Category Archives: oil

How Occupy Has Won the Argument

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A rash of Serious Books by Serious People–the kind who get on the news or NPR–has validated Occupy’s critique of American political economy. Not that they put it that way. But from debt to Big Oil to the economy, it seems that the unwashed anarchist rabble–as those same Serious People see OWS–were right all along.

I’m bit a bit unfair to some of these writers. Joseph Stiglitz, whose term “the one percent” was part of the inspiration for “the 99%,” calls his new book The Price of Inequality, an Occupy-friendly concept. And Paul Krugman’s End This Depression Now! uses a slogan for a title. The primary conclusion of both writers is that the current economic crisis is in fact a political crisis. It’s at this point that we tend to say, “we know!” However, in the rarefied domain of academic economics, this is heresy. Stiglitz warns mainstream liberals that they are at risk of an Arab Spring:

our own country has become like one of these disturbed places, serving the interests of a tiny elite.

Apart from the Orientalism, the idea that this is new and the suggestion that the 2011 events were a bad thing, I agree!

Of course, what’s at stake in many of “these places” is oil. New Yorker writer Steve Coll has a massive tome out, exploring what he calls the Private Empire built by ExxonMobil. The book uses the judicious tone of his home journal but nonetheless amply reveals how astonishing the power wielded by this “too big to fail” behemoth has become. For example, when agreeing to drill oil in Chad, ExxonMobil and other Big Oil companies secured a thirty-five year compact. It provides that

the State guarantees that no governmental act will be taken in the future, without prior agreement between the parties, against the Consortium which has the effect either directly or indirectly of increasing the obligations or amounts payable by the Consortium or which adversely affects the rights or economic benefits of the Consortium.

As well they might: Coll notes that the $5.3 billion profit made by ExxonMobil when this was signed in 1988 was several times larger than Chad’s entire economy.

This history, and many others of its kind, like the Memorandums of Understanding by which India’s mineral wealth has been handed over to private corporations, indicates that the concept of corporate personhood, complete with “human” rights, was created in the underdeveloped world and then imported to the neocolonial metropole. Even Republican administrations wait to be told what ExxonMobil want. The reviewer of this book for The Nation noted that even Coll’s own foundation has received grants from ExxonMobil–although, to be fair, Coll recused himself from the process.

Coll cites some interesting evidence that ExxonMobil were prepared to accept a carbon tax, while vehemently opposing a cap-and-trade policy for carbon. You wonder why the Obama administration, never one to stand on principle, couldn’t have found that out so that some small limitations on fossil fuel use might have resulted.

Arguably, it’s too late. In an article on Truthdig, Chris Hedges quotes Richard Heinberg, the author of “The End of Growth: Adapting to Our New Economic Reality,

Our solution is our problem. Its name is growth. But growth has become uneconomic. We are worse off because of growth. To achieve growth now means mounting debt, more pollution, an accelerated loss of biodiversity and the continued destabilization of the climate. But we are addicted to growth. If there is no growth there are insufficient tax revenues and jobs. If there is no growth existing debt levels become unsustainable.

This is Strike Debt’s argument: the “externalities” created by growing the carbon-based economy sufficiently to pay off even a percentage of household and sovereign debt would include disastrous eco-cide. Coll notes in passing that extracting fuel from tar sands uses immense quantities of water, as does fracking. In both cases, the water is horribly toxic afterwards. When we have 63% of US counties in drought, can we really afford to use this water to accelerate climate change and produce more drought? What happens when humans start running short of water in the US? Are humans small enough to fail?

Where there are political arguments in these books, they are not being discussed by either political party. Where there are political implications, they are being drawn out only by the social justice movements. The disturbances have only just begun.

The Fall of the Oil Empire

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We have spent much time trying create a narrative to tie together the themes of biosphere extinction, debt catastrophe and the failure of counterinsurgency. It may be as simple as this: the oil empire built by the US was undone by the unanticipated consequences of debt and climate change. There never was a grand strategy, just the application of overwhelming force that no longer holds sway. No one knows what comes next.

What do we know is that the empire doesn’t work, the debt machine has been exposed as a fake, and the biosphere is really starting to show signs of non-viability.

In no particular order: the LIBOR (London Interbank Offered Rate) debt scandal is huge and should be the top political issue of all time. LIBOR is the means of setting global interest rates by a few men in London after polling 16 leading banks. This sets the rate for your mortgage, credit cards and student loans. And it has been systematically fixed for years. These manipulations were of the order of five or ten basis points (1%=100 basis points), which sounds negligible. But $550 trillion of credit is affected by this rate: some estimate as much as $800 trillion. Apparently tiny changes save or cost the banks billions. So far from this being a “free” market, it’s been fixed.

Not only that, it’s not just Barclays, who have paid a minimal fine of $450 million as part of their acceptance of wrong-doing. LIBOR rates automatically exclude the highest two rates and the lowest two. So to actually change LIBOR at least six, probably eight, maybe all 16 banks had to be involved. If the mafia had done this, we’d have 800 year prison sentences being handed down under RICO statutes. Don’t hold your breath to see a bankster do time. Because government must have known: or, equally scandalously, they didn’t. Either way, in a functioning political system of any kind, heads would roll. If they don’t, we’ll know that the empire has no functioning bureaucracy and that it has all been outsourced to the financial sector.

It’s been obvious for some time that global counterinsurgency has morphed into a drone-enabled assassination program, a kind of automatic merger of COINTELPRO and Murder Inc. It doesn’t work very well. Why does this matter? Because if non-US nations buy US Treasury bonds as tribute to the global empire, as David Graeber has argued, it rather makes a difference whether that empire can keep order.

Here the US has benefited from the disaster that has become the eurozone so that rumors that circulated in 2007 about oil being priced in euros have disappeared. Global liquidity has nowhere else to go except the dollar. One group of mainstream economists have described the US dollar as being on the “oil standard.” In this view, the empire kept peace in oil-producing regions and in exchange, oil was priced in dollars and not too highly. Since the invasion of Iraq, the connection that kept the dollar strong when oil prices were high has been broken.

It still makes sense to think of the dollar as a petro-currency and of its empire as being boosted by oil. In 2007, it was predicted that the US would produce about 30% of its oil needs in 2010. In fact, it currently produces about 45% of its needs, due to massive exploitation of all available resources and greater fuel efficiency. From not being in the top ten oil producers in 2005, it is now number three.

Big oil is very much alive and well as a result.  The five largest oil companies made $136 billion in net profits in 2011, with no sign of decreases this year. US Representatives that receive significant campaign contributions from Big Oil get over $150,000 each: all 250 of them. Ironically, the supposed oil man, Bush, has been replaced by a far more oil friendly regime.

There are just two tiny problems. The oil is running out, one, and the biosphere is dramatically transforming, two. Which is why, three, things aren’t going so well.

The International Energy Authority, a totally pro-fossil fuel organization, has been sounding the alarm for some time. On the one hand, according to their chief economist Fatih Birol

We think that the crude oil production has already peaked in 2006, but we expect oil to come from the natural gas liquids, the type of liquid we have through the production of gas, and also a bit from the oil sands. But in any case it will be very challenging to see an increase in the production to meet the growth in the demand, and as a result of that, …the age of cheap oil is over.

Notably, even though their percentages have improved, the big five oil companies are indeed making less oil than they used to do.
And then there’s the heat.

Temperature records for June 2012 in the Midwest

Across the country, 3300 temperature records were set or tied in June. 172 new all-time temperature records were set. The climate scientists are now able to tie these weather events directly to carbon emissions, while also being able to say that events like the cold winter in the UK in 2011-12 were not so caused.

If you were, say, running for office and needed to win in the Midwest, where 600 heat records were set in June, you might make something of all this: if that is, you had any idea what to do about it. Time’s up for pretending that everything will be OK, that some invention will come along or whatever else.

So what’s left for the empire? Good question.