How oil conquered the world – and threatens to destroy it

Mike Phipps reviews Crude capitalism: Oil, Corporate Power, and the Making of the World Market, by Adam Hanieh, published by Verso.

DECEMBER 2, 2024

Nearly three-quarters of the human-driven increase in the atmospheric concentration of carbon dioxide has happened since the 1950s – and the simple reason is oil. Oil is now the most important energy source in the world, making up 40% of all fossil fuels consumed. Four of the six biggest companies in the world are oil companies and in 2022 the Saudi oil giant Saudi Aramco recorded a profit of over $100 billion, the largest by any company, ever. In short, oil is the key to our economy and energy systems.

Oil wins wars

Through the 20th century, argues Adam Hanieh, war and militarism have been catalysts for the rise of oil. Today the largest consumer of oil worldwide – and the biggest source of carbon emissions – is the US military.

The mechanisation of the military and the huge increase in output of military factories helped the Allies win World War I: Lord Curzon said they had “floated to victory on a wave of oil.” US firms were central to this new war economy, integrated into political decision-making and receiving an unprecedented range of financial subsidies. This fuelled international oil expansion first into Latin America and later Asia and Africa, the history of which forms much of the narrative of this book.

After World War II, oil supplanted coal as the world’s main fossil fuel – in electricity generation, transport fuel and petrochemical products. Supply lay in the hands of a small number of large integrated companies, but the key source – the Middle East – was an unstable region in the context of European imperial decline. Britain’s control over much of the region meant that oil was traded in sterling, which was central to the strength of the UK currency.

Anti-colonial pressures

The loss of empire therefore hit sterling hard, at the same time as anti-colonial pressures within the Middle East and Latin America pushed for a larger share of the vast profits oil companies made. In Iran, the pitifully low level of royalties that the Anglo-Iranian Oil Company was paying led the Mossadegh government in 1951 to nationalise it. To prevent this assertion of national sovereignty from becoming an example to be emulated elsewhere, the West boycotted Iran’s oil, destabilising its economy, and then overthrew its government in 1953. It was, notes Hanieh, “the first time the US government had deposed a foreign ruler during peacetime.” It would not of course be the last.

But Iran’s efforts lit a fuse across the region, with rising nationalism in Egypt and Jordan, huge labour strikes in Saudi Arabia and the 1958 Revolution in Iraq. Oil was at the centre of these movements and a push by oil-supplying countries to control pricing led to the formation of the Organization of Petroleum Exporting Countries in 1960.

A dozen years later, OPEC flexed its muscles. Between 1973 and 1974, oil prices quadrupled – they would double again at the end of the decade. The immense power of the big US oil companies, however, allowed them to frame the crisis as one of scarcity, which apparently necessitated less government regulation, more drilling and greater consequent environmental degradation.

The newly rich OPEC countries recycled their petrodollars into the US economy, buying armaments. US military aid to Saudi Arabia increased more than tenfold between 1972 and 1978 and the trade locked together US and Saudi security interests in the region. Saudi’s huge investment in the US economy not only gave the US access to a large pool of foreign capital – it also cemented the global domination of the dollar in the oil economy.

It’s worth mentioning in this context, although it’s not explored in this book, that one of the central motives often cited for the US-led invasion of Iraq in 2003 was not just the control of the second largest oilfields in the world, but also the fact that the Iraqi government had threatened to start trading the commodity in euros, which would have had a catastrophic impact on the dollar and the US economy.

Oil conquers the world

Oil played a pivotal role too in the emergence of post-Soviet Russia. Its privatisation, along with other state assets, at knock-down prices, rapidly created a new capitalist class which helped mould the authoritarian character of the contemporary Russian state.

The future of Africa is also being determined by oil. By 2005, over a quarter of the total worldwide reserves of oil held by the big seven Western oil companies were in Africa, far more than any other region of the world. The impact on the environment and communities living near oil wells, pipelines and rigs has been “ruinous”, argues Hanieh, the “direct outcome of an oil industry allowed to operate with little concern for the ecological or social effects of its activities.” The deals done with African elites to permit this state of affairs has strengthened authoritarianism on the continent.

Today, the shale revolution – “an unmitigated ecological and social disaster” – has allowed the US to overtake Saudi Arabia as the world’s largest oil producer. The North American oil sector is also highly financialised, making big financial investors leading beneficiaries of the carbon economy.

Supposed alternatives

The urgency of the global climate emergency has forced oil companies to diversify into alternative energy technologies. But the focus on ‘Net Zero Emissions’, carbon offsetting and carbon capture, which is now driving climate policy, is actually allowing an expansion of oil production, because of the various sleights of hand by which emissions are measured. For example, “When oil companies report their climate emissions, they refer only to the carbon evolved in the actual production of a barrel of oil – not the carbon released when that oil is consumed.” It’s like a tobacco company “disowning responsibility for cigarette deaths because lung cancer rates were very low among workers on the company’s assembly line.”

Hanieh concludes: “Net zero has licensed a recklessly cavalier ‘burn now, pay later’ approach which has seen carbon emissions continue to soar.” He is also critical of ‘solutions’ such as bioenergy and electric vehicles, which bring their own environmental problems. Meanwhile, frequently left out of the debate is the colossal growth in petrochemically produced plastics, the production of which grew nearly two hundredfold between 1950 and 2015 – and the pace is accelerating.

If you looked at the thousands of delegates from the fossil fuel industry who attend COP summits, you would presume that oil companies are the key to solving the climate crisis. They are not. Systemwide transformation, uniting climate struggles with movements for social and economic justice, will be needed to save the planet – and this is not compatible with continued capital accumulation.

This is an excellent book for understanding the fundamental causal connections between our economic system and the destruction of our environment wrought by the rise of oil. I recommend it.

Mike Phipps’ book Don’t Stop Thinking About Tomorrow: The Labour Party after Jeremy Corbyn (OR Books, 2022) can be ordered here.