We blitzed it

The​ #IdleNoMore movement against Keystone XL – a long-planned pipeline that would have carried petroleum from the oil sands of Alberta and the shale fields of the Dakotas to refineries in Illinois and Texas – began in December 2012. Three years later there were more protests, this time against the construction of the Dakota Access Pipeline, which crosses the Standing Rock Sioux reservation. In 2020 blockades halted work on the Coastal GasLink, designed to carry natural gas across the Canadian Rockies to the Pacific coast for export to Asia, and passing through unceded Wet’suwet’en territory in so-called British Columbia.

These protest movements, often led by Indigenous women, made radical claims not only about the stewardship of land, water and air and the protection of Indigenous sacred sites, but also about the origins of property, sovereignty and justice. They questioned notions of unrestricted growth fuelled by hydrocarbons. The protesters were imaginative in strategy and language, drawing on symbols, myths and rituals to bring attention to the cause. In Oceti Sakowin cosmology the Dakota Access Pipeline was a great Black Snake wreaking destruction – but also uniting Indigenous nations, and sparking an epic battle to protect Grandmother Earth.

The Indigenous nations’ protest camps attracted activists from across the continent, who were met with extensive corporate surveillance, state monitoring and violence. Oil companies and state and federal governments hired private armed security with experience of fighting in Iraq and Afghanistan. The water-protectors, as the protesters called themselves, secured legal injunctions at various stages of the projects and their fight became a political bellwether. Obama withdrew the permits for Keystone XL, then Trump restored them a few days after his inauguration. But the protests and court cases continued, and on his inauguration day Biden again withdrew the permits for Keystone XL. But none of this stopped the industry’s rapid growth. In 2017, during this period of protest, the US overtook Russia and Saudi Arabia to become the world’s biggest oil producer.

According to BP’s Statistical Review of World Energy, in 2021 the US produced 16.6 million barrels of oil per day, with Russia and Saudi Arabia at 11 million barrels each. The US consumes far more than it produces (nearly 20 million barrels per day) and more than any other country (China consumes 15.5 million barrels), so despite being the world’s biggest producer, it imports a substantial amount of oil from Canada, Mexico and, before the war on Ukraine, Russia. The US is also the world’s biggest producer of natural gas, but doesn’t consume all of it and is now the largest gas exporter after Russia. The boom in shale oil in North Dakota and the Permian Basin in Texas between 2010 and 2015 caused an astonishing 1 per cent rise in US GDP. But the boom proved fragile and an oil price war between Russia and Saudi Arabia on the heels of Covid staunched the shale producers’ cashflow.

The price war had another significant, and unprecedented, effect: it drove the price of West Texas crude below zero. This is what happened: in March 2020, as Covid spread around the globe, with factories and ports in China already shuttered, the worldwide demand for oil dropped dramatically as people stopped driving and flying. As demand fell, OPEC called on Russia to observe a general cut in production. When Russia rejected the request, Saudi Arabia set a price war in train by announcing a discount of between $6 and $8 a barrel for its European, Asian and American customers.

The price of oil follows three benchmarks: Brent, Dubai and West Texas Intermediate. Each benchmark acts as a reference for a different grade and quality of oil. Brent sets the price for light North Sea crude, and since offshore petroleum is easy to transport by ship, it’s the main measure of market prices in many parts of the world. West Texas Intermediate, which is distributed by pipeline across North America, sets the domestic price of oil in the US. Dubai is the reference for heavier oil from the Persian Gulf, mostly for the Asian market. Although the benchmarks track the current (or spot) price of oil, they are affected by the far more financially significant futures contracts, whose rise and fall are reflected in spot prices. Futures and options contracts incorporate political, economic, climatic and social risks in calculating the future price of a contracted commodity and allow speculators to wager on the direction of futures prices via derivative financial instruments. The volume of futures and options trade in energy on the New York Mercantile Exchange can reach 1.5 million contracts a day, with each contract representing a thousand barrels of oil: orders of magnitude more than the three to five million barrels a day produced in West Texas.

In spring 2020, even though the price was falling, oil was still being pumped out, since it’s difficult to shut down an active well without damaging its capacity to produce. Commodity traders took advantage by buying the oil cheap and storing it in tankers at sea. The lower the price fell, the higher the charter price of hydrocarbon carriers rose, and even old rust-buckets were brought out of mothballs. In the US, meanwhile, pipelines were still carrying oil to storage facilities in Oklahoma that were already near capacity, and on 20 April traders began to dump their futures contracts rather than take delivery of oil they had nowhere to store. In Benfleet in Essex, a dozen independent traders assembled by a pit trader known as ‘Cuddles’ forced the price crash by flooding the futures markets at the rate of 153.5 contracts a minute. The price of West Texas Intermediate plunged to -$37.63. When it recovered to $10 the next day, the Essex Boys, as Bloomberg dubbed them, made $700 million. Court records show the jubilant traders celebrating their windfall on WhatsApp: ‘We pushed each other so hard for years for this one moment … And we fucking blitzed it boys. Please don’t tell anyone what happened today lads.’

Futures contracts for oil are relatively recent innovations, introduced in 1983 and 1986 for West Texas Intermediate and Brent respectively. Financialisation of the trade in hydrocarbons followed hard on the heels of the nationalisation of Middle Eastern oil during the 1970s and the price shocks brought about by the Iranian revolution in 1979. Both events destabilised European and North American oil companies, alarmed governments and triggered the rise of private commodity traders. The commodity trade led to the vertical integration of oil production and sales, and financialisation – unmooring trade from the physical delivery of the commodity – helped to make up for the Euro-American loss of ownership of oilfields.

Oil​ was a constant presence in my life when I was growing up in Iran. Petroleum was the engine of Iranian history in the 20th (and 21st) century: from the British usurpation of the Iranian national patrimony with the establishment of the Anglo-Persian Oil Company in 1909, to the British and US-engineered coup that removed Mohammad Mossadegh from power in 1953, to the Iranian revolution and the subsequent Iran-Iraq war, to current sanctions on the sale of Iranian oil.

We were taught in school that APOC (later AIOC, and eventually BP) paid more in taxes to the British government than it did in rent to Iran’s treasury. Mossadegh’s nationalisation of the company in 1951 – thirteen years after the nationalisation of Mexican oil and five years before Egypt’s nationalisation of the Suez Canal – catalysed efforts by nationalist diplomats and bureaucrats from the Middle East and Latin America to demand sovereign rights over the petroleum and other primary commodities extracted from their territories. As Christopher Dietrich argued in Oil Revolution (2017), nationalisation of oil by anticolonial leaders ‘set off the most concentrated non-violent transfer of global wealth in human history’. It was a ‘transformation of the political landscape of international capitalism’.

British and US intelligence agencies worked hard to reverse the nationalisation of AIOC, fearing it would prove contagious. Europe and the US boycotted Iranian oil, with tankers carrying it detained by the Royal Navy. BP took Iran to the International Court of Justice at The Hague. In the summer of 1953, Ann Lambton, an Orientalist who worked for my former employer, the School of Oriental and African Studies, provided cultural ‘services’ to the British government on how best to sow division in Iran. BBC programmes transmitted secret codes to British proxies in Tehran, and the CIA agent Kermit Roosevelt, grandson of Teddy, delivered suitcases of cash to the leaders of the coup against Mossadegh. The shah, who had escaped to Italy with his glamorous but soon to be discarded second wife, Soraya, returned to Iran triumphant, but paranoid about the wobbliness of his throne. With the aid of the US, he went on to construct a repressive petrostate. He negotiated a concession with a consortium of European and US firms which took over AIOC’s oilfields and production facilities. It took nearly two decades, and the shah’s megalomaniacal competition with revolutionary OPEC ministers elsewhere, to wrest a better deal out of the consortium.

Twenty-five years after the coup, the Iranian revolution was in part a revolt against the regime the coup had forged. The National Iranian Oil Company workers’ strike in the cataclysmic autumn of 1978 strangled the government’s foreign revenue flows and set in motion skyrocketing global petroleum prices that continued to rise for the next two years. Locally, the strikes translated into fuel shortages, electricity blackouts and illegal protests during curfews, when people would climb to the rooftops and shout slogans under cover of the dark. From the moment it became clear that the revolution had succeeded, in April 1979, the state was subjected to sanctions and other external pressures, with oil boycotts the most frequently wielded weapon. The Iran-Iraq war that began in 1980 was sparked by Saddam Hussein’s desire to control the massive oilfields that straddle the border between the two countries. He was supported by the Gulf monarchies (which feared revolutionary contagion), by the French (who provided Iraq with Exocet missiles), and by Britain and the US (which turned a blind eye to Iraq’s use of chemical weapons).

Through all these years, oil was a part of our lives. My father was a petroleum geologist. Like so many of his generation, he acquired his techno-scientific education because he believed in the possibility of transforming an independent Iran into a richer, modernised and fairer country. My own first degree was in chemical engineering at the University of Texas, where the petroleum and chemical engineering courses, sponsored generously by the oil majors headquartered down Interstate-10 in Houston, taught us how to add value to that viscous, smelly slime spurting out of the parched ground and subsea reservoirs of our homelands. As a ‘summer engineer’, I interned in the ‘front of the house’ at the Amoco Chocolate Bayou plant near Alvin, south of Houston. The plant received hydrocarbon products from the nearby Amoco refinery and produced olefins, the feedstock used to manufacture plastics. The plant was acquired by BP in 1999.

When I heard about a catastrophic explosion at the site in August 2005, I wondered if any of the laconic union men in the ‘back of the house’ I had known fifteen years before had been injured (thankfully, they hadn’t been). But only a few months earlier fifteen workers had been killed when a BP refinery in Texas City blew up. The middle-aged men I had known at the Chocolate Bayou plant were funny and warm. They knew how things worked better than the summer engineers – of course! – and joked with us in their broad Texas drawl about everything from our personal best running times to Oscar the alligator, who lived in the water filtration pond.

The oil world I inhabited brought together geopolitics and the everyday. It was material and dirty, and bloody and wracked by wars, coups d’état and revolutions. It was a world wrought by political struggle on the streets and at the diplomatic table. Corporations, universities and security apparatuses all had a finger in the pie. And along with the people who worked the oilfields and filled the streets during demonstrations they changed the world in perceptible ways, sometimes suddenly and monumentally, as when Middle East and Latin American leaders negotiated better oil deals for their countries; sometimes gradually, through a series of unintended consequences.

Helen Thompson’s​ Disorder begins with an intuition: that the intertwining of oil and monetary policy lay behind two of the most dramatic events in recent Anglo-American politics: Brexit and the election of Donald Trump. Brexit was a result of ‘the long-standing monetary divergence between Britain and the Eurozone’, which ‘became particularly consequential from 2011 because of the very different responses’ of the Bank of England and the European Central Bank to high oil prices. In the US, the 2016 presidential contest was ‘the first election for nearly fifty years that had taken place with the United States as a top oil producer’. To explain the dual catastrophes of 2016 – the most significant ‘disruption of the last decade’ until the Covid pandemic came along – Thompson tells three stories. The first is about the geopolitics of oil. The second is about money, finance and the behaviour of central banks since the collapse of the Bretton Woods system in the early 1970s and the end of a stable monetary regime in Europe and beyond, propped up by the US dollar. The third is about the unravelling of democracy in the countries of the North Atlantic.

The first story, Part One of Thompson’s book, lays out the probable consequences for Europe, Russia and China of the US’s emergence as the world’s largest oil producer. To arrive at this point, Thompson ranges through 20th-century history. Her argument is that until the 1970s Europe was dependent for energy on Britain’s protectorates in the Gulf; ever since then, it has been dependent on the US for the maintenance of the supply of oil worldwide. The ideological and material competition between the Soviet Union and the US during the Cold War has transmuted into a contest between Russia and America over oil, played out on the battlefields of Iraq and Syria as well as in foreign policy more generally. The introduction of hydrocarbon-thirsty China and increasingly unbiddable Arab client regimes into the mix has encouraged America’s desire to ramp up its production of hydrocarbons: by achieving global energy supremacy the US has maintained its standing as the world’s most powerful state.

Part Two traces the breakdown of the Bretton Woods order and the incorporation of China into the world economy. Europe’s desire for free-flowing capital and a stable arrangement to replace Bretton Woods eventually led to the creation of the eurozone, while China’s economic rise was one of the precipitating factors for the crashes of 2007 and 2008. Both events reshaped the global financial sphere. In response to the oil price surge of 2011, when Brent prices averaged more than $100 per barrel, the European Central Bank raised interest rates, while the US Federal Reserve and the Bank of England held fast. Thompson argues that this threw the eurozone into recession, making Britain an ‘employer of last resort’ for some of the countries of continental Europe. The divergence between the eurozone and the sterling area led to the large-scale migration of Europeans to work in Britain, creating the political pressure that led to the Brexit referendum.

The final section focuses on the causes of the long-term decline of democracy in the US, Britain and Europe. Thompson suggests this was effectively preordained, since in her view postwar democratisation and the welfare state had their roots not in popular struggles for better working and living conditions and more participatory politics, but in nationalism. The welfare state was bestowed by statesmen like Bismarck, moved by ‘patriotic spirit’ to ‘provide some economic protection to national citizens’. Because nationhood, rather than redistributive politics, was central to the welfare state, inequality continued to grow alongside representative democracy. In response to early 20th-century crises, from world war to the Great Depression, ‘the democratic tax state’ came into being on both sides of the Atlantic. The growing strength of unions in 1970s Europe, Thompson argues, made it ‘difficult for their governments to bring down inflation’. The energy crisis of that decade exacerbated inflationary pressure, brought down social democratic governments, and led to the removal of international capital controls. Internationalised and financialised economies in turn eroded the welfare state, weakening democracies at every turn. In Europe and the US, a politics beholden t0 the interests of capital – debt and credit, migration flows, free trade agreements, austerity measures and other economic requirements – has made the word ‘democracy’ all but meaningless.

Thompson’s book is a dense synthesis of a range of historical processes. She makes confident, sometimes too confident, assertions about hotly contested controversies. The idea that the boycotts of Arab oil in the 1970s led to the energy crisis, for instance, has been rejected by many historians. Colonialism, empire, imperialism and race are rarely mentioned in her text. Where the word ‘empire’ does appear, it’s as a descriptive label (the British or Ottoman Empire) rather than an analytic concept. She gives far too much geopolitical salience to Russia, and understates the influence of many oil producers or European countries beyond the economic behemoths. China is discussed mostly as an economic engine, not as a significant actor on the global stage; Africa – other than the countries sweepingly included under the rubric ‘Middle East and North Africa’ – has no role in her account.

Her analysis has also in some places been overtaken by events. She argues that ‘by the 2000s, the German economy no longer operated in an economic world where policymakers had to protect it from inflationary pressures coming from elsewhere.’ Now, as the cost of living increases everywhere and multiple external shocks – from Covid to the food and energy crises brought on by the invasion of Ukraine – are changing the complexion of world politics, this statement seems premature. On 18 July, the CEO of Goldman Sachs issued a categorical general warning: ‘We see inflation deeply entrenched in the economy,’ thanks entirely to ‘exogenous events, namely the pandemic and the war on Ukraine’. Time and again over the past century, events have shown how vulnerable the world’s economies are to sudden disruptions in the supply of basic commodities – with hydrocarbons at the top of the list.

Thompson writes that by outsourcing industrial production to Asia, Europeans and Americans now consume less coal and oil, but the decline is marginal, and not steady: EU consumption of oil in 2019, before the pandemic hit, was slightly higher than in the years between 2012 and 2016. The Russian war has resulted in Austria, the Netherlands and Germany all returning to coal power, and European coal terminals have seen a 35 per cent surge in coal imports over the last few months. Nor does a reduction in the sale of gas-guzzling vehicles in the US or a significant increase in more energy-efficient public transport in Europe seem as close as Thompson suggests.

Given her book’s huge range of historical actors and events, it might seem churlish to wish that it paid attention not just to great power politics but to the forces of popular mobilisation. Geopolitics is never untethered from political struggles and the world’s prime mover isn’t located somewhere in the middle of the Atlantic Ocean, even if so much malignant power has emanated from Europe and North America. Oil, money and democracy aren’t always about the calculations of a few powerful governments. Oil companies matter, state-owned national firms as well as BP, Chevron, Exxon and Shell, and the independents working in shale and funded by private equity firms. So do distant financiers who manipulate the price of oil and other commodities from nondescript suburban offices oceans away. The many tens of thousands of workers and activists who have fought for what Tim Mitchell has called ‘carbon democracy’ matter. Diplomats and ministers nationalising oil, struggling for sovereignty and fighting colonial impositions in rigged commercial tribunals matter. Revolutionaries and striking oil workers in the Middle East and beyond matter. The union men working in dangerous petrochemical plants on the US Gulf Coast matter. And the Indigenous communities protesting against pipelines slashing through their sovereign territories also matter. They matter to the argument not just because of a moral calculus around labour, or colonialism and decolonisation, or popular mobilisation, or the guardianship of the environment – though also that – but because these forces have changed the course of history in a million different ways.