Nature's Evil

The First World War did not start because of oil, but supplies of petroleum brought about its end. In the Second World War, oil was one of the chief spoils. The Cold War redistributed oil rent from private producers to state ownership, and the big oil-producing regions in the Middle East, Africa and South America turned into trouble spots. Nowadays, most oil is extracted from deposits in state ownership: ‘conventional oil’ is mostly state oil. Paradoxically, the biggest trade on the global capitalist market has been executed not by private entrepreneurs but by states. The formation of OPEC, the cartel which owns four-fifths of the world’s oil reserves, offered a unique opportunity for creating a global trade monopoly. A combination of a monopoly on violence – a constituent feature of the modern state – with a monopoly on energy has given the members of OPEC an unprecedented power in world affairs. 3 Only their internal and mutual disagreements – the imperfect character of both monopolies – have diminished this power.

Oil is used mostly as a source of energy, and oil-fuelled vehicles have massively improved the efficiency of many human activities, from war to work to play. But oil is also the raw material for making plastic, synthetic fibre, fertiliser and much else. Out of every fifteen barrels of crude oil, one is used in the chemical industry and the rest is consumed as fuel. But finding oil, extracting it and delivering it to the consumer itself requires energy, a proportion of what is extracted. Since the beginning of the twentieth century, that proportion has risen from 1 per cent to 20 per cent. Moreover, all stages of the process give off carbon dioxide. The useful work achieved per unit of emissions has fallen by a factor of twenty. Like the production of other raw materials, oil extraction is subject to the law of diminishing returns. When oil fountains shut down, petroleum had to be pumped up from deeper and deeper wells. When the wells were exhausted, the remaining fuel had to be pressed out from its deposits by tremendously complex techniques. Then, ‘non-conventional’ sources were found such as shale and oil sand. As the quality of petroleum went down, it underwent ever more complex procedures of refining. But, as long as the prices of fuel were going up, the oil industry continued to expand.

Oil is linked to natural gas, with the huge difference that oil is liquid and gas is a gas. It is difficult to store, much more so than oil. For this reason, gas used to be traded just as if it were a perishable product. Impossible to transport by sea, gas remained an inland commodity. Traded via a fixed network of pipelines, it was sold on the basis of long-term, guaranteed contracts. This made natural gas ideal for a planned economy. Free markets preferred oil. Gas was the right fit for socialism just as oil was for capitalism. The new technologies for liquefying gas have changed these conditions, and gas has changed its political characteristics. Since liquid gas can now be stored, it can be traded as required, its price can be defined ‘on the spot’, and it is a market commodity just like coal or oil. Liquid gas is more expensive than oil but less harmful – it releases fewer emissions when burnt. This makes their futures different: the consumption of gas will rise while the consumption of oil will fall.

Farflung corners

Playing with fire, people have always been fascinated by exotic places where inflammable oil flowed out of the earth, or where they found a hissing jet of natural gas. The first oil-processing works started in a remote corner of the Austro-Hungarian Empire – in eastern Galicia. In 1854, the pharmacist Ignatius Lukashevich discovered how to use oil instead of whale blubber for lamps. Local oil was abundant – he just needed wells, but his refining workshops were quite sophisticated. However, Galicia was as remote from the consumer as Arabia or Siberia. Until the authorities brought the railway there, kerosene had nowhere to go. But labour was so cheap that even lighting local villages earned profits. Lukashevich used these profits to help finance the Polish uprising of 1863 against the Russian Empire. In 1880, Emperor Franz Joseph visited Galicia. He was probably surprised to see a problem which has plagued the oil industry ever since then: overproduction.