Tag: Oil

  • Ask the Editor: Oil Demand and Destruction

    Ask the Editor: Oil Demand and Destruction

    To the editor,


    Is the energy crisis stemming from the war on Iran a simple matter of supply and demand?

    Cheers,

    Breezy.

    [Sent from Substack]

    Dear Breezy,  

    The world is staring at a billion barrels of oil lost due to military actions undertaken by the belligerent governments of Israel and the United States. This number will only go up with each passing day of disruption to maritime traffic in the Persian Gulf. To put that number into context, it is roughly equivalent to ten full days of total global consumption. This kind of supply squeeze will present itself unevenly; the higher cost of gas and transported goods can be either a nuisance or a calamity depending on the financial capacity of consumers.

    Turning to Karl Marx the political economist, he himself did not live to see oil come into dominant use and it was coal that reigned supreme during his Victorian era. But he recognized fossil fuels as a foundational mean to the capitalist mode of production because their dense energy content allowed for the intensification of human labour and factory output.

    The utilization of this new mean of production is what ultimately lead to the standardization of wage labour and industrial processes. Whereas water mills depended on the ebbs and flows of natural streams, the coal-fired steam engine could be plunked wherever potential workers were, with trains and ships doing the rest. Oil merely advanced the technological revolution that coal set into motion regarding production and circulation.

    Because oil is so foundational to the capitalist mode of production, its presence in the marketplace cannot be reduced to the dollars and cents of each barrel. Countless wars have been fought, governments toppled, acres fracked, blockades raised—all to influence the direction that precious crude flows black. If the price is too high, economic activity will be suppressed. If the price is too low, Big Oil bleeds profits. It’s a fragility that puts Goldilocks to shame.

    In Marxian economics, supply and demand “play a vital surface role in generating price movements for a particular commodity” without which “there could be no equilibrium price.”1 With the economic rise of China and the Global South, oil prices routinely clocked in over $100 per barrel as new demand pressured existing supply. While oil companies blistered with cash, high prices suppressed potential consumption in virtually all other areas of the global economy. After all, only 15 countries export meaningful quantities of oil that another 160 countries must bid on. 

    As the process of capital accumulation in one sphere became a contradictory force suppressing accumulation in others, the economic system demanded a way to get beyond it.2 Fracking technologies were unlocked by American public–private partnerships and they opened up vast supplies of oil in the United States and around the world. Fracking is what brought the supply and demand of oil back into an equilibrium that guaranteed both stable profits and continued future growth. 

    What the war against Iran has accomplished is to throw disequilibrium back into the oil markets, this time because of disruptions to shipping in the Strait of Hormuz. As many Gulf producers go toward zero, oil operations outside the region see their profits soar. The sudden scarcity of oil and its byproducts has led to the cancellation of tens of thousands of planned flights, MRI screening is pressed by helium shortages, semiconductor manufacturing in Asia is throttled and a lack of fertilizer is scarring agriculture in Africa and South Asia.

    Disruption to supply inevitably leads to destruction of demand. Free market orthodoxy dictates that price adjustments alone bring about equilibrium in commodity markets. But it will be shown that the value of oil to labour processes and capital accumulation transcends the spot price of each barrel. The oil market is an artifact of economic planning carefully designed to keep the downstream tributaries trickling outward. With those plans now buried under Middle Eastern rubble, capitalism is confronted with yet another “constantly overcome but just as constantly posited” barrier.3 

    In sols.

    Send your questions to the Reclamation: editor@thereclamation.co

    Footnotes:


    1. David Harvey, A Companion to Marx’s Capital (Verso, 2010): 166. ↩︎

    2. The barriers that capital imposes on itself before leaping over them are explored by Karl Marx in his Grundrisse (Penguin, 1993): 410. ↩︎

    3. Ibid. ↩︎
  • Ask the Editor: A Silver Lining to the Clouds

    Ask the Editor: A Silver Lining to the Clouds

    Dear editor,

    Amidst the flurry of travel disruptions, high costs and global conflict, it is hard to see any positives. Is there anything to look forward to in these bleak times?

    Sincerely,

    Helen.

    [Sent via email]

    Hi Helen,

    In Marx’s materialist conception of history, particular attention is paid to the “objective conditions” of individual life and social being.1 These conditions include available technologies, resources, level of accessible material comfort and productive employment that shape our governing ideologies, happiness and culture. In the present economy we are heavily dependent on oil and gas for energy, fertilizer and plastic byproducts.

    This fossil fuel dependency has transformed the resource-rich Middle East into a site of economic competition between great powers. The result is a raging boil of oil money, ethnic strife and a vast quantity of weapons propping up systems of repression, resistance and neo-colonial extraction. What is happening in Iran right now is what happens when the pot boils over, just as it has previously boiled over in Yemen, Iraq, Afghanistan, Palestine, Sudan, Libya, Lebanon and Syria.

    It is important for those of us in the West to appreciate just how much of our perceived progress has relied on managing the conflicts and resources of other nations. The capitalist world order was largely cemented by accident, when Old World European technologies collided with New World resources and societies. But its persistence is consciously maintained by way of corporate exploitation of capital starved countries and military containment of economic rivals. In other words, there is an intrinsic relationship between the riches of one country and the poverty of another.

    Having survived the U.S. proxy war with Iraq, Iran became one of those rivals earmarked for “containment.”2 They were systematically marginalized from the global economy with sanctions and surrounded by American military bases. From the American point of view, this containment strategy was largely successful for decades and culminated with massive Iranian protests against the economic conditions of their country. The resulting crackdown only exposed the unsustainability of Iran’s trajectory.

    Luckily for the IRGC, Trump’s decision to go to war with Iran allowed them to unleash the full force of their asymmetric power and they exploded out from the box that had previously contained them. Trump is now confronted with the stark reality that he won’t be able to contain them economically or militarily again. He’ll have to either destroy the country entirely or watch it become dramatically strengthened.

    The bleak circumstances of war are a heavy burden to bear for this geopolitical competition over economic dominance. But if there is a silver lining to these clouds, Iran has plucked it from the sky and laid it at our feet. They have weaponized the global dependency on oil and wielded it to their great advantage; they have exacted a toll from the genocidal state of Israel; they have exposed limits to American militarism, inspiring defiance from tormented nations like Cuba. 

    Since the belligerent and cowardly attack on Iran, the world has turned to greener fertilizers, electric vehicles and renewable solar and wind power generation for energy needs. A helium shortage will put the brakes on a runaway tech sector and military-industrial complex. From the ashes of war, we may find the objective conditions of mankind gradually change for the better. Since a hegemonic power cannot sanction the Sun or go to war over wind, the foundation of a post-capitalist cooperative economy slowly becomes concretized.

    Henri Lefebvre once said, “History puts its worst foot forward.”3 There is a duality to history, a tendency for progress to be paid up-front in coins forged by blood and fire. Iran is paying that price now in opposition to the oil-thirsty American establishment and Zionist lobby.  As allies for a better world, we can always hope that Tehran is the rock where the wave of western imperialism breaks. 

    In sols.

    Send your questions to the Reclamation: editor@thereclamation.co

    Footnotes:


    1. Erich Fromm, Escape From Freedom (Holt, 1969): 293. ↩︎

    2. China, Russia/the former Soviet Union and Iran have all found themselves surrounded by American bases at one time or another. ↩︎

    3. Henri Lefebvre cited in Jameson, Valences of the Dialectic (Verso, 2010): 287. ↩︎