If money makes the world go round, oil sure comes a very close second. With surging worldwide demand, upward price trends (despite recent falls) and dwindling reserves concentrated mainly in US-unfriendly states, this priceless fossil fuel has become a major magnet for conflict, instability and power politics. Most recently, this has been borne out by the imperialist forays by Russia into the Caucasus, and by the US in Iraq and Afghanistan. The slavish and unwavering pursuit of oil as the catalyst to economic growth also remains the principal cause of global warming, with energy related emissions set to double by 2050.
Across the industrialised world, oil forms the lifeblood of the economy, not only for the petrol which fuels transport and industry, or the energy that heats our homes, but also for products as diverse as PCs and pesticides. Many scientific observers predict that sometime around 2010 we will hit “peak oil”. Peak oil refers to that point when supplies of this finite resource, in the face of growing demand, falls into irreversible decline. It is precisely this fear – and the prospect of wholesale economic collapse – that the oil industry vigorously exploits to realise massive profits and to cajole governments into pursuing their blinkered policies. Sustaining profit levels may also explain the reluctance of the oil majors to invest heavily in developing renewable energy sources.
With the price of a barrel of oil having peaked in the region of $140 last year, all of us have felt the pinch both at the petrol pump and with our domestic gas bills – the latter having doubled since 2000. But other more complex forces than (oil producing cartel) OPEC are increasingly bearing on global oil prices. True to form, market forces have conspired to massively and artificially inflate prices. The deliberate limitation of refinement capacity, for example, greatly exacerbates scarcity when in reality there is a glut of (unwanted) Iranian crude oil just waiting to be processed. In the last 30 years, US oil consumption has increased by some 35%, with no new refineries built to reflect this growing demand. This bottleneck has enabled the likes of oil giant Exxon Mobil to return profits of $14.83 billion in the third quarter of last year alone. Oil means big bucks. In fact, Exxon Mobil, BP-TNK and Shell are now the world’s second, third and fourth biggest corporations respectively.
Oil, as a commodity, is traded on the global markets by speculators with a vested interest in buying low and selling high, thus pushing up prices which are then duly passed on to the consumer. Estimates suggest that as much as 60% of today’s oil prices are down to sheer speculation. As prices are driven ever higher, and demand also increases (as at the present), there will come a time when it becomes too expensive for oil based capitalism to afford. At that point we enter a slump until such time as demand and prices fall significantly.
At the end of 2003, BP estimated there to be reserves of some 1.1 trillion barrels of oil, unevenly distributed around the globe. Of these, Saudi Arabia holds about 25%, and Iran, Iraq, Kuwait and Abu Dhabi nearly 40%. Outside of the Middle East, the 2 largest reserves are in Venezuela (6.8%) and Russia (6%). However, global consumption of oil is also very uneven. The US consumes over 25%, whilst producing only 9.2%, making it the most heavily import dependent nation in the world. The Middle East meanwhile, consumes 5.9%, while the Asia-Pacific nations (Australia, China, India and Japan) import the greatest percentage of their 28.8% share of global oil consumption.
a bizarre alliance?
The US’s dependence is of particular significance here, spawning some seemingly bizarre alliances. Of these, the House of Saud and House of Bush cabal may seem the most odd. Most of the 9/11 hijackers originated from Saudi Arabia, a nation which remains a hotbed of anti-western Islamic fundamentalism and maintains a hard-line in Sharia law. With Saudi’s 4,000 princes living lives of (US funded) unparalleled luxury, their impoverished people endure a torturous, inhumane justice system condemned by Amnesty International and Human Rights Watch alike. Iraq is another case in point. When outgoing US Vice-President Dick Cheney was CEO of oil company Halliburton, the Chicago Tribune reported that he did almost $24 billion in business with Saddam Hussein. In September this year, a former colleague of Cheney’s pleaded guilty to funnelling millions of dollars in bribes to secure lucrative oil contracts in Nigeria for Halliburton. That global capital acts without morals should come as no surprise, as should not the securing of the Iraqi oilfields as the first action after the 2003 invasion. With US foreign policy indelibly focussed on the Middle East, the supply and control of oil has emerged as the prime fuel not only for the economy, but also for war and terrorism.
Oil transportation is a precarious task. The impact of a major terrorist attack on one of the global oil shipping routes (such as the Gulf of Aden, the Strait of Hormuz or Strait of Malacca), or on a refining facility like Abqaiq in Saudi Arabia, was simulated in 2005 by oil industry and defence experts. Their conclusions, based on predicted disruption to the world economy, painted a doomsday scenario of epic proportions. In 2005 a US State subcommittee reported that sabotage of Iraqi oil pipe-lines had cost some $10 billion in lost revenues, despite protection being a high priority. The mere suggestion of supply disruption – whether caused by accident, war or terrorism – is, of course, another trigger prompting major price hikes.
The true cost of petroleum is inherently too expensive to sustain. From the social, political and human costs of finding cheap labour and land, to the environmental costs of extracting and burning a non-renewable, toxic fuel, and the destruction caused by war and militarism – the price we pay for an economy saturated with oil is more than any of us can afford.
The realisation of the EU’s dependence on Russian oil and gas explains Gordon Brown’s current enthusiasm for a new Caspian Sea gas pipeline to effectively circumvent the Kremlin’s ability to hold Britain to energy ransom. The Caspian region is riven with separatist conflicts, and the need to control import routes via Chechnya explains Russia’s unwillingness to grant independence to the Chechen state. The events in Georgia last August are also indicative of Russia’s desire to preserve its interests. Amidst the howls of indignation from the West, the siting of US military hardware in Poland and the proposed assimilation of Georgia into NATO may yet prompt the re-emergence of a new Cold War. Thinking ahead, Russia has claimed parts of the Arctic, and American Senators are also eyeing drilling in the region as a means to fashion an escape from the impending energy “crisis”. As an up and coming oil dependent superpower China will also be a major player in the grand scheme of things.
On the subject of China, the dramatic ecological toll inflicted by the global oil curse cannot be underestimated. China is rich in coal, but poor in oil. Craving a domestic oil source to sustain econimic growth, China has built a huge refinery capable of converting coal into synthetic oil. The “tar sands” in Alberta, Canada, form another potential source of oil. But converting tar sands and coal into something resembling useful oil is massively polluting – far more so than conventional refining. It is of tremendous irony that melting glaciers in the likes of Alaska and Greenland – caused primarily by the burning of fossil fuels – have opened up previously inaccessible oil fields. While these new sources may last well into the future, this ruinous trend leads in only one direction. A global temperature rise of at least 3ºC by 2050, forecast by the Intergovernmental Panel on Climate Change, will cause drought, famine, extreme weather and flooding, leading to millions of climate refugees and inevitable territorial conflicts. The refining of tar sands and coal, as substitutes for scarcer, less accessible forms of oil, will only hasten this process.
But the legacy of oil addiction does not end there. In countries like Nigeria and Equatorial Guinea, oil wealth and corporate intervention contrive to shore up corrupt, des-potic regimes. In turn, this delivers only internal repression, decreased self-sufficiency and abject poverty for the vast majority. In 1995 Ken Saro-Wiwa and 8 other Ogoni people were framed and executed by the Nigerian state for fighting the devastation of their homeland by oil extraction. Here, in the Niger delta, it is well documented that the oil industry has extensively degraded the eco-system and severely contaminated water supplies. Tribal people in the Amazon are currently struggling against a Peruvian governmen decree opening up their lands for oil and gas extraction. Moreover, from the Arctic to the Amazon, the corporate quest for black gold is systematically destroying rapidly diminishing natural wildernesses. The oil industry is also notorious for its appalling treatment of workers, victimisation and failure to recognise unions. Yet it is those very workers and their communities that hold the key to reversing the apparently suicidal road to ruin paved by politicians and oil barons.
beyond big business
While many environmentalists overlook the pivotal role played by workers in making the change to a world based on greener, renewable alternatives to oil, groups such as “Just Transition” in the US form an exciting and necessary development. Amidst calls for action on climate change – a call yet to be fully embraced by British unions – the movement seeks to unite workers and communities affected by oil exploitation. The danger, of course, is that this may become just another watered down, reformist attempt to petition those in power when, in truth, it is the combined forces of big business and the state which have led us into this horrific quagmire. Only by looking beyond these afflicted powers, can we realistically hope to get ourselves out of this mess. Critical to our struggle is raising awareness and promoting solidarity and constructive social action between workers, local communities, and environmentalists, in other words unity in struggle against our common enemies.
Ultimately, the problems we all face – from global warming, to war, to fuel poverty – are caused by capitalism. Creating a system of self-managed production by workers, for workers which is organised federally and is fully accountable to the communities it serves, is an essential starting point in deconstructing the profit driven, oil obsessed economy. But since, in the words of one industry expert, “it is hardly conceivable that the world could function without oil”, it would be naive to suggest this transformation will be a simple overnight process. However, in the face of the evidence, the urgency for change cannot be underestimated. The requirement for a coordinated global transition to clean, renewable energy sources and the phasing out of oil dependence is clear. Far reaching energy efficiency measures and lower consumption lifestyles are also vital. Such moves, and the replacement of production for profit by production for need, will negate the capacity for conflict and environmental damage, and also ensure that we can all enjoy equitable access to sustainable energy supplies on an indefinite basis.
Without prompt and radical action, however, our future and that of our children continues to look uncertain to say the least.