Carbon Democracy by Timothy Mitchell, a Middle East scholar at Columbia University, is the most thoughtful, yet radical, account I have seen of how the oil industry organized itself and the economy and politics of the world throughout the Twentieth Century. He concludes with concerns about why this powerful structure is unable to cope with the twin problems of peak oil and climate change in the Twenty-First. I strongly recommend it.
Two preliminary notes. First, the 2013 paperback edition includes a valuable afterword that is not in the Hardbound or ebook versions of the text. Second, the author gave an interesting talk in early 2012 at George Washington University about his ideas that can be found online, for people who want a preview of the book.
The book presents a new version of the oil story. He starts with coal, and a critical problem it had, in that it was highly vulnerable to disruption by labor actions. Oil was attractive from the beginning - including Churchill's decision to replace coal with oil in the British Navy - because it was more easily controlled from above and less threatened from below. The challenge for oil was that the demand was less elastic than supply at any particular time, so the oil companies (eventually including OPEC) had to figure out how to control everything to prevent overproduction and downward price pressures.
The companies worked well together, and took extreme measures to keep control. In 1900 half the world's oil production was in Baku, so the Brits acquired the rights to oil control and transit in Persia mostly to prevent a Russian pipeline to the Persian Gulf. Around 1915 the British Navy was trying to acquire oil from Mexico, then the third largest oil producing company and a part of the world claimed by the Rockefeller interests, which protected itself by funding the overthrow of the government. Ibn Saud's campaign to consolidate power and unify the Arabian Peninsula was financed by Standard of California (now Chevron), which also stopped him when he was moving too far north toward Jordan and Palestine. The companies agreed in the 1930s to manage production to support the (high) US price set by the Texas Railroad Commission. The book is full of such stories.
The demand side was also carefully managed. After World War II, Defense Secretary Forrestal recognized the need to construct an American lifestyle that required lots of energy consumption, to support the oil industry. At the same time, scarce Marshall Plan steel was sent to construct the Trans-Arabian Pipeline to help promote the use of oil instead of coal in the new European economy.
Mitchell argues that "the economy" was a creation of the abundance of cheap oil. While economics had focused on the allocation of scarce resources, the expansion of oil supplies and other natural resources created an expectation and need for endless economic growth that could be managed centrally. Money, not "stuff," became the subject, and mathematics, not organic factors, became the method of analysis. Making Gross National Product (now GDP) the sole measure of prosperity changed politics and redefined what could and could not be discussed in the public sphere.
One recurring theme in the book was the abuse of Iraq. From the earliest negotiations with the Ottoman Empire to dealing with Saddam Hussein, efforts to limit production of oil from Iraq have never ended. Work on the Berlin-to-Baghdad railway was dragged out at a pace just fast enough to keep the British oil concession alive without actually doing anything. The Iraqi Petroleum Company was run and managed by BP, with no Iraqi ownership, and BP failed to tell the locals for two decades that they had discovered the Rumaila oil field, the world's second largest, because they didn't want it developed. By the time Saddam was in power, he resisted the rules of the global oil cartel, so he was subject to three major wars (Iran-Iraq and two Gulf Wars) that prevented an orderly expansion of the Iraqi oil industry for over three decades. (Iraq's oil exports have finally reached the level they had in 1979, 35 years ago.) Similarly, when the elected government of Iran tried to take control of its own oil, the US and the UK had it overthrown in 1953 and set up the Shah instead. In this sense, "Carbon Democracy" is an ironic title, since the oil industry and the governments it worked with rarely tolerated popular governments that could threaten the game.
The book concludes with the recent and ongoing transition to a period of high priced oil and production that can no longer increase to support a growing global economy, while climate changes represent a cost of fuel use that is now coming due. Neither the oil industry nor governments know how to deal with these challenges. The shale/fracking boom makes much more sense to Wall Street than to the profits of the oil industry.
Mitchell's narrative is vastly different from the more common approach taken by Daniel Yergin and others. The story of oil is not about the brave and innovative men to found this wondrous substance, but of the efforts to sabotage and limit production growth while never allowing the public to understand what was happening. This is an innovative and unsettling book.
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CHARLES F. MERRILL
GOOD TO KNOW
Reviewed in the United Kingdom 🇬🇧 on August 23, 2018
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A thorough consideration of oil as the missing link to modern economy.
Reviewed in Australia 🇦🇺 on August 7, 2017
