Is It about the Oil?

“No War for Oil” is one of the most popular slogans in the many emergency demonstrations sprouting up around the world in response to the criminal kidnapping of Nicolas Maduro and Cilia Flores from their residence in Caracas, Venezuela and their forced removal to detention in the US.

For many outraged by the naked military aggression on Venezuelan sovereignty, the abduction is an escalated step toward the capture of Venezuelan energy resources by the US government, given that Venezuela has the largest proven petroleum reserves of any country at this moment. 

The argument goes that-- when you pull the curtain back-- the ultimate goal of US imperialist designs is the control over and possible exploitation of Venezuela’s most important resource.

Having argued frequently that oil-imperialism or energy-imperialism is often an important-- if not decisive-- factor in capitalist foreign policy, this claim is appealing. Since the time when Britain in the early twentieth century turned from coal-burning naval ships to oil, petroleum has become more and more essential for the functioning, growth, and protection of capitalist economies. Consequently, intense competition for a rapidly diminishing, increasingly hard to discover, and growing-costly-to-exploit resource dictates the actions of great power rivals.

History gives us important examples of resource-scarcity spurring devastating imperialist aggression by capitalist powers. Nazi Germany’s Lebensraum program had at its core the necessity of acquiring energy resources to propel its imperialist designs-- a program that led to world war. Similarly, Hirohito’s Japan-- a resource-poor island nation-- launched its Pacific offensive largely to acquire the oil to continue its war against China in the face of a US embargo.

The US embargo to deny oil to Republican Spain was, conversely, an aggressive act in oil imperialism, as is today’s blockade of Cuba. The war in Ukraine is indirectly a war over energy resources, since US resolve was stoked by the opportunity to win the vast EU market from Russia-- a convenient, inexpensive, and formerly reliable supplier.

Less well known, the major oil and gas suppliers are constantly influencing global politics through manipulating production and prices. The most well-known example is the 1970’s OPEC oil strike against Israel’s Western supporters (an act that the Arab countries have lost the stomach for in recent times).

As a wise friend speculated once: “Why do you think the US never occupied Somalia after the Battle of Mogadishu in 1993 left 92 US casualties? Because there was no oil!”

Yet many believe that the attack on Venezuelan sovereignty was not about the oil… even with the President of the aggressor state saying that it was! 

Instead, they believe it was about Western values, the rule of law, democracy, petty grievances, hubris, or even drug smuggling. Those in the loyal opposition-- Democratic Party leaders-- share many of these same explanations, but fault the Trump administration for its procedural or legalistic errors.

The center-left, the bogus-left, and the anti-Communist left deny that oil could be the motive because they imagine that it might bolster the case for an explanation based upon classical Leninist imperialism-- that the invasion of Venezuela was motivated by corporate interests, by exploitation of resource-rich countries.

Thus,  widely-followed liberal economist Paul Krugman scoffs at the idea that Venezuela was invaded for oil: “... whatever it is we’re doing in Venezuela isn’t really a war for oil. It is, instead, a war for oil fantasies. The vast wealth Trump imagines is waiting there to be taken doesn’t exist.”

Krugman collects and endorses the most popular arguments against the “war for oil” viewpoint:

1. Venezuela reserves are a lie.

2. Venezuela's heavy crude oil is uneconomic, undesirable, and unwanted.

3. The Venezuelan industry is so decrepit that it is beyond rescue.

4. The US has so much sweet, light crude oil available at low cost that no one would want Venezuelan oil.

The Nobel prize award-winner’s dismissal could easily be dismissed by simply asking why-- if acquiring Venezuelan oil is so pointless-- did Chevron ship 1.68 million barrels of Venezuelan crude oil in the first week of January, according to Bloomberg?

And then there is the ever-voracious, parasitic Haliburton-- the consummate insider corporation-- that announced that it's ready to go into Venezuela within months!

It is worth looking a little deeper into the reasons that Venezuela’s oil is a possible target of imperialist design.

If Venezuela’s oil reserves are even one-third of what OPEC, The US Energy Information Administration, or The Energy Institute concede, their reserves would still be double those of the US. 

While Venezuela's heavy, sour crude is costlier to extract and refine, it remains as a legacy with many refineries in the US that were established before the shale boom. Naked Capitalism concedes that “[i]t is true that the US has motive, in that our refineries are tuned so that 70% of the oil they process is heavier grades, despite the US producing light sweet crudes.” It further quotes The American Fuel and Petroleum Manufacturer's website:

Long before the U.S. shale boom, when global production of light sweet crude oil was declining, we made significant investments in our refineries to process heavier, high-sulfur crude oils that were more widely available in the global market. These investments were made to ensure U.S. refineries would have access to the feedstocks needed to produce gasoline, diesel and jet fuel. Heavier crude is now an essential feedstock for many U.S. refineries. Substituting it for U.S. light sweet crude oil would make these facilities less efficient and competitive, leading to a decline in fuel production and higher costs for consumers.

Currently, Canada exports 90% of its very heavy, sour oil to the US, accounting for approximately a quarter of its total exports to the US. Oil from the Alberta oil sands is also expensive to extract and refine, but nonetheless amounts to 4 to 4.5 million barrels per day exported to the US. It must be acknowledged that future Venezuelan oil counts as powerful leverage in the recent and continuing political and economic friction between the US and Canada, especially as Canada is defying the US by building “a new strategic partnership” with China.

Much has been made of the state of the Venezuelan oil industry, today producing around a million barrels a day, down from its peak at over 3.5 million barrels per day decades ago. Indeed, the US blockade has stifled investments, shuttered export markets, and denied technological advances. Nonetheless, Venezuela has produced as much as 2 million barrels a day as recently as 2017. Admittedly, it would take significant investment to return to the 2017 level and vast investment to restore the level of the 1970s. 

Many commentators are “shocked” by the enormous capital required to upgrade the Venezuelan oil industry. They forget earlier “shocking” assessments of the fracking revolution: “The U.S. shale oil industry hailed as a “revolution” has burned through a quarter trillion dollars more than it has brought in over the last decade. It has been a money-losing endeavor of epic proportions.” 

Still, the Trump administration's gambit has many competitors concerned that US control over Venezuela’s oil “would reshape the global oil map--putting the US in charge of the output of one of the founding members of the Organization of the Petroleum Exporting Countries and, along with America’s own prodigious production, give it a potentially disruptive role in a market already struggling with oversupply.” According to The Wall Street Journal, US oil production, US political and corporate domination of Guyana’s emerging energy sector, and now Venezuela’s reserves, may place the US in a position to unbalance the market, particularly at the expense of the OPEC alliance, a move of enormous political consequence.

The critics of oil-imperialism fail to understand all of its dimensions. They crudely simplify the politics of oil to the immediacy of extraction and its costs of the moment, ignoring indirect impacts, the wider prospects, and the longer term.  

Nor do they grasp the issues that are facing the US domestic oil industry. While fracking has allowed the industry to return to being the largest crude oil producer in the world, the industry faces the perennial question of peak production for a given technology-- the ever-present problem of rising costs of discovery and extraction. Further, the exalted Permian Basin is “becoming a pressure cooker”, pressing upon both costs and public acceptance. “Swaths of the Permian appear to be on the verge of geological malfunction. Pressure in the injection reservoirs in a prime portion of the basin runs as high as 0.7 pound per square inch per foot, according to a Wall Street Journal analysis of data from researchers at the University of Texas at Austin’s Bureau of Economic Geology.” As The Wall Street Journal also reports: “A buildup in pressure across the region is propelling wastewater up ancient wellbores, birthing geysers that can cost millions of dollars to clean up. Companies are wrestling with drilling hazards that make it costlier to operate and complaining that the marinade is creeping into their oil-and-gas reservoirs. Communities friendly to oil and gas are growing worried about injection.”

Because of the current glut of oil (likely retaliation by OPEC+ producers seeking to drive down US production below its cost of production and recover market share) the number of operating rigs is down 14% in the Permian. Oil markets are volatile, competitive, and transient. Where Venezuelan crude will fit into these equations remains an open question.

And then there is the Essequibo, a region currently within the borders of Guyana, but disputed by Venezuela. Recent discoveries in the area promise a potential of over 11 billion barrels of oil, with Exxon estimating a production of 1.7 million barrels per day by 2030. This economic plum is now off the table in the conflict between the Maduro government and Guyana and Exxon. As OILPRICE.com puts it succinctly: Trump’s Venezuela Takeover Will Make Guyana Oil Safer… for the US and Exxon. 

Let us not forget China. The People’s Republic of China has granted around $106 billion in loans to Venezuela since 2000. Daniel Chavez, writing in TNI, notes that those loans place “it fourth among recipients of Chinese official credit globally.” Estimates vary, but the PRC imports between 400,000 and 600,000 barrels per day from Venezuela, at least doubling since 2020. While it is less than 5% of PRC usage, it is not inconsequential. And it represents a serious penetration of capital and trade in the Western hemisphere-- the US sphere of interest.

It underscores the reality that oil-politics is not merely about the immediacy of reserves, extraction, costs, and price, but also about competition and rivalry within the imperialist system. The competition and conflict between the US, Venezuela, Guyana, Canada, PRC, OPEC, and other oil-producing countries is intrinsic to a system that lives and breathes thanks to its exploitation of energy resources. In that regard, it is still most clearly viewed through the prism of Lenin’s theory of advanced capitalism devised over a hundred years ago. 

I give the last word to the informed and serious student of the oil industry, Antonia Juhasz:

If the greatest lie the devil ever told was to convince us that he wasn’t real, the greatest lie the oil industry ever told us is to convince us that they don’t want oil. Where do we even begin to think about that as possible? They want to control when they produce it and how, and under what terms. They need to show a growing amount of oil that they can count as their reserves.

There are very few big pots of oil left sitting around anywhere unclaimed. The only way to get that is to increase technology, go into very expensive, technologically complex modes of production that face a lot of resistance. Venezuela is a country that [the big oil companies] were producing in not that long ago and making money in not that long ago and have wanted to get back into but on their own terms.

So I think when they protest publicly, one, it’s to distance themselves from Trump’s extremism, but two, it’s a great public negotiating tactic. They’re basically saying publicly, and the media is repeating it, “We wouldn’t want to operate in Venezuela. Oh, my God, it’s expensive, it’s technologically complex.” I actually think those are ridiculous things if you look where else they operate.

Greg Godels

zzsblogml@gmail.com

Is It All about the Oil?

“It’s all about the oil” has been a persistent refrain in response to US Middle East policy for as long as one can remember. Certainly there is much truth in this statement. Since the energy transition from coal to oil and its derivatives, leading imperialist powers have sought to dominate or control global oil resources. And the center of global oil extraction, especially for the US and other powerful capitalist countries, has remained in the Middle East and its periphery. 

When the navy of the then-dominant British Empire shifted from coal-fired, steam-driven warships to dependence on oil, the Middle East became the strategic service station for imperial reach. Accordingly, the status and fate of people, nations, and states in the Middle East became inextricably bound to the interests and the will of the greatest imperial powers. 

After World War I, the British and French hacked and hewed the Middle East into “protectorates” beneficial to their own economic interests. The US, self-sufficient in oil resources, was pushed to the margin-- left to explore the vast underpopulated deserts of the Arabian peninsula. 

Of course the vast expanses of the Arabian peninsula turned out to be the source of vast and cheap oil and natural gas. The Arabian-American Oil Company (ARAMCO) proved providential when US domestic energy reserves began to decline.

As the dominant imperialist power after World War II, the constabulary for the capitalist world, the US took on the task of guaranteeing that oil would be safe and within reach throughout the capitalist world and outside the reach of its Cold War foes and their allies. This necessitated a powerful and agile military. Since oil and gas are transported by sea and pipeline, the US military was ensconced in bases globally, and the US enlisted heavily armed deputies at key positions in the midst of energy-rich areas (pre-revolutionary Iran, Israel, Saudi Arabia, etc.). 

The US (and its closest, most trusted NATO allies) did not serve as a global gendarmerie for free; rather, they extracted a tribute from the oil-producing countries and their peoples. With colonial fetters rapidly breaking after World War II, imperialism established new modes of dominance over the world’s raw materials, including energy resources. Neo-colonial relations replaced total dominance with economic dominance. Despite nominal political self-rule, resource-rich “independent” countries were still the captive of US corporations and their European counterparts. US and European corporations “participated” in the development and ownership of gas and oil resources.  

Because oil and gas are so central to modern economies, imperialist powers display a keen interest in ensuring low, stable prices. Thus, the US and other imperialist countries have invested heavily in oil and gas extraction throughout the world, while installing, when necessary, friendly governments in resource-rich countries. 

Of course even the most empire-friendly governments have sought more of the fruits of resource extraction from their lands. Saudi potentates, among others, have restructured deals, formed production alliances (e.g., OPEC), and exerted their power over global supplies for political purposes. Notably, OPEC producers punished Western countries for their support of Israel with an oil embargo in 1973. 

The 1973 oil embargo proved to be a turning point for imperialism’s relations with the oil-producing states of the Middle East. Differences within imperialism restrained the considered US use of military power to “...forcibly seize Middle Eastern oilfields in late 1973.” Taking advantage of these differences, the Saudis and other countries were emboldened to nationalize their industries and command a measure of independence from Western imperialism. In some cases, the dramatic increase in oil dollars flowing into the oil-producing states’ coffers led to equally dramatic improvements in the lives of citizens (Libya, for example). In other cases, oil dollars only enriched the elites. And, in the case of the Saudis, the enormous bounty of oil-revenue went to promote Wahhabism and an ultra-conservative sectarianism against progressive and radical secular movements in the Middle East and elsewhere.

The US and Israel were successful in channeling Saudi money and resources in support of their own foreign policy objectives, notably by marginalizing, even combatting non-sectarian Arab nationalism, socialism, and anti-imperialism in Palestine, Afghanistan, and many other states. From the rise of Nasserism until today, imperialism and the most reactionary Islamic conservatism have used sectarianism to counter, even destroy, progressive movements. Oil money has subsidized that effort. 

Since the victory over imperialism and sectarianism in Syria, we are beginning to see the encouraging rise of class-oriented, non-sectarian struggles in other countries like Sudan, Lebanon, and Iraq. The setbacks to Saudi Arabia and its Gulf allies in Yemen have also paved the way for a higher, more advanced level of struggle with less of the pernicious confusion of tribal and sectarian division. While there is always a danger of imperialism using the new militancy for its own purposes, it is operating from a weakened position.

US Oil Imperialism Today

“I always said, if you are going in, keep the oil.” -- Donald Trump

Commentators were abashed by Trump’s audacity when he linked involvement in Syria with expropriating Syrian oil. Most were embarrassed that Trump publicly exposed that oil thievery so easily ties in with US foreign policy goals. They preferred to mask US objectives behind an almost comical alarm that ISIS would rise again without US presence. This thin excuse stood in sharp contrast to the fact that the entire US military engagement combating ISIS was through air power.

So, is the US meddling in Syria, Iraq, Saudi Arabia, Libya, and other countries to steal, secure, or expropriate energy sources? Are these instances of the century-old imperialist plunder of global energy sources?

Certainly US imperialism and its allies continue to serve monopoly capitalist concerns in their quest to exploit global resources. But that is not the entire story today. 

Thanks to the fracking, shale oil revolution, the US is also an intense competitor with global energy producers. This is a new twist that is now shaping US imperialist policy, moving it in other directions. With the US today exceeding the oil and gas production of all other countries, it is less committed to securing, commandeering, protecting, or exploiting global energy resources and more directed toward garnering a greater market share of worldwide sales. 

The war-- and it is war-- for more markets for US energy supplies favors the US when other suppliers are threatened, made less reliable, or more costly by wars, political upheavals, or other causes of chaos. Where US post-war, Cold War oil politics were directed toward stability, low, constant prices, and secure transit, the US benefits today from global instability, volatile prices, dangerous sea routes, and thwarting pipeline infrastructure.

The endless US wars, the stirring of big-power hostility, saber-rattling in sea lanes, blatant military action against stable energy-producing states, and inflated threats of terrorism and banditry all contribute to favoring energy supplies from a politically and economically stable state with the most powerful and far-reaching military in history-- the US.

It is important to place US-induced chaos in the perspective of no real, existing imminent threat from any major power or from so-called “terrorism.” Nearly all of the global chaos is simply manufactured and sustained by imperialism.

US determination to reign over energy markets was decisive in warding off the Saudi price attack of 2014. With production costs half or less of those for US shale, the Saudis, through both calculated collective inaction and overproduction, drove the price of oil down from historic highs, hoping to cripple the vastly expanding US shale market. Saddled with debt piled up from exploration and the high initial costs of rigs, the emerging US shale industry struggled in the face of collapsing prices. But Wall Street came smartly and decisively to the rescue; the loans are only beginning to be called in today. 

With oil-producing Libya a failed state, with oil-producing Iran expelled from commerce, with the Persian Gulf becoming a war zone, with oil-producing Venezuela sanctioned from markets, with Boko Haram disrupting Nigerian oil production, with giant oil-producing Russia forced into a new Cold War, with the Saudis about to sell chunks of ARAMCO to US and other capitalist investors, and now with Donald Trump keeping Syrian oil out of global markets, the US is busy hustling its oil as the most reliable and readily available. 

The same could be said for the US efforts to expand its markets for liquified natural gas. The manic desire to depict Russia as an existential threat looming on the borders of Eastern and Central Europe is meant to stigmatize Russia as a dangerous partner and undermine its standing as the chief supplier of inexpensive, pipeline-supplied natural gas to Europe. Accordingly, the US hopes to kick open the door to that market by establishing LNG terminals in the most anti-Russian states. Similarly, the chaos in the Straits of Hormuz and Iran-bashing have cast a shadow over the reliability of the US’s biggest LNG competitors: the vast Iranian and Qatar gas fields.

In this competition for global energy markets, the US relies upon economic sanctions as its weapon of choice, especially shutting down trade activity of its energy rivals.

Where imposing stability on a capitalist world dependent upon energy imports was the former goal of US imperialism, overproduction of energy from revolutionary technologies has set new goals. Because the US lusts after the traditional markets for oil and natural gas, US imperialism is content to live with, to even foster global instability. It is no accident that endless destructive wars, global hotspots, threats, and hostilities are features of the twenty-first century. 

Bolstering energy exports and arms sales makes the US the biggest troublemaker in a volatile, ultra-competitive capitalist world. 

US energy imperialism makes an already unstable world even more dangerous.

Greg Godels

zzsblogml@gmail.com