Hanieh’s Crude Capitalism provides a thorough analysis of the interrelationship of capitalism and oil, showing why society must be rid of both to be sustainable, finds John Clarke

Adam Hanieh undertakes a fascinating and enormously useful examination of the role oil has played in the development of global capitalism. He brings a series of important analytical insights to this process and the result is an invaluable contribution to an understanding of fossil-fuel capitalism and the vital place of ecosocialist perspectives in the struggle for social transformation.

First coal and then oil played an essential role in the advance of capitalism as a world system, but the book makes clear that the qualities possessed by these materials only had the huge influence they did because of the nature of the social and economic system that utilised them. For capitalism, oil has been a serendipitous substance that has interacted with its profit-driven nature and its relentless drive to accumulate.

This being so, oil has given full expression to capitalism’s most rapacious and destructive instincts. As we consider the way forward in the face of a dire and intensifying climate crisis, those who wish for a greener future under this system will find nothing in this book to cheer them up. Hanieh argues that the rational approaches that must be taken in order to avert climate disaster are inconsistent with the nature of the oil-drenched capitalist social order.

Sticky black goo

In the opening passages of the book, we see that decades of oil production and consumption have unfolded despite the existence of resounding scientific evidence that this would lead to ecological disaster (p.1). Indeed, oil ‘remains at the core of our economy and our energy systems; without dislodging it from this position there is no possibility of ensuring a future for humanity’ (p.3).

This historical impasse, however, can’t be understood simply in terms of the qualities of ‘a sticky black goo’ (p.3). As long as ‘oil’s power is assumed to derive from the natural properties of the commodity itself’ while the ‘historical uniqueness of capitalism’ (p.4) is disregarded, no progress can be made in understanding or responding effectively.

In the second chapter, Hanieh explores the means by which capitalist interests came to terms with the oil resources available to them. These represented a promising source of energy, easily transportable and with a myriad of potential uses. However, it took some time to develop the approaches and organisational structures that could turn this substance, with its vast untapped reserves, into a profitable proposition.

Hanieh traces the emergence of corporate structures based on ‘vertical integration,’ with Standard Oil as the trailblazing formation, that could combine extraction, transportation and distribution functions (‘upstream and downstream’). This ‘would become the defining characteristic of the world’s largest oil companies’ (p.31). Based on this, the ‘internationalisation of US oil’ (p.45) was undertaken and already well advanced by the interwar years.

Chapter three considers the vital place of the Middle East in developing the global reach of fossil-fuel capitalism and we see the role oil played in establishing the hegemonic power of the US. The European colonial powers had their own ambitions and entered into oil production with great determination. It is not surprising that the ‘oil industry served as the immediate and direct arena for tensions between a rising US power and the enduring realities of European colonialism’ (p.55).

However, colonialism ‘had to be made to work for all aspiring powers’ (p.58) and the rising strength of US fossil-fuel capitalism, as part of a broader productive capacity, was unstoppable. The ground was laid for the emergence of the dominant ‘Seven Sisters’ oil giants, with US companies as the most powerful players.

The fourth chapter shows the great importance of the Caucasus oilfields. ‘By 1901, Baku and its immediate environs were supplying more than half the world’s crude’ (p.76). Western oil companies invested heavily in the area, only to face expropriation at the hands of the Russian Revolution in 1917. The ‘history of the global oil industry would have followed a very different path if … European industrialists had continued to dominate Baku’s oil’ (p.85).

However, with the Soviet government in dire need of hard currency, the oil giants scrambled to obtain concessions and access to Baku oil and, in this contest, US companies were greatly strengthened. However, the export channels that were opened increased the threat of oversupply and led to negotiations among the international oil giants. Thus, ‘the attempted cartelisation of world oil … was as much a product of Bolshevik nationalisation as it was a result of the oil riches of the Americas and the Middle East’ (p.87).

‘Great Acceleration’

In chapter five, Hanieh explores the post-World-War-Two ‘Great Acceleration’ in which ‘this addition of oil to the world’s energy matrix set off a huge surge in global consumption of fossil fuels, which doubled in just fifteen years between 1950 and 1965.’ (p.90). In this context, ‘petroleum helped underpin the radical reorganisation of global production and consumption’ (p.94). The role of oil in energy, transport and petrochemicals, in the context of the long post-war boom, had a profound effect on capitalist economies and societies and this period saw the consolidation of the US as the leading ‘oil power’ (p.96).

As Europe was being positioned within the framework of US hegemony, ‘the expansion of European capitalism … was thus inextricably bound to the ongoing realities of colonial rule in the Middle East and, even more so, to the deepening alliances between the US and ruling oligarchies in countries such as Saudi Arabia and Iran’ (p.112).

Chapter six looks at the threat posed to Western oil interests by anti-colonial revolt and it explores the methods used to contain it. Larger shares of the wealth were granted to oil producing nations, but this period also produced the American-led and British-backed coup that overthrew the nationalist government of Mohammad Mossadegh in Iran in 1953. This was ‘an important precursor for later US interventions such as the 1954 coup in Guatemala and the overthrow of Chile’s Salvador Allende in 1973’ (p.120).

Hanieh explores the rise of Opec and the ‘counter-revolutionary turn’ (p.130) in which ‘the potential for OPEC to become something other than an instrument for the enrichment of ruling elites disappeared’ (p.132). The distinct interests of precisely those elites with non-Western producing countries is a question Hanieh returns to in his assessment of present realities.

The seventh chapter sets out the role played by petrochemicals and the array of new products that were developed in shaping global capitalism and the contours of US domination. Hanieh stresses that ‘the petrochemical revolution was a radical change in the nature of production itself: the materiality of commodity production had become a derivative – or a by-product – of the production of energy’ (p.144).

The rapid growth of petrochemicals after World War Two created ‘massive, integrated industrial complexes’ where basic petrochemical production was connected to the manufacture of more complex derivative products through a spaghetti-like maze of pipes, tubes, and specialised storage hubs.’ In the two decades after 1950, ‘the size of such plants in the US increased by a factor of ten …’ (p.150). These massively profitable operations involved highly advanced technology and set the pace when it came to the displacement of living labour.

Chapter eight challenges the myths surrounding the oil shock of 1973 and the supposed ‘Arab oil squeeze’ (p.155). The assertion of the interests of producing states was a major factor in the crisis that unfolded, but it also reflected a situation where, with the post-war boom at an end, ‘the preeminent position of the US within the wider global political economy was also under considerable strain’ (p.169).

Though Opec challenged ‘the prerogative of the largest oil majors to control the price of oil at the point of extraction’ (p.171), the oil embargo of the time has been greatly exaggerated. The biggest Western operators drove out smaller rivals and consolidated their power as ‘the profit for barrel for foreign oil companies operating in the Middle East tripled during 1973 as a result of OPEC’s actions’ (p.173).

In fact, ‘the 1973 crisis provided a powerful boost to the profitability and market strength of the largest integrated oil majors.’ The ‘OPEC bogey … provided a convenient scapegoat for skyrocketing prices and partial shortages’ (p.176) and was used to advance the neoliberal mantra that state interference in business dealings must be tackled. As Nixon’s Secretary of the Treasury put it at the time, ‘we must lift the deadening hand of government from the many areas of our economy such as energy where overzealous government regulations are now cramping our growth and hopes for the future’ (p.177).

Global finance

The ninth chapter shows oil production coming ‘under the direct control of producer governments’ and a situation where ‘Western firms were no longer the dominant producers of crude at the global level’ (p.179). The US, however, responded to these developments so as to preserve and consolidate its power.

The growing strength and enormous wealth of producer states helped advance changes in global finance that were to the advantage of the US. ‘Following the first oil shock, the circulation of petrodollars became fundamental to the maintenance and reproduction of these relationships between the US and the Gulf monarchies’ and ‘at the heart of these ‘petrodollar interdependencies’ was the sale of US weapons and military hardware’ (p.183).

The tenth chapter looks at the part played by oil in the final days of the Soviet Union. The governing strata needed oil revenues and hard currency in order to maintain living standards and to contain unrest. The 1986 collapse in oil prices, which the Soviet government had staved off with ‘a frenzied campaign of oil drilling and exploration in Western Siberia’ (p.204), was a huge factor in the final reckoning.

Hanieh shows how ‘the social dynamics of the new post-Soviet capitalism continued to be fundamentally tied to the world market through the mediation of oil’ (p.207). He explores the consolidation of a reckless and destructive oligarchy and its role in the oil industry during this period. Vladimir Putin didn’t by any means overthrow this oligarchy but did enforce a certain discipline and developed a state-owned national oil company (NOC), with an ample role for private profit making, in the process.

Hanieh traces the wave of privatisation in Western countries from the 1970s to the early 2000s and notes that ‘oil privatisation sat at the leading edge of a broader economy-wide sell off of state owned assets among which oil companies were by far the largest and most valuable’ (p.231).

Oil privatisation went over to an intensified financialisation as stock ‘markets … enabled oil companies to issue equity or sell debt, and thus raise money for overseas expansion’ pp.234-5). The way was open for ‘new financial actors, such as US-based asset management firms, hedge funds, and private equity companies’ (p.236). These changes ensured that ‘oil company managers became subject to the financial imperatives of stock-market valuations and the demands of major shareholders for higher dividend payments.

In chapter twelve, we see the Western supermajors facing major rivalry that created areas of global oil production in which they were no longer the dominant players. In this regard, the rise of China as an economic superpower has been of vast significance. ‘Between 2000 and 2019, annual global oil consumption increased by around 30 per cent, due primarily to China’s booming demand for hydrocarbons’ (p.253).

Oil companies and NOCs outside of the West have made great strides in conventional oil production and Western oil interests have become the ‘leading edge in some of the most destructive types of oil extraction, notably shale, tar sands, and offshore deep water drilling’ (pp.256-7). The supermajors are putting most of their investments into these forms of production, whereas ‘around 90 per cent of NOC upstream investment goes to conventional onshore fields’ (p.257).

At present, ‘Western supermajors hold a relatively marginal position within [the] hydrocarbon circuit’ that has developed between the Middle East and east Asian countries, especially China.’ Indeed, in ‘1999, three out of the top four refiners in the world were Western supermajors …Today, the first, second, and fourth spots are taken by Chinese and Saudi companies’ (p.264). Hanieh pointedly notes that oil ‘is not just a physical commodity, and any breakdown in the geopolitical dominance of the US will undoubtedly also involve a challenge to the American currency’s privileged connection to oil’ (p.272).

Ecosocialism

In the final chapter, Hanieh considers capitalism’s relationship with oil from the standpoint of the threat it poses to the survival of humanity. He is clear that ‘there is no chance that the world’s largest energy firms (including those NOCs beyond Western markets) will willingly walk away from the enormous wealth to be made from continued oil and gas production’ (p.276).

Hanieh examines the duplicitous efforts of fossil-fuel interests to overcome efforts to prevent the destructive course they are pursuing. Exploring various fronts, from tech-fixes to electric vehicles, he uncovers a strategy to maintain fossil-fuel production, while embracing the role of diversified ‘energy firms’ that are ‘grounded in oil but with a mix of different energy portfolios and downstream activities’ (p.284). For the oil barons, the roles of environmental despoiler and green saviour are completely compatible.

Hanieh stresses that ‘while the North-South division is critical to assessing potential paths of the climate crisis, we must reject straightforwardly binary models of the world market’ (p.306). The Western supermajors have now lost their monopoly on environmental destructiveness, with the Saudi giant Aramco ‘doubling down’ on oil and intending to be ‘the last oil major standing’ (p.307). Taking the oil industry as a global whole, we ‘must confront the multiple logics of a social system that has served to centre oil throughout all aspects of our lives’ (p.310).

Hanieh advances the notion of an ecosocialist alternative that would end ‘the blind pursuit of profit of growth and endless accumulation that drives capitalism, replacing this with the prioritisation of social needs and recuperation of the planet’ (p.311). He concludes with the proposition that ‘the history of oil over the last century confirms capitalist states exist to support and facilitate the accumulation of capital, and this cannot be changed without a root-and-branch transformation of society’ (p.313).

This book explores the connection between oil and capitalism thoroughly, convincingly and from the perspective that the flow of oil must cease and the system that sends it down the pipelines must be brought to an end. It demonstrates that oil has been a fortuitous substance for a system based on profit and accumulation and shows how capitalism put it to a powerful but ultimately disastrous use. This profoundly influenced systems of production, world transportation, international relations, financial structures, political systems and much else. Hanieh explores these factors in ways that are deeply informative and useful.

Crude Capitalism reinforces the proposition that capitalism is incompatible with the creation of a sustainable relationship with the natural world. It deepens our understanding of the enemy we are fighting against and points compellingly to what we should be fighting for. It should be widely read, seriously studied and taken into the struggle for climate justice.