Crude Capitalism, Oil, Corporate Power and The Making of The World Market
Adam Hanieh, Verso 2024
“This is an irrational economic system that pits the interests of a tiny few against the vast majority, and only by taking political and economic power away from the logic of the market will it be possible to build a different and better world.”(pg.313)
This book is a brilliant and fascinating account of the intersection of fossil fuels and capitalist development.
The onset of oil as the foundation of capitalist energy is recent. Until the late 1800’s oil was not much of a factor though coal had been essential for centuries. It was only in the mid-twentieth century that oil overtook coal. Oil is not only central to energy but also to modern industrial processes, especially plastics and petrochemicals . Eliminating fossil fuels in energy production and all other technological processes will take a new industrial revolution which will only come about through an eco-socialist transformation. Such an elimination is required to prevent the climate crisis and other ecological deformations from destroying human civilization and to protect species facing extinction. By analyzing the role of fossil fuels in all aspects of the modern capitalist economy, Hanieh reinforces the central thesis of the conflict of capitalism and ecological sanity.
Oil Transformed Society
The use of oil has transformed the economy and society:
“ introduction of mass individualized transport was the beginning of a wholesale restructuring of US urban life: the dismantlement and mothballing of public transit systems; suburbanization and the linking of cities through a spaghetti-like maze of tangled highways: and a revolution in corporate advertising that went hand in hand with the emergence of a road culture…large automobile manufacturers …became a recognizable and powerful force in US politics , their interests closely aligned with ..the oil industry.”(45)
The petrochemical revolution was an important part of this transformation:
“It is difficult to overstate the significance of the petrochemical revolution. Through it, oil enabled an exceptional increase in both the variety and quantity of goods produced across the world market. The production of food ..was transformed through the application of chemical fertilizers , pesticides, defoliants, and herbicides — new synthetic products all ultimately derived from oil. ..tractors that ran on petroleum, this …turned oil and natural gas into food…Farming was no longer farming. It was petro-farming.. the pervasive spread of plastics and other synthetic materials produced from petroleum colonized all aspects of everyday life.”(95)
Imperialism
The U.S. was in a favorable position when oil became dominant. Oil and U.S. imperialism went hand in hand and still do. This is true when the U.S. is a net exporter as well as when it is a net importer of fossil fuels. Imperialism in general and US imperialism in particular are important elements in the oil economy. Oil paved the way for the US to replace Britain as the major imperialist power after World War 2.
Reliance on oil was one of the factors that led imperialist countries to oppose self-determination:
“the UN General Assembly adopted a resolution. that ‘ all peoples have the right to self-determination and to freely dispose of their natural wealth and resources.’ The only opposition to the resolution came from the three countries where the Seven Sisters were headquartered: the U.S., Britain and the Netherlands.”( 123)
State Oil Corporations?
However, faux anti-imperialism often lets state oil corporations outside Europe and the U.S. off the hook. The author argues that state oil companies are important actors that are fully integrated into the world capitalist economy. With the onset of neoliberalism, many of these state corporations have been partially privatized. The onset of neoliberalism itself was facilitated by the rapid increase in petrodollars. Any transformation of the world’s energy economy will have to confront the large state oil corporations as well as the private ones.
“there is no contradiction between the state control of hydrocarbons and the growth of private capital; rather it is through their partnership with state run NOCs that domestic business conglomerates across Asia and the Middle East have been able to expand and enter sectors such as refining, petrochemicals and plastics” (266)
“the export of weapons routed a considerable portion of the Gulf’s petrodollar surpluses into the pockets of the leading echelons of the country’s war industry. This ‘weapon-dollar-petrodollar‘coalition remains an integral part of the economics of oil today”(184)
Capitalism and Energy
All economies rely on energy. This is especially true of capitalism which demands higher and higher levels of production and the continuing replacement of human labor by “dead labor”, capital. (10) To expand markets and increase accumulation, “conquering of space by time is something that springs immanent from the nature of accumulation itself, manifested through the repeated revolutions in modes of transport.” (12) Oil is important because “mobility of fuel supports mobility of capital which in turn helps to liberate capital from the constraints of space and time.” (13) Coal and then oil allowed production away from sources of water power.
Cheap energy based on cheap labor and environmental destruction is a basis of capital accumulation:
“cheap energy emerges as a means to prevent and address downturns ..through reducing input costs and thereby increasing surpluses. An easy way to cheapen energy is to avoid paying the full costs of its production …, utilizing underpaid labor or dumping toxic waste products into the environment. For this reason, the places where energy is extracted and produced tend to become sites of deep social and ecological degradation.”(14)
The so-called oil curse is actually a capitalist curse.
Today, “Mechanization and automation were indissolubly linked to oil’s new role as petrochemical feedstock” (95)
Despite its importance to capitalist development, oil has “a chronic tendency towards overproduction …” which “led to repeated cycles of oil booms and price busts..”(30) . These in turn accelerated the boom-bust nature of capitalism.
To partially overcome this, the largest oil companies strove for vertical integration, controlling extraction, refining, marketing and distribution. This tendency to overproduction has led to cartels and furthered the capitalist tendency to monopolization. Despite that, competition has continually broken through. To augment their profits and avoid taxes, large corporations try to make more of their profit “downstream” (refining, marketing, distribution and final sales). They set prices low upstream and higher downstream.
Fossil fuels laid the basis for the development of particular centers of capitalism:
“The transition to coal…helps explain why Britain experienced rapid and large-scale urbanization ahead of all other capitalist powers…”(18)
Politics and the Oil Market
Major political developments impacted the oil industry which in turn shifted economic power in the capitalist world economy:
“The Soviet Union was the world’s first OPEC , and it was the unintended effects of the Bolshevik Revolution that helped US oil firms expand their global reach ahead of their major British counterparts. At the same time, Soviet oil exports laid the ground for the emergence of key independent oil firms in Western Europe ..”(22) and later national oil companies in the Global South.
Hanieh explains the real nature of the Arab Oil Embargo of 1973, “..there was never any real shortage of oil as a result of the embargo…the embargo can be read as little more than a performative act, ultimately aimed at convincing Arab audiences that an anti-colonial front was possible between oil-rich monopolies and the more radical nationalist movements of the region” (174)
Energy Independence?
“the solution proposed by the oil companies and their ideological interlocutors was straightforward: American energy independence from the Middle East to be achieved by the relaxation of environmental and clean air laws, the opening up of.support for more offshore drilling, an end to import restrictions and allowing US oil prices to rise in line with the rest of the world. These demands were implemented..between 1972 and 1977.”(177).
“… the 1973 crisis provided a powerful boost to the profitability and market strength of the largest oil majors.” (17)
The oil company’s solution has been implemented by Republican and Democratic administrations since the early 70’s. Obama and Biden both bragged about America’s energy independence contradicting their rhetoric against global warming.
Most of the book is devoted to a detailed analysis of different countries and corporations’ competition over oil and how this has shaped the world market and capitalism generally. This is important history that gives a good understanding of oil in the world economy.
Climate Emergency
The final chapter, “Confronting the Climate Emergency” is perhaps the most important. Eliminating the dependence on oil is vital to human survival.
“As of early 2023, the world’s largest oil companies –including the National Oil Companies — -held oil, gas and coal reserves that will release around 3,600 gigatons of CO2 into the atmosphere if burnt. This figure is more than fourteen times the world’s remaining carbon budget of 250 gigatons — the amount of carbon that can be emitted before global temperatures are likely to rise 1.5 degrees about pre-industrial levels.. There is no imminent physical limit to oil supplies.”(277).
Survival of human civilization requires that humanity stops the corporations and states behind them from developing these reserves, however “ ..there is no chance that the world’s largest energy firms will walk away from the enormous wealth to be made from continued oil and gas production.” (276)
Most important, “oil firms…are a manifestation, not a cause of the underlying problem. We must confront the multiple logics of a social system has served to center oil throughout all aspects of our lives. And we cannot extricate ourselves from oil’s pervasiveness…while remaining within this social system. Systemwide transformation rooted in democratic control over energy is thus urgently needed, …ecosocialism..that highlights the need to go beyond capitalism, while centering ecology and the repair of the biosphere at the heart of any radical shift. Ecosocialism means ending the blind pursuit of growth and endless accumulation that drives capitalism, replacing this with the prioritization of social needs and the recuperation of the planet…decommodification of our social existence.”(310–11)
It is clear from the author’s analysis that this transformation will require a complete social, economic and political revolution.
Read this book for a detailed understanding of how oil has impacted and still impacts our lives; for an explanation of how oil and capitalism mesh; and for a deeper understanding of why we need a complete eco-socialist transformation!
