Many vital left-wing books about global oil politics have been published over the last 15 or so years: Mazen Labban’s Space, Oil and Capital, Timothy Mitchell’s Carbon Democracy, Matt Huber’s Lifeblood, and Simon Pirani’s Burning Up. Perhaps none have provided quite as sweeping and synthetic of an analysis as Adam Hanieh’s Crude Capitalism: Oil, Corporate Power, and the Making of the World Market, published by Verso in September.

In Crude Capitalism, Hanieh—a professor of political economy and global development at the University of Exeter’s Institute of Arab and Islamic Studies—offers a highly readable overview of the oil industry, stretching from the late-1800s to the present day, stopping along the way for deep dives into topics ranging from the Soviet Union’s fossil economy, the rise of OPEC, and the failed promise of so-called “low-carbon solutions.”

Of particular usefulness is the book’s emphasis on petrochemicals and national oil companies, including their intertwined relationship in the Middle East and East Asia, especially China. Hanieh argues that this dynamic helps account for the United States’ ongoing support for Israel, with power over Middle Eastern oil producers used as a key lever to rebuff China’s rising global influence.

Canadian Dimension spoke with Hanieh on October 15, 2024.

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Canadian Dimension (CD): Many CD readers are familiar with the oil shock of 1973, where OPEC producers asserted greater control over the pricing and production of oil. Arguably far less known, but equally important, is the subsequent oil glut and the “counter-shock” of the 1980s. Can you explain this period of oil price stagnation and freefall, and how it set the stage for the rebounding of the industry in the 2000s?

Adam Hanieh (AH): This is an important period to understand better and is often overlooked in the current discussions on oil and fossil fuels more broadly. The place to start here is the world market and its dynamics at the end of the 1970s and early 1980s, following the end of the post-war economic boom. This was a moment of major economic slump and the reorganization of the world economy, and this was deeply connected to what went on with oil at that time.

One part of this was the “Volcker shock,” a pivotal moment in 1980 when Paul Volcker, then chair of the Federal Reserve, raised US interest rates to more than 20 percent. He did this in order to create a recession with the goal of halting US inflation and strengthening the US dollar vis-à-vis other currencies. It triggered a global recession between 1980 and 1982, which was the deepest recession since the Second World War. In turn, this meant a contraction in economic activity, and therefore a huge drop in consumption of oil. So there was about a 10 percent drop in oil consumption between 1979 and 1983. It is not widely recognized that this was actually the largest drop in oil demand in history. It was even more than during the COVID pandemic.

The second dynamic alongside this global recession was an increasing diversity in the geographies of oil production. New oil reserves had come online in the 1970s and early 1980s, notably in the North Sea and in Mexico, and the Soviet Union was still producing significant amounts of oil. So concurrent with the global recession, we also have increased availability of supplies of oil outside of the traditional OPEC countries. This is non-OPEC supply.

As these two trends developed, there was a really important structural shift in the global oil industry related to the way that oil was priced. Up until the early 1980s, oil prices had been set in what is described as a system of “administrative pricing.” For the first part of the 20th century, up until OPEC, it was the big Western oil supermajors who set the price of oil. These firms were called the “Seven Sisters”—the predecessors of today’s ExxonMobil, Shell, BP, Chevron and other big oil firms. They controlled oil from the moment of extraction, through refining, on to the petrol pump, with most of the world’s oil moving within their vertically integrated structures. And then after the establishment of OPEC, the big oil producers—Saudi Arabia, Venezuela, Iran—gained much more influence over the price of oil. This is what is meant by administrative pricing—the ones who controlled crude supplies set the price at which oil was sold.

But during the early 1980s, OPEC’s ability to control the price of oil had begun to slip. Partly because there were new oil supplies entering the market such as those from Mexico and UK in the North Sea. There were also new oil traders entering the picture. These were private commodity trading companies that bought oil from producer countries and then sold it on what are called spot markets, which are financial markets where short-term contracts and cash prices could be negotiated for oil between buyers and sellers, often for one-off transactions, rather than the long-term contracts that had previously been in place with the big OPEC producers.

So we’re talking about three concurrent shifts. One is the global economic slump, the crisis of world capitalism in the early 1980s. Secondly, more supply of oil coming online and an increased diversity of producers. And thirdly, this emergence of new actors buying and selling oil.

There are two principal consequences of these trends that would be useful to highlight. First is the counter-shock itself, the big drop in the price of oil that took place between 1985 and 1986 when the price of oil dropped by about 50 percent. This impacted all oil producers, but had a particularly severe impact on the Soviet Union, which was reliant on oil sales to earn foreign currency. The collapse in the price of oil played a significant part in the crisis of the Soviet political economy through the late 1980s, culminating in the USSR’s eventual breakup in 1991.

The second consequence of this counter-shock was that it really marked the breakdown of the longstanding system of administrative oil pricing. And in its place emerged a market-based system of oil pricing, in which oil futures traded on financial markets set the price of oil. This is what we have today, and it is substantially autonomous—although not separate from—the physical production and consumption of oil. The link between oil and financial markets played a big part in the emergence of what is often described as “financialization.” I think it’s a problem that so much of the discussion about oil takes place without acknowledging these changes to oil pricing mechanisms—as if the 1980s never happened and we are still living in the 1960s.

CD: One of the more effective pieces of oil industry propaganda that we’ve seen emerge in the last while is that, beyond a fuel for transportation, petroleum products are in countless things that we use on a daily basis: plastics, synthetic fibres, and so much more. For the most part, it seems that this line has largely been disregarded by the left. In contrast, your work argues that it’s vital that we understand the material uniqueness and significance of petrochemicals, and how plastics are being posed as the future of the oil industry. Why do you think this aspect of oil consumption has often been underappreciated, and why is it important to come to grips with?

AH: One of the key arguments in the book is that we need to break with a kind of commodity fetishism when we think about oil. What I mean by this is that we need to situate oil and oil’s meaning, if you like, in the various logics of capitalism—not as something inherent to oil itself. If we take this approach, we can see oil beyond its role as simply a liquid transport fuel, and trace how it has become so embedded throughout a huge array of our daily lives. Finance is one side to this, but the petrochemical/plastics industry is another.

This transition to a synthetic world began in the mid-20th century. And it meant that natural products like wood, glass, natural rubber and fertilizers, and so forth, were systematically displaced by products of petroleum: plastics, synthetic fibers, synthetic fertilizers, and other kinds of petroleum-based chemicals. I spend some time in the book explaining what this did for capitalism, including enabling a huge expansion in the quantity and diversity of commodities that could be produced and consumed, cheapening manufacturing and reducing labour costs, and speeding up the turnover time of capital’s circulation. Of course, it also came with disastrous ecological consequences.

This moment was fundamental to oil’s emergence as the world’s principal fossil fuel, because it enabled oil to become the material substrate to basically all of the commodities that surround us. Once you stop and pause for a minute and just look around the room and think about where all these plastics, rubbers, and paints come from, you see how ubiquitous oil (and increasingly fossil gas) really is. It has woven fossil fuels into our daily lives, but in an unseen way. It not only made the oil industry so much more powerful—in the sense that this commodity becomes integrated into everything we consume and depend upon—but it has also made oil invisible. It’s a paradox: oil is everywhere but we can’t see it.

I think this is really crucial for the left to address because it takes the discussion both about oil and where oil’s apparent power comes from in a different direction. And it also helps us think about the problem of plastics in a different way. The dominant narrative about plastics is that the problem is one of toxic waste and the need to improve recycling. Obviously plastic waste is a hugely important issue, but the problem is actually much bigger than that when we place the emergence of petrochemicals in the bigger picture of what they do for capitalism. It also helps explain why the demand for petrochemicals and plastics is growing so rapidly. The estimate is that there’s going to be a tripling in the consumption of plastics by 2060.

One of the most striking examples here is the advent of fast fashion—the rapid turnover of clothing styles involving many micro-seasons of styles, and a huge increase in the quantity of clothes that are produced. Now, one side of this is of course the highly exploited workers in factories located across the Global South producing clothes on demand for the multinational clothing companies. But it was synthetic fibres—petrochemical products like polyester—that enabled this huge increase in clothing production from the 1980s onwards. The ever present tendency for capitalism to increase the quantity of commodities produced—in this case clothing—was made possible through oil and the petrochemical commodity.

Today, oil companies describe petrochemicals and plastics literally as the future of oil. And there is also an increasing recognition that plastics themselves are a major source of greenhouse gasses. If plastics were a country, the emissions associated with their production would rank them as the world’s fifth-largest greenhouse gas emitter. So we need to think about plastics in the sense of how they have embedded the power of oil in our lives, and are thus a central question to tackling the climate crisis.

CD: An important point you make is that historical and contemporary “energy transitions” have consistently been a process of addition, not replacement. What are a few past examples of this, and how might this understanding help us make sense of so-called low-carbon technologies like carbon capture and storage and hydrogen power?

AH: I think there are many flaws in the way that energy transitions are typically thought about. The generally accepted notion is that capitalism is transitioning away from fossil fuels with renewables and various kinds of green technologies. We might quibble about how fast that is happening, but the assumption is that oil, gas, and fossil fuels are on their way out.

But if you look historically, energy transitions under capitalism have always been additive. The so-called coal to oil transition that happened in the middle of the 20th century is a good example. Coal, back in the early 20th century, was about 85 percent of the world’s primary energy. Now it’s much, much less: it’s about 25 percent. But if you look at the total quantity of coal that’s being consumed, we’re producing more coal than ever before. The same is true with natural gas. Natural gas only really became an important energy source in the 1980s and 1990s. Now it is significant and substantial, particularly in electricity production. But it doesn’t mean that oil or coal have declined in terms of their absolute production and consumption.

The reason for this is another feature of capitalism: the tendency to increase energy throughput, to draw in new forms of energy production and increase the total quantity of energy consumed and thus the quantities of commodities produced. The problem is that so much of the climate debate is framed in relative terms, and not in absolute terms. What matters is the absolute production of fossil fuels, not their relative share.

It’s exceedingly rare to see a global drop in energy consumption. It happened in the early 1980s with the global recession I’ve just spoken about. It happened in 1973 with the global recession associated with the oil shock. It happened in 2008, and it happened with COVID. But there has only been four times in the last six decades that we have seen a sustained drop in the global consumption of oil.

So when we look at renewables: it’s clear that, yes, there is going to be an increase in renewable sources, particularly for electricity. There may even be a drop in the relative share of fossil fuels for things like electricity production. But I think it’s unlikely that under capitalism we will see any genuine transition from fossil fuels. In this sense, the green transition is a myth. It’s not happening—and certainly not at the pace necessary to mitigate the worst case scenarios of the climate disaster.

The question of AI and the huge energy demands that are required for this sector confirm this point absolutely. Some of the predictions around the increased electricity and water needed to run data centers are mind boggling. And an increasing share may come from solar and wind (and nuclear). But this makes it even more unlikely to envision a shift away from fossil fuels.

The other kinds of technologies you mention such as hydrogen and carbon capture—these kinds of so-called low carbon solutions—raise a whole set of different problems, which I talk about in the book at length. But in short, I think really these are false or chimeric kind of solutions that are being pushed by oil companies, basically because they allow for ever increasing oil and gas production. In that sense, they’re even more dangerous than some of the illusions around renewables supplanting fossil fuels.

CD: Another major argument in the book concerns the formation of an “East-East hydrocarbon axis” between the Middle East and Asia, which—in contrast to North America and West Europe—involves massive national oil companies and largely conventional oil resources. This aspect is another piece that seems to have been overlooked, with understandable emphasis on the private Western supermajors and consumption. Briefly, when did this East-East hydrocarbon axis start to take form, and how should it shape our understandings of the global industry?

AH: Again, we need to start with situating oil as a crucial commodity within global capitalism and the major shift that’s taken place over the last few decades of much of global manufacturing towards China and wider East Asia. This shift in global production, much of it destined for markets in North America and Western Europe, was associated with a massive increase in the demand for oil coming from East Asia.

The share of China’s consumption of oil globally is about 14 percent of the world’s oil today, which has tripled since the early 1990s. So China now is second only to the United States in terms of global oil consumption. And this is the main reason why the world’s consumption of oil is about 40 percent higher today than it was in 1995. China has big oil supplies domestically but not enough to meet this demand. And so it had to be met by imports. The primary place where those imports came from and continue to come from were the Gulf states of the Middle East: Saudi Arabia, the United Arab Emirates, and the other monarchies of the Gulf.

Today, something like one-third of all oil consumed globally is in East Asia, and most of this is supplied through imports. China’s share of world oil imports now exceeds 20 percent. So that’s one-fifth of the world’s oil imports going just to China. And about 70 percent of all crude oil exports from the Middle East go to Asia. That’s what I mean by this East-East hydrocarbon circuit.

But it’s not just crude oil that’s important to this story. Coming back to the question of petrochemicals, we also see refined products moving from the Middle East to China and East Asia. And we see cross-border investments from big oil companies in the Gulf, and oil companies and petrochemical companies in China, moving back and forth between the two regions: joint ownership structures in major Chinese petrochemical firms that are now owned by Saudi or part owned by Saudi firms and so forth. We can see the same kind of patterns in wider East Asia, particularly South Korea and Japan.

It’s essential to put this in the global picture. The US and Canada are major oil producers—the US is the biggest oil producer in the world. But most of this North American oil circulates within North America. The Gulf’s oil production goes eastward now.

One thing this has done is really strengthened the big majority state-owned or national oil companies that are based in the Middle East. The standout company here is Saudi Aramco, the Saudi state-owned firm, which is by far the largest oil company in the world. Its profits last year were about $121 billion. If you add up the profits of ExxonMobil, Chevron, TotalEnergies, Shell, and BP, Aramco’s profits exceed all of them combined. So it’s a massive company. And it’s no longer simply a crude oil producer. It’s also one of the biggest petrochemical firms in the world now. It’s a major refiner of oil. It’s a major shipper. It owns fertilizer production sites. So all down the value chain, Aramco and the other big Gulf producers are present. They’re following the same pattern that the Western supermajors followed in the early- and mid-20th century of downstream integration. All of this is not to say that the Western companies are not important. They’re absolutely crucial. It’s instead a call to see the diversity of the actors in the global oil industry today.

CD: How can we make sense of the role of oil in global militarism, while also accounting for major recent shifts in oil production, with Canada making up a larger share of US oil consumption, replacing OPEC imports?

AH: There are a lot of simplistic narratives about oil, American imperialism, and the Middle East. The idea that the US wants to grab the oil supplies in the Gulf or elsewhere in the region is not the case. Saudi Arabia’s oil is owned by Saudi Arabia and produced by Saudi Arabia and the US is not going to take that oil and has no intention of doing so. The other myth, of course, is that there is a US dependency on oil from the region. The US is actually the biggest oil producer in the world: it doesn’t need oil imports from the Middle East.

But that doesn’t mean that the Middle East and Middle East oil isn’t critical to American imperialism. I don’t think we can understand the Gaza genocide today, or the crucial place of the Middle East in US geopolitical ambitions, without centering it in oil. This has been the case since after the Second World War. The US became the leading capitalist power globally alongside the rise of oil as the primary fossil fuel. These dual transitions in the world system were conjoined and very much fed one another—and the Middle East was the vital crucible in this process, as I discuss in some detail in the book.

Today, the rise of China and relative erosion of American power is closely connected to the Middle East’s importance to US imperialism. Because of China’s dependency on oil from the Middle East, and all of the refined and chemical products associated with it, there has been a growing connection politically as well as economically between China and the broader Middle East region. In this context, the US is attempting to reassert its primacy in the Middle East, particularly its alliances with the Gulf monarchies, in the face of this kind of encroachment of China’s influence.

If we ever got to a situation where the US wants to place sanctions on China, for example, a key question is going to be where China gets its oil and its access to the Middle East’s oil supplies. It’s also going to be a question of the currency in which China trades and the role of the US dollar in the global financial system. One of the ways that Russia has attempted to get around sanctions is to trade more in renminbi (Chinese yuan). China is also looking at oil trading with the Gulf in renminbi rather than US dollars, which again would play a major role in the event of any kind of US sanctions or any kind of heightening conflict between the US and China. We also need to think about the huge quantities of petrodollars that have accumulated in the Gulf—we’re talking trillions of dollars here. Where those funds are invested and what role they play in supporting the US dollar is a really important part of the story.

To come back to the wider geopolitics of the region, historically, the US had two major pillars of influence and power in the Middle East. One was Saudi Arabia and the Gulf monarchies, and the second was Israel, particularly after the 1967 war. And what the US has tried to do over the last couple of decades is bring these two pillars together: to normalize relationships between the Gulf and Israel under American hegemony. And it has been able to do that to a significant degree. The United Arab Emirates have normalized with Israel, and so has Bahrain. Saudi Arabia has openly said it would be willing to do so if there was some settlement around Palestine. So these two pillars of American power remain absolutely critical to US influence and this attempt by the US to reassert its dominance in the Middle East.

This is ultimately why the US continues to fund, support and back Israel and its war against the Palestinian people, and now across the wider region. This is an attempt to reassert American power in the face of the kinds of rivalries that we see emerging globally. The Middle East is such an important part of this global picture because of the ongoing centrality of oil to capitalism.

This interview has been edited for clarity and length.

James Wilt is a Winnipeg-based PhD candidate and freelance writer. His latest book is Dogged and Destructive: Essays on the Winnipeg Police.