Stirring the Energy Pot

Since February of 2017, I have written frequently about changes in the global political economy of energy and the effects of those changes on imperialist rivalries and accompanying political trends: New Developments in Political Economy: The Politics of Oil (2-6-17), US Imperialism: Changing Direction (6-25-17), More on Energy Imperialism (7-26-17), Economic Nationalism: What It Means (12-28-17).

The broad gist of these articles was that (1) the era of global economic integration was severely challenged by the 2007-2008 shock; (2) a technological revolution in energy extraction moved the US-- the leading imperialist power-- towards energy independence; (3) the failure of OPEC and others to rein in US energy production and the continuing sluggishness of growth and trade prodded the US towards a further goal of energy dominance through competition in energy markets; (4) without the burden of dependence on stable, secure international energy sources, US imperialism stepped back from its role as the primary promoter and guarantor of global integration and stability; (5) intensifying competition in the context of stagnant growth fostered the politics of economic nationalism and the promotion of national self-interest in contrast to the politics of globalism.

Since the British navy and other navies converted from coal to oil-burning vessels in the early 1900s and with the burgeoning dependence of modern militaries on oil, securing energy sources has been a strategic centerpiece of imperialist strategy.

It is not too great of an exaggeration to see German expansion in World War II as accelerated by a thirst for reliable energy supplies (Romania, Soviet Union). And the denial of energy resources to the Japanese militarists similarly prodded aggression in Southeast Asia.

For the US, declining domestic production and increasing reliance on foreign oil, particularly from the Middle East, led to greater attention to security and stability in the Middle East. The US established a powerful gendarmerie to police the region: the Shah’s Iran, Israel, and the Arabian petrostates. Billions of dollars of military hardware bolstered these watchdogs at various times in an effort to guarantee stable supplies of oil. US security services worked overtime to install stable regimes in all of the petrostates and their neighbors. US dominance was sealed with the establishment of the dollar as the petroleum-trading currency. The dominance was so complete that the US was able to use low petroleum prices as a weapon against the Soviets during the Cold War.

But matters have changed radically with the technology-enabled explosion of oil and natural gas production in the US.

The New

Writing in The Washington Post (The US is about to be the world’s top crude oil producer. Guess who didn’t see it coming, 3-7-18), Charles Lane reminds us of how matters were before: “During his 2006 ‘addicted to oil’ State of the Union address, President George W. Bush bemoaned imports from unstable parts of the world and called for replacing 75% of Middle East oil imports by 2025.” Bush, like his father, spent great efforts-- lives and wealth-- policing and bullying those “unstable” oil producers.  

Energy writer James Blas explains in Bloomberg Businessweek (The New World Order of Energy Will Be American, 1-29-18) how matters are now, how the US no longer has to “tiptoe around oil supplying nations” whether they are “friends” (Saudi Arabia) or “adversaries” (Venezuela). Instead, “energy dominance” is on the agenda.

Blas notes that the US won the battle for dominance started by Saudi Arabia in 2014 when the Saudis drove the price of West Texas crude oil down to as low as $26 a barrel through massive overproduction, expecting to cripple US shale production. Thanks to huge investments, the shale oil companies survived the attack, cut costs, and roared back. Today growth is faster than pre-2014 when prices for oil were actually much higher. And imports are now below 2.5 million barrels a day, the lowest level since record-keeping began in 1973 (imports were 12 million barrels per day in 2008).

Thanks to geo-political “flare-ups” (generally US-instigated instability), US exports at one point in 2017 hit 2 million barrels a day, mainly to Canada and the People's Republic of China (PRC). Exports are fully expected to grow even more in the future.

Venezuela is Illustrative of the US’s growing interest in disrupting oil markets to its advantage. Through disinvestment and sanctions, Venezuelan oil production dropped nearly 30% last year. Similarly, the US-NATO destruction of Libya has succeeded in disabling its oil industry. The wreckage of the Libyan energy industry means that oil prices would have to reach $78.10 per barrel for the industry to break even. With prices trending well below that number, there clearly is little chance for the Libyan industry to recover, invest, or add to the country’s sovereign wealth.

With massive corruption and an expensive war to finance, Saudi Arabia now needs $70 a barrel to merely break even. Hoping to escape from dependency on an oil regimen, the Saudis had planned a public offering (a sell-off to private interests) of its national oil company, ARAMCO. In the current unfavorable competitive environment, that move has been postponed time and time again.

Formerly a price dove-- the world’s advocate for low oil prices-- the Saudis are now desperate to achieve higher prices. Their escape plan from their losing hand in oil competition-- Vision 2030-- is endangered by modest prices. To reduce supply and increase both demand and prices, the Saudis are a strong advocate for sanctions against Iran, as are powerful energy interests within the US ruling class.

The new, competitive environment has brought forth new, unexpected alliances. Russia-- a frequent foe of Saudi foreign policy-- has recently signed a comprehensive energy agreement with Saudi Arabia. For its part, Russia is offering to take a substantial position in any future IPO of ARAMCO, boosting its prospects (along with a similar offer from the PRC). Saudi Arabia, in return has agreed to invest in Russian LNG projects and Eurasian drilling. It appears that Russia and the PRC are looking to guarantee security, stability, and cooperation among the energy-producing states, a role that the US has now abandoned with its pursuit of energy dominance and a role that is a necessary condition for peace in the region.

Because emerging US oil dominance (and sanctions: war by other means) threatens to disrupt the reliability and stability of existing petro-suppliers, the PRC has begun to negotiate crude-oil futures contracts in renminbis rather than petro-dollars.

Natural Gas

Much of the growing US animosity that is so apparent in US-Russia-PRC relations revolves around competition in the natural gas market. Through political fantasies, sanctions, threats, saber-rattling, and contrived affronts, the US has made every effort to wean Europe away from Russian natural gas, especially the expansion of pipelines to Europe promising consistent supply and favorable prices.

Some Eastern European countries, mired in historic anti-Russia enmity, have welcomed US liquefied natural gas (LNG) shipments, constructing new receiving facilities. They accept inconvenience, inefficiency, and higher prices as the cost of the politically motivated anti-Russia campaign. The US is trying to browbeat the rest of Europe into giving preference to US LNG.

But the big prize is the PRC, the fastest growing natural gas market in the world. Both Russia and the US are fighting to supply natural gas: Russia has a pipeline project (GAZPROM) sales agreement to supply 1.3 trillion cubic feet a year, while the US (Cheniere Energy) has contracts to supply 1.2 million tons of LNG per year.

The recently announced selective, very selective US tariffs-- apparently really only against PRC-- likely have a covert motive. US Secretary of Commerce Wilbur Ross suggested that increased Chinese purchases of LNG might have a happy consequence for tariffs by reducing the US-PRC trade deficit-- another shot fired in the energy wars.

Trade Tariffs

The sharpest edge of US economic nationalism is the emerging establishment and threats of trade tariffs. Short of embargo or out-and-out war, establishing disruptive trade barriers is the most hostile posture towards other nations. In the case of a powerful country like the US, tariffs constitute unabashed arrogance. As perceptive left commentators have noted, the US has always pressed its problems unto its weaker “friends,” but not with this hubris.

Lest anyone think this is a ‘Trump’ problem and not shared by fellow Republicans and Democrats, attention should be paid to what others are saying. When Trump announced the first round of tariffs directed at the PRC, Democratic Senate leader Chuck Schumer was quoted in The Wall Street Journal: “I don’t agree with President Trump on a whole lot, but today I want to give him a big pat on the back.”

And Reuters reported on April 1 that Democratic Senator Elizabeth Warren, speaking in Beijing:

The Massachusetts Democrat and Trump foe, who has been touted as a potential 2020 presidential candidate despite rejecting such speculation, has said U.S. trade policy needs a rethink and that she is not afraid of tariffs.

After years of mistakenly assuming economic engagement would lead to a more open China, the U.S. government was waking up to Chinese demands for U.S. companies to give up their know-how in exchange for access to its market, Warren said.

“The whole policy was misdirected. We told ourselves a happy-face story that never fit with the facts,” Warren told reporters on Saturday, during a three-day visit to China that began on Friday.

Clearly, broad sections of the US ruling class have joined the trend towards economic nationalism.

The implications for peace or war are stark.

Greg Godels

zzsblogml@gmail.com

History Lessons

Remember in 2009, when the then White house chief of staff, Rahm Emanuel, labeled the “progressive” wing of the Democratic Party “f**king retards”? Without Emanuel's notoriously crude bluster, President Obama expressed a similar sentiment on April 23 in public remarks on the Trans-Pacific Partnership (TPP) trade agreement.

According to MSNBC, President Obama said: “Some of these folks [opponents of the TPP] are friends of mine. I love them to death. But in the same way that when I was arguing for health care reform I asked people to look at the facts – somebody comes up with a slogan like ‘death panel,’ doesn’t mean it’s true. Look at the facts. The same thing is true on this. Look at the facts. Don’t just throw a bunch of stuff out there and see if it sticks...”

Obama's comparison referencing the “death panels” concocted by the lunatic right did not go unnoticed by his critics from labor and the left. Most objected that comparing their opposition to TPP to the ravings of crazies hardly suggests the sentiments of a friend.

Of course this is an old story. Since the defeat of Walter Mondale in 1984, the founding of the Democratic Leadership Council and numerous associated think-tanks, the Democratic Party has moved smartly and steadily rightward, shedding any semblance of New Deal or Great Society progressivism. During the Obama years, the process has reached a point where the Democratic Party's meager left wing pretends to represent the Party's soul while the leadership pretends to welcome its views. On occasions like the TPP incident, the leadership fumbles the script and reveals its true feelings.

Sadly, few lessons are drawn from this experience or the pattern of contempt and derision demonstrated by the party's corporate coddling leadership.

Flashback

As we enter the Silly Season-- the 18 months of lies, bluster, and empty promises preceding the Presidential election-- I am reminded of the last great moment of self-induced, liberal/left self-deception. In the lead-up to the 2008 presidential election, all but a few unrepentant Marxist-Leninists, Green Party hardliners, and assorted outliers joined hands in a mad orgy of Obama-mania. For those who need reminding, Obama was actually the corporate choice preferred by the ruling class to clean up the mess left by a failed, embarrassing Bush administration that destabilized the Middle East, antagonized allies, blemished the image of the US, and stood clueless before an economic crisis unprecedented since the Great Depression. A fresh face was needed, a politician unstained by the Bush era, untainted by the “insider” label.

Barack Obama fit the bill, just as Jimmy Carter, a Georgia peanut farmer and home-spun governor did nearly four decades earlier after the Nixon crimes and indignities. In both cases, an “outsider” promised to restore confidence in a tarnished office. I wrote in 2008:

There are some striking and illuminating parallels between this election season and the Presidential election campaign of 1976. Like the eight years of the Bush administration, the eight years of Nixon/Ford produced an unparalleled collapse of support for the Republican Party. The Watergate scandal coupled with the failure of the US military in Vietnam and an economic crisis left the Republican Party wounded and regrouping. The interim elections of 1974 produced gains for the Democrats, especially in former suburban Republican strongholds.

Most citizens looked to the then forthcoming elections with a profound desire for a new course. The Democrats chose a political outsider, Governor Jimmy Carter of Georgia. Carter promised to make the government “as good as the people.” Pundits hailed Carter as a departure from the old politics and a fresh, honest voice for change (e.g. The Miracle of Jimmy Carter, Howard Norton and Bob Slosser, 1976).

Similar to 1976 and the Presidential candidate J. Carter, his presumptive 2008 counterpart, Barack Obama, is viewed as a Washington “outsider.” He has campaigned as a candidate of change. Pundits hail him as a fresh voice untainted by the vices of the establishment. (2008: a Reprise of 1976?)

Was Obama really the corporate choice? Or is this just baseless cynicism of a sectarian old leftist? I observed in 2008:

Wall Street has strongly supported the Democratic candidates over the Republicans. Through the end of 2007, seven of the big 8 financial firms (Goldman Sachs, Citigroup, Morgan Stanley, Lehman Brothers, JP Morgan Chase, UBS, and Credit Suisse) showed a decided preference towards the Democrats. Only Merrill Lynch gave more to Republicans, though they gave the single most to Clinton. The Wall Street Journal (2-3/4-08), while noting that Obama receives a notable number of contributions from small donors, pointed out that “…even for Sen. Obama, the finance industry was still the richest source of cash overall…”

Through February, Obama leads the other candidates in contributions from the pharmaceutical industry and was in a virtual dead heat with Clinton with respect to the energy sector.

These numbers strongly suggest that candidates, especially Democratic Party candidates, are unlikely to challenge their corporate sponsors in any meaningful way. (The Political Economy of the Elections)

To underscore the meaning of these campaign contributions, I ventured:

This election cycle has revealed something new: Democrats are raising more money from corporate interests for their campaigns than the traditionally dominant Republicans. This process began before the 2006 elections, accelerated sharply in the Presidential elections, strengthened in the early primaries and continued into 2008. In March, 2008, McCain gained somewhat on his Democratic rivals, but still fell well below the total raised by the two Democrats.

Within the Democratic camp, Clinton dominated most corporate contributions until 2008, when Obama enjoyed big gains, pushing ahead through March especially in the key industries of finance, lawyers/lobbyists, communications and health.

Would it be far-fetched to say that the corporate choice was there for all to see? Is it difficult to imagine from these facts that unlimited, unconditional bail-outs were ahead for the financial industry in 2009? Or health care “reform” structured around the wishes of insurance companies, the health care industry, and pharmaceuticals?

Yes, it was there for all to see.

Of course many were willfully blind to the facts, embracing self-delusion instead. I wrote of one left pundit so struck with Obama-mania that he reported the Obama victory with wild hyperbole and messianic verve:

"...hundreds of millions-Black, Latino, Asian, Native-American and white, men and women, young and old, literally danced in the streets and wept with joy, celebrating an achievement of a dramatic milestone in a 400-year struggle, and anticipating a new period of hope and possibility." (Quoted in Getting beyond Euphoria)

That pundit has today found a new messiah in Bernie Sanders.

Two days after the 2008 election, weighing the new administration's chief players, their backgrounds, and political records, along with stressing the limitations deeply embedded in the national political institutions, I cautioned that Obama would not and could not deliver the goods expected by the broad left. I summarized the election as follows:

The 2008 US Presidential election is behind us. A fair estimation of the results might be as follows: A clear, significant statement of the US electorate; a hollow, likely disappointing result for the people. After the euphoria of the Obama victory, it is vital that we separate these two assessments and avoid the cynicism of leftist isolationism and the self-deception of hopeful idealism. What the voters wanted was unquestionably significant change. What they were promised was change. Whether change will come from the Obama administration is - at best - questionable. (The Presidential Election: A Victory for the People?)

I concluded the essay with the following remarks:

It's time for the left to put aside the comforting illusions and rebuild an independent, oppositional front that is not dependent upon the good will of the corrupted Democratic Party. We desperately need that left to forge a true people-saving agenda from the destructive gorilla.

Unfortunately, we (the left) have yet to construct the independent, oppositional front needed. Nor has the opposition to the Democratic Party steamroller advanced much beyond the motley group of “a few unrepentant Marxist-Leninists, Green Party hardliners, and assorted outliers” present in 2008. Accordingly, the new political season very likely will reproduce many of the same inanities and fantasies inflicted seven years ago.

 Hillary?

 With the ability and expectations of raising well over a billion dollars for the forthcoming presidential campaign, Hillary Clinton will likely be the Democratic nominee and very probably the next President. Unlike the 2008 Obama-moment, the ruling class is opting for “insiders” in the period ahead. Even with polls showing a twenty-five year low in confidence that the country is going in the right direction, even with barely double-digit approval of congress, and even with decidedly negative images of both parties by poll respondents, the masters of our fate are favoring old dynastic names: Clinton and Bush.

Chastened by its encounter with “hopey-changey,” the electorate appears to be looking for “experience” as the most important attribute of a candidate this election cycle (Washington Post/ABC News poll). Of course this is precisely the image Clinton has been carefully cultivating since her Senate tenure. Like her husband, the former President, Ms. Clinton seems untouched by her publicized failings. Neither the abuse of her internal communications while in government service nor her slimy horse trading with foreign and domestic wealthy donors to her billion-dollar family foundation has shaken her campaign. The Clintons know no shame, the media show no indignation, and Democratic Party loyalists own no principles.

While there is much talk that the Democratic Party's liberals need some red meat to keep them in the game, there is little evidence that it is forthcoming or needed. Elizabeth Warren likely pledged loyal opposition in her meeting with Ms. Clinton last year.

Even a recent dust-up between Warren and Obama over the secretive, corporate-friendly TPP never moved the compass leftward. Warren timidly and opportunistically raised fears that “foreign” corporations might use the TPP enforcement function to influence US regulation of financial institutions (instead of exposing it as a license for any corporation to violate the sovereignty of all participating nations). Obama shot back artfully: “...The notion that I had this massive fight with Wall Street to make sure that we don't repeat what happened in 2007, 2008 [the recession], and then I sign a provision that would unravel it? ... I'd have to be pretty stupid." Readers may be unacquainted with events occurring exactly as Obama recalls them. They may search their memories in vain for a “massive fight” with Wall Street. Instead, they may remember the massive bailout of Wall Street on his watch, vivid memories that should make one suspicious of Obama's defense of TPP.

Missing from the spat is any effort to call out Hillary Clinton on the TPP. Presumably, her stand on this controversial subject is of great importance for those wishing to make an informed choice in the 2016 election. But the Clinton campaign does not want informed opinion. Her campaign chief reportedly said of the issue: “Can you make it go away?”

Another anti-Clinton “populist,” former Maryland Gov. Martin O’Malley, has cast aside his hard-line image while serving as Baltimore's mayor. Then, he was a Giuliani clone; his administration terrorized marginalized people to ethnically and class-cleanse the new Baltimore, a Baltimore that has made the murderous rough ride in police custody globally infamous. Today, he has been reborn as an ardent enemy of Wall Street.

But Democratic Party leaders need not fear. Opportunism has become so deeply embedded in liberal politics that 87% of liberal poll respondents “could see themselves supporting Mrs. Clinton” (Wall Street Journal/NBC News poll).

To corral the rest, Democrats have Bernie Sanders. Writing in BlackAgenda Report, Bruce Dixon astutely labels Sanders the “shepherd” for the Democratic Party:

...we have seen the Bernie Sanders show before, and we know exactly how it ends. Bernie has zero likelihood of winning the Democratic nomination for president over Hillary Clinton. Bernie will lose, Hillary will win. When Bernie folds his tent in the summer of 2016, the money, the hopes and prayers, the year of activist zeal that folks put behind Bernie Sanders' either vanishes into thin air, or directly benefits the Hillary Clinton campaign.

As Dixon understands and history shows, Democratic Party insurgencies end by sapping the energy and zeal of its idealistic fighters while herding them back into the fold for the ensuing center-right campaign. Before Sanders, Howard Dean and Dennis Kucinich were the standard bearers for the futile Children's Crusades against the Party's bosses. Sanders' motives are irrelevant here. Whether or not he sincerely believes he can change the trajectory of politics within the two-party system, the Democratic Party has morphed into an institution irredeemably in the clutches of the rich and powerful. Only forces outside of the Party are capable of directing matters leftward.

Voters seem resigned to mediocrity and the parties seem anxious to comply. In a recent Wall Street Journal/NBC News poll, respondents' net positive feelings (positive minus negative) were graphed. Five Republicans scored in negative territory. Only Hillary Clinton managed a net zero to lead the pack. Despite rating quite poor on honesty and straightforwardness, Ms. Clinton is polling ahead of the early Republican candidates.

The Republicans face added obstacles with conflict between their corporate-coddling economic royalists and their ideologically extremist wing, especially the Tea Party. Republican leaders embrace the ideologues as foot soldiers, but recognize that they are a liability with voters in the general election and shun them as candidates. While most Republicans currently prefer Jeb Bush over the rest of the pack, the ideologues-- especially the Tea Party-- question his bona fides (among Tea Party loyalists, he is only the first choice of about 6%). Republican leaders know they must keep the Tea Party in the game (would any Republican leader dare call the Tea Party a bunch of f**king retards?) At the same time, they desperately want to minimize the Tea Party agenda. In 2012, they succeeded by securing the nomination for a corporate shill, Mitt Romney.

Undoubtedly, many dollars will be spent, speeches made, and articles written to convince the electorate that there are real differences between the parties and their candidates. But the differences that surface will not be with goals: the two parties share a common goal of US dominance in foreign policy; the two parties share a common goal of protecting and promoting capitalism in domestic policy.

The differences will be in contrasting assessments on how to achieve these goals. Some politicians believe that the empire is crumbling because the country has turned away from traditional values; others believe the empire is crumbling because we have acted rashly and highhandedly; and still others believe that the empire is doing just fine! But all but a very few fully support the empire. If you don't believe it, ask yourself how many elected officials show up at your anti-drone demonstration, your protest of Israeli outrages, or your solidarity march with Venezuela.

And on the domestic front, our political options are determined by which policies best promote the smooth operation of capitalism; some politicians see unions and welfare as obstacles to the optimal operation of the market; others see inequality and poverty as obstacles to the optimal operation of the market; and still others think that the economy is going swimmingly. But all pay obeisance to capitalism. And do politicians show up at picket lines; have they joined the fight against police brutality; are they leading the fight for a new minimum wage?

Rarely.

The silly season conjures frustration and anger. But as I wrote elsewhere, “...it is vital that we...avoid the cynicism of leftist isolationism and the self-deception of hopeful idealism.” We must not drink the dubious lesser-of-two-evils kool-aid, nor should we leave the electoral field to the hypocrites and liars. Many former loyalists now speak of Obama as a traitor or back-stabber. He is neither. He never was on our side.

I learned (Labor Notes, May 2015) that Vermont Governor Shumlin has rejected the Vermont health care program and has set out with fellow Democratic legislators to go after other programs through steep budget cuts. Author, Traven Leyshon, notes that “The sense of betrayal runs as deep among state workers and teachers as it does among health care campaigners.” But Governor Shumlin did not betray the workers; he was never on their side. This is the important lesson that we must continue to share if we are to move beyond the two-party trap.

Happily, Leyshon reports that “Unions here are drawing the conclusion that we need to run our own candidates. The existing Vermont Progressive Party, which now has nine legislators, could become the vehicle.” This, too, is the lesson that we must spread. If we are to fight the hopelessness and impotency of two-party politics, we must tackle the difficult task of mounting independent and third-party campaigns. Can we afford to wait on another election cycle?

Zoltan Zigedy

zoltanzigedy@gmail.com