It is here that the objectives of socialists and the radical environmental movement alike can begin to wage a war to the finish against a common enemy. But as has been argued here, it is at the global scale where climate crisis and petro-imperialism manifest themselves that the fight must be waged.
For this, revolutionaries will learn some humility as late-comers in the environmental fight. And equally radical environmentalists will have to accept that the goal of a habitable world can be achieved only by winning a world in which the harmony with nature is compatible with the flourishing and happiness of a humanity freed from exploitation and oppression. A point in history where our most renewable and almost infinite resource can be realised; the vast and largely untapped wealth of human creativity. Truly a world to win.
 See: John Bellamy Foster and Paul Burkettt, Marx and the Earth: An Anti-Critique (Chicago: Haymarket, 2016)
 IEA World Energy Outlook (2019).
 Jessica T Matthews, ‘America’s indefensible defence budget’, New York Review of Books 66:12 (July-August 2019).
 Edward Wong, ‘The Rapture and the real world: Mike Pompeo blends belief and policy’, New York Times (30 March 2019).
 Steven Simon and Jonathan Stevenson, ‘Iran: the case against war’, New York Review of Books 66:13 (August-September 2019).
 Karl Marx, Capital. A Critique of Political Economy, vol. 1, trans. Ben Fowkes (London, Penguin: 1990), p. 742.
 John A. Hobson, Imperialism: A Study (London: James Nisbet, 1902); V. I. Lenin, Imperialism, the Highest Stage of Capitalism [written January-June, 1916, first published in mid-1917 in Petrograd], available in his: Selected Works (Moscow: Progress, 1963) 1: 677-766.