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The political-economy of a globalized oil system —
How “objective conditions” drive the OECD and OPEC from
confrontation to collusion
Thomas W. O'Donnell,
The University of Michigan, Ann Arbor, USA*
__________________________
[NOTE: This is an excerpt from the draft of a longer, unpublished document.]
1 Introduction – Crises predictions and the new oil
order
This CNS conference at York University, to honor James O’Connor‘s work, has been a very
stimulating experience. Over the past three days, others have already critiqued the environmental
and social-justice consequences of hydrocarbon society in detail, so I will not return to these
issues. My goal, in this final plenary session, is to examine historically the political-economy of oil
as a natural resource, and how the global oil order is now being restructured as a globalized order.
In the process, I want to soberly address the seemingly ubiquitous predictions of
impending crises and collapse of the oil sector one encounters nowadays in both academic and
popular discourse--and not only in left-oppositional discourse. The sine qua non of these is the
“Peak Oil” prediction by a group of retired petro-geologists including Dr. Collin Campbell, Dr. Jean
Laherrere, Prof. Kenneth S. Deffeyes and others.1 In the 1950’s, Shell-Oil petro-geologist M. King
* Science, Technology and Society Program (STS), Center for Middle East and North African Studies (CMENAS), and Michigan Center for Theoretical Physics (MCTP).
Address: The University of Michigan, Residential College, 701 E. University St., Ann Arbor, MI 48109-1245
e-mail: twod@umich.edu, URL: http://www.umich.edu/~twod
The Association for the Study of Peak Oil and Gas (ASPO) website is: http://www.peakoil.net . Its founder is Colin
Campbell, Ph.D. (see: http://www.hubbertpeak.com/campbell/). Campbell worked as an exploration geologist
worldwide, and is now “a Trustee of the Oil Depletion Analysis Centre” in London; Jean Laherrere (see:
http://www.hubbertpeak.com/laherrere/) worked for the French oil company “TOTAL for thirty-seven years” in
“exploration activities in the Sahara, Australia, Canada and Paris”; Prof. Kenneth S. Deffeyes (see:
http://www.princeton.edu/hubbert/) worked at Shell Oil when Hubbert was the major figure there, and is retired from
Princeton University’s Geology Department.
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Hubbert2 developed a now-standard mathematical model of petroleum depletion—a model which
really applies to the depletion rate of any natural resource--and correctly predicted the peak and
subsequent decline of liquid-oil production in the U.S. lower-48 states that occurred in about 1971.3
The Peak Oil group takes an updated version of this model and applies it to world oil depletion as a
whole. By plugging in their interpretation of the available data on the history of worldwide proven
oil reserves, they come to the conclusion that global oil production will peak very soon. For
example, Deffeyes, an emeritus professor of petro-geology at Princeton University, recently
predicted the final, historical peak in world oil production would occur on Thanksgiving Day of
2005,4 and that, thereafter, the production of oil will forever decrease.
A voice added to the Peak-Oil chorus, is that of Mr. Matthew Simmons, former Harvard
Business School professor, and the founder and former CEO (retired) of Simmons International,
which describes itself as “by far the largest investment banking practice serving the energy
industry.” Simmons also “serve(ed) as a member on the Bush Administration's National Energy
Policy Development Group,” that produced the National Energy Policy of 2001 (a k a, the Cheney
White House Energy Report).5 Simmons has spoken extensively over the past couple of years
embracing the predictions of the Peak Oil group, and has created quite a stir with the conclusions
reached in his recent book: Twilight in the Desert: The Coming Saudi Oil Shock and the World
M. King Hubbert, (1903 -1989). See: http://www.hubbertpeak.com/hubbert/ on the Peak Oil group’s web pages.
With which he correctly predicted the approximate year in which the lower 48 U.S. states would have passed their
peak in oil production, which occurs when one-half of their proven reserves (economically recoverable portion of the
ultimately to be discovered liquid-petroleum natural resources. ) See: Deffeyes, .... 200x, pp. ....
4 Professor Deffeyes make this prediction on the U.S. National Public Radio’s “Dianne Rheam Show” in early 2005.
When pressed for a specific date, Deffeyes, with his characteristic good-natured, curmudgeonly demeanor, declared “if
you want a date” then it is “Thanksgiving” of this year. Of course, his prediction is somewhat tongue-in-cheek, as he
realizes that such a nodal point cannot have such fine resolution; nonetheless, he is completely serious in his
prediction that the global Hubbert’s peak in historical worldwide oil production is occurring essentially right now. In this
regard, see, for example, his otherwise excellent primers on petro-geology and the prospects for alternative energy:
Hubbert's Peak: The Impending World Oil Shortage, Princeton University, Princeton, New Jersey, 2001. And the follow
up: Beyond Oil: The View from Hubbert's Peak, Hill and Wang, New York, New York, 2005.
5 See: Simmons and Company International website: http://www.simmonsco-intl.com/ (last access January 8, 2006)
2
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Economy,6 where he warns of an impending collapse of the world’s largest oil fields in Saudi
Arabia. This prediction he infers from extensive reading of professional-engineering articles in the
Oil and Gas Journal that discuss the latest developments in Saudi oil-extraction techniques. Based
on this prediction, he then demands that the Saudis and other OPEC oil producers open their oilfield records to pubic scrutiny, as this information is needed to calculate when Saudi oil might pass
its Hubbert’s peak and begin to decline, causing a catastrophic collapse of the global oil market.
His bottom line is that, if investors—such as he himself--are expected to put up the huge foreign
direct investments (FDI) that will be needed to sufficiently expand pumping capacity to satisfy
burgeoning world oil demand, then international investors need to have some proof (a k a
transparency) from the Saudis about how much oil is really available.7
Still others who embrace the Peak Oil group’s predictions see a coming era of “resource
wars” growing out of intense mercantilist competition between the Great Powers for access to
Middle-East and Caspian-Basin oil resources--a struggle of each against all (sauve que peut) to
supply home markets. This theory has been made popular by Professor Michael Klare of
Hampshire College through his recent books, “Resource Wars” and “Blood for Oil.”8 Here, the
predicted oil-centered crisis is, ultimately, a WW I-style inter-imperialist war among the United
States, Russia, China, and Europe for access to scarce energy resources.9
Matthew R. Simmons, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, Wiley and Son,
Hoboken, New Jersey, 2005.
7 The Saudi’s have recently offered a certain amount of data to counter Simmons’ claims about their fields in an effort
to retain confidence in their reliability, and gave the U.S. Secretary of Energy an unprecedented inside tour of their
massive oil-fields to reassure the U.S. (New York Times, December 24, 2005, p. 1.).
8 Blood and Oil: The Dangers and Consequences of America's Growing Dependency on Imported Petroleum (The
American Empire Project), Michael Klare, Metropolitan Books, New York, New York, 2005; and Resource Wars: The
New Landscape of Global Conflict, Michael Klare, Henry Holt and Co., New York, New York, 2001. While I critique the
conclusion predicting resource wars as the main character of the evolving geo-strategic environment in the global oil
order, there is no doubt that in these works Professor Klare’s marshalling and analysis of extensive information about
U.S. geo-strategic maneuvers over the past several decades vis-à-vis oil are a highly informative study.
9 ibid, Chapter xyz “xyz”, pp. xyz.
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Most Peak-Oil school adherents do not stop, however, at predicting the immanent decline
of global and/or Saudi oil resources, or predicting war among the Great Powers over oil. As a
group, they further predict that this decline will precipitate an inevitable, apocalyptic collapse of
industrial society. For example, Richard Heinberg, in his recent book The Party’s Over: Oil, War
and the [XYZ] of Industrial Societies, says:
“Expanding agricultural production, based on cheap energy resources, enabled
feeding of a global population that grew from 1.7 billion to over 6 billion in a single
century. Cheap energy will soon be a thing of the past. How many people will
post-industrial agriculture be able to support? ... A safe estimate would be this: as
many people as were supported before agriculture was industrialized – that is ...
fewer than 2 billion people.”10 [emphasis in original]
and,
“... If that reduction does not take place through voluntary programs of birth
control, then it will probably come about as a result of famines, plagues and
wars—the traditional means by which human populations have been culled when
temporarily surpassed the carrying capacity of their environments.”11
And, he spends considerable time advocating a policy of “managed collapse” of industrial society. 12
When he says “the party is over” in the title of his book, he means industrial society is over
because, he claims, hydrocarbon society is now ending. Heinberg himself is careful to
demonstrate that he is an orthodox exponent of the Peak-Oil school by acknowledging in the
Preface, [xyz Acknowledgements?] that two of its geologist-founders, mentioned above, have read
all or part of his work before its publication, and made significant suggestions and contributions.
Probably the most extreme exponent of this fin-de-civilisation trend is the writer James Howard
Kunstler. He similarly states that:
“I believe that we face a dire and unprecedented period of difficulty in the twentyfirst century, but that humankind will survive and continue further into the future—
Richard Heinberg, The Party’s Over: Oil, War and the Rate of Industrial Societies, New Society Publishers; BC,
Canada, 2005, p. 196.
11 ibid., p. 197.
12 Heinberg, ibid., p.226.
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though not without taking some severe losses in the meantime, in population, in
life expectancies, in standards of living, in the retention of knowledge and
technology, and in decent behavior. I believe we will see a dramatic die-back, but
not a die off.”13
The factual and theoretical errors involved here parallel those followed by the Club of
Rome, 14 Paul Ehrlich and others in the late-1960s and early 1970s. Ehrlich, for example,
had predicted disastrous global overpopulation, immanent natural-resource depletion, and,
in particular that global famines would occur between 1970 and 1985.15 In spite of the
well-known theoretical flaws in making these previous predictions, the present-day Peak
Oil school specifically defends Ehrlich’s work, and cites approvingly others who have
updated Ehrlich’s work, as one sees in Heinberg and Kunstler’s books.
It does not seem unfair to characterize these resource-scarcity-based predictions
of the collapse of industrial society as “neo-Malthusian,”16 a criticism offered a few decades
back, by a certain number of friends and foes alike, about Ehrlich’s and the Club of Rome’s
predictions then. Unless, that is, someone objects that, in point of fact, both these authors
actually defend Malthus himself and therefore should simply be seen as Malthusians.
Indeed, Kunstler, for example, frankly asserts:
“Malthus was certainly correct, but cheap oil has skewed the equation over the
past hundred years...”17
It is not my intention, in this particular paper, to dissect the scientific-technical and socialtheoretical difficulties in the predictions of today’s Peak-Oil school and its adherents.18 Rather, my
John Howard Kunstler, The Long Emergency: Surviving the Converging Catastrophes of trhe Twenty-First Century,
Atlantic Monthly Press, New York, 2005, p. 5.
14 Limits to Growth, Donella Meadows et al, The Club of Rome, 1972.
15 The Population Bomb, Paul Erlich, 1958. For a data-based study which explained clearly that natural resources
were actually not being depleted, and why, see the work of M. H. Ross and xyz , such as: ...........
16 Reverend Thomas Robert Malthus, An Essay On The Principle Of Population, 1798.
17 Kunstler, ibid. p. 7.
18 This is not to say that such a peak in liquid oil is not on the horizon eventually. It is widely held by the mainstream of
petro-geology (viz., including the U.S. Geological Service) that this global peak will occur in thirty-to-forty years.
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purpose in enumerating these predictions here has been simply to show, very concretely, that
indeed there exists a quite-developed intellectual trend, which predicts dire crises associated with
an actual scarcity of oil. Rather than critique these directly, I instead want to do what I think needs
to be done first and foremost, in order to properly prepare the ground before one can soberly
assess these apocalyptic views. That is, one must look in detail at the political-economy of the
world oil system in a historical manner, avoiding fashionable hyperbole about immanent crises,
and, instead, elaborate precisely what the system’s contradictions have actually been, what crises
these have actually given rise to, and the effects these crises have had on the form and trajectory
of the system. That is, how, and to what extent, have the oil-consuming states (the U.S. in
particular) as well as the oil-producing states (especially Saudi Arabia and the U.S.) been able to
dynamically manage contradictions and adapt to crises.
My research of the past several years indicates, as I asserted above, that the global oil
system is being restructured into a more globalized one.19 It is striking that, while one hears so
many predictions of Peak Oil and other impending energy crises, one hears almost nothing about
this ongoing fundamental reconfiguration of the international oil system.
Generally, I have been giving very data-driven presentations over the past few years;
however, this discussion requires a more historical examination.
2 History: Four stages of the global oil order
The world oil order and the U.S. position of hegemony within it, that is, its position of
“predominant influence”--especially as pertains to relations with its allies20--is not a static entity; it
The author is in the process of writing a book on the Global Oil System, which will address a number of additional
issues it is not possible to address here.
19
20 By the striving of the U.S. for “hegemony” in the hydrocarbon sector, I do not mean anything beyond the standard definition used in political science today; that is, the “predominant
influence” enjoyed by the U.S. state in the global oil system over especially over its allies. [Insert dictionary definition
from my *.PPT presentation]
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has evolved and been re-invented through at least four quite distinct stages since the start of WW
II. You will notice in the delineation of these four periods, that each was demarcated by a particular
crisis. “Crises”, as used here, are distinct from mere problems; they are paradigm-changing events
requiring a re-organization of the existing oil-order.
2.1 Phase 1: WW II, 1936-1945
The utter lack of petroleum resources in Germany and Japan was a major, strategic factor for the
Axis powers in World War II21. In contrast, on the Allied side, not only did the USSR
his epic work, The Prize, concludes, and, to
each of Pelletière and Klare. From 1985, my story draws especially from Pelletière, and
somewhat Klare, as well as general historical sources. Where particular points of analysis are unique to an author, I
cite them. When widely known facts or points of analysis are related, I do not. In general, the historical story here is
drawn from facts related by these authors, combined with extensive reading of the business press and, for later
periods, of reports of the EIA, IEA and other official sources. The analytical threads presented throughout are my own
unless specifically noted otherwise.
21Much of the following historical narrative relies on Yergin (ibid.), especially up to about 1980, but occasionally up to 1991 where
lesser degrees, two works by