The Brooklyn Rail

There is no shortage of books about the impact of oil on our climate, the markets built around it, and the wars fought to control it. But in such discussions, the material itself tends to fade into the background as either an inert object of exploitation or a malevolent agent of corruption. In Crude Capitalism: Oil, Corporate Power, and the Making of the World Market (London: Verso, 2024), Adam Hanieh—Professor of Political Economy and Global Development at the University of Exeter—sets out to demystify the substance itself through a densely packed yet highly readable history of our interaction with oil at every step from its extraction to its consumption. Beginning with the decentering of coal in the nineteenth century, Hanieh traces with engaging precision how the development of the oil industry around the world has been shaped by the shifting demands of private and national interests, and how the industry has shaped the contours of the global economy in turn. Recently, he took the time to explore with me a few of the questions raised by his important book.

Alex Gendler (Rail): I noticed you place the emergence of capitalism in the 1400s, taking a position in a classic debate in Marxist history. What's your reasoning behind this particular periodization, and how important is it to the rest of your argument?

Adam Hanieh: Good question—you are actually the first person to bring this up in discussions about the book! In general, I am sympathetic to the argument that capitalism didn’t just emerge from internal transformations in European class relations but was fundamentally shaped alongside and through the violence and enormous wealth extracted by colonial conquest. Those accounts that locate capitalism in the transformation of property relations in the British countryside—or the later Industrial Revolution—tend to understate this critical role of colonial plunder.

Is it important to the rest of the book? Perhaps not directly, but I do think it is there implicitly in how I frame and think about capitalism. The subtitle of the book refers to the “world market” because I think that capitalism wasn’t something that was born in Europe and then diffused outwards. It was global from its very beginning. My perspective on this has really been shaped by some of the debates around the relationship between colonial slavery and capitalism (you might have noticed I thank the much-missed historian of slavery, Dale Tomich, in my preface).

The other key thread that I think this points to is the bigger history of energy before oil in the making of these globalized forms of exploitation. There are a couple of points where I note this even though it’s not the main topic of the book. For instance, the shift to coal away from muscle, wind, and water—or the place of peat in the emergence of Dutch capitalism.

Rail: In your introduction you discuss the Jevons paradox and the trend towards increasing energy throughput, something also noted by Adam Tooze in a recent piece observing that instead of “energy transitions” what we’ve actually seen is an accumulation of new energy sources alongside old ones. What do you make of arguments put forward by leftist techno-optimists who say that energy use can be “decoupled” from resource consumption through nuclear and renewables?

Hanieh: I have little patience for any kind of technology fetishism that treats paths of technological development separately from capitalist social relations. Clearly the climate emergency demands that we shift to different ways of producing energy, but I am fully convinced that’s not going to happen under capitalism. Part of this relates to the arguments I make around the additive nature of energy consumption, which is now even more obvious given the huge energy demands of AI and data centers. There is also a kind of path determinacy at play here: we’ve gone so far down the fossil fuel road that there are many powerful interests that work against any kind of shift (we can see this on display in the COP summits). And when it comes to renewables, there’s a fundamental contradiction: solar and wind are hard to commodify. This is a problem for a system driven by the pursuit of profit. Brett Christophers’s latest book, The Price is Wrong, is really good on this, as is Andreas Malm’s and Wim Carton’s Overshoot.

Rail: You mention that oil and petrochemicals enabled “decoupling commodity production from nature”—but isn't the whole point that this decoupling is illusory and temporary before nature inevitably reasserts itself, as it has with climate change?

Hanieh: Yes, exactly—it is illusory. A key argument in Crude Capitalism is that we need to ask what the petrochemical revolution actually did for capitalism. And one of the things it accomplished was the massive expansion in both the volume and types of commodities it enabled through the introduction of synthetic materials like plastics, artificial fibers, fertilizers, and so forth. We can see this in so-called “fast fashion”—the explosion in the volume and varieties of clothing that we’ve seen over the last couple of decades. Alongside poorly paid garment workers, this transformation of the clothing industry was enabled by polyester and other synthetic materials. But you are absolutely correct, the apparent decoupling from nature is just deferral. By breaking the link between production and natural cycles of waste disposal, we overwhelm the planet’s carbon sinks. Fundamentally, this is why we face climate collapse today.

Rail: Do you think a large-scale shift to nuclear energy is capable of changing the overall trajectory?

Hanieh: No. The renewed push to nuclear is part of the overall expansion of energy consumption, especially connected to AI and data centers. Apart from all the obvious problems such as waste disposal, safety, and nuclear proliferation, this infrastructure also takes a long time to build and demands a big throughput of fossil fuels.

Rail: One of the main points that really comes across throughout the book is how the principal challenge regarding oil for Western firms has not been scarcity but abundance, and how Western involvement in global oil fields has not followed the simplistic narrative of “stealing” oil to sell more of it, but controlling the supply to prevent overproduction and price drops. Is oil unique in this regard or does this kind of relationship extend to other commodities?

Hanieh: I think overproduction is a general feature of capitalism and is encountered across the board. Too much is produced that can’t be sold at a high enough price. In fact, one of the underlying drivers of the new tariff barriers pushed by Trump and the EU is really the global overproduction of various commodities. We’re seeing it today with solar panels, which really shows the incompatibility of capitalism with addressing the climate crisis.

The case of oil is complicated by the fact it is only found in a few parts of the world, and the decisions about how much to extract are made by those who control those underground reserves (both states and private companies). This is why the vertically integrated structure of oil firms is so important: they are attempting to manage the flow of oil products onto the market by controlling all stages of the value chain—extraction, refining, petrochemicals, transport, marketing, etc.

But another layer of complexity emerged in the mid-1980s after a major change to how crude oil is priced. From that moment onwards, the oil price became connected to the buying and selling of oil futures on financial markets—it was no longer directly set by the producers. One of my frustrations about a lot of discussion and writing about oil is that this change to the pricing mechanism is completely ignored—it’s like we are still living in the 1930s or 1970s, when the big producers set the price.

Rail: You explain how the US/UK “special relationship” was shaped by US firms needing to partner with British colonialism to access Middle Eastern oil in the years following World War I. What role does that relationship play in today's market? How does Brexit figure into it?

Hanieh: The history of the US/UK relationship in the Middle East is crucial to the global rise of American power from the early twentieth century onwards. After World War I and the breakup of the Ottoman Empire, the region was dominated by British and French colonialism. But through the 1920s and especially after World War II, the US government and American oil firms were able to gain an increasing foothold in the region. In part this was related to the weakening of the old European colonial powers and the anti-colonial movements in the region. But it also reflected the leading role played by the US in the global transition to oil after the war, and the huge size and importance of the domestic US oil market. There is a fascinating story here about how the US used access to American oil as a cudgel to open up their access to oil in the Middle East. This is a point I really try to emphasize throughout the book: we can’t understand any one part of the world market in isolation from the whole.

Things have shifted since the 1950s, but Britain still has a lot of influence in the Middle East, especially through the important role played by the City of London in recirculating financial wealth from the region. After Brexit, the British state has tried to cultivate closer ties with Gulf monarchies—in part aimed at increasing markets for British military exports.

Rail: Early on, you describe how coal’s portability compared to water and wind allowed factories to be placed in cities with large concentrations of labor, eventually enabling the emergence of a militant working class. But later, you mention that oil’s even greater portability relative to coal undermined this same working-class power by allowing it to be imported across borders. What are the implications here for worker organizing?

Hanieh: The point about the coal-to-oil transition’s impact on labor was made by Timothy Mitchell in his classic, Carbon Democracy, which argued that the shift to oil helped undermine militant coal miners and unions in the US and Western Europe. I think there’s certainly some truth to that, especially in the early years of the oil transition, but it also meant that oil workers in places like Mexico, Iran, Venezuela gained more power. And this overlapped in contradictory ways with the course of nationalism and Third Worldism from the 1950s onwards.

A big part to the history of oil are the various attempts used to control labor—and again, the question of vertical integration of the oil companies is essential to this. In Venezuela, for instance, a decision was made by Western oil firms in the 1920s to locate their refineries in the Dutch-controlled islands of Aruba and Curacao rather than Venezuela itself. This was a deliberate strategy to undercut the ability of workers to disrupt production. So yes, it really does point to the importance of transnational organizing efforts that extend across the entire value chain—including transport and logistics workers.

Rail: It seems like every few years there are triumphalist announcements of how some new initiative from China or BRICS is finally going to displace the US dollar as the global reserve currency; so far these don't seem to have amounted to much. Do you think a significant shift away from the dollar is plausible in the medium term? Would it be sudden or would there be potential for the two to co-exist as “sterling oil” and “dollar oil” did in the early postwar era?

Hanieh: I am skeptical of any rapid end to a financial system structured largely around the US dollar. There are a lot of factors going against this shift, not least the enormous dollar holdings of oil-exporting countries such as Saudi Arabia. There is also a political dimension that often goes unremarked. Despite the instability of the US-Gulf relationship, American military power remains dominant in the Middle East, and the final backstop to the monarchies in the Gulf. That’s not to deny, of course, the various attempts to internationalize the Chinese currency, and we could well see oil traded in limited amounts in currencies other than the US dollar as part of this. But I think the bigger motivating factor here is the ability to get around any potential US sanctions, not the end to US dollar hegemony.

Rail: I was surprised to learn that since as early as the 1970s, the petrochemical industry has been more automated and enjoyed higher productivity with lower labor costs than any other industry. Is this still true today, even with the rise of the computer industry and the information age?

Hanieh: I was referring to the share of labor in overall costs within petrochemical production, and the ways in which plastics and petrochemicals also helped push forward automation in other industries. I haven’t looked at this in comparison to other high-tech industries today, but the level of automation in the petrochemical industry remains extremely high. There is also a lot of research going into new technologies that can convert oil directly into chemicals, which has the potential to really shake up the petrochemical industry. Some of these next generation refineries are now coming online. There is one currently being built in Saudi Arabia, which has a price tag of 25 billion dollars and is due to be finished this year.

Rail: Your account of the early Soviet role in the oil market—the Bolsheviks justifying concessions to Western industry as “developing our productive forces” and the Western companies not wanting to normalize the Bolsheviks’ nationalizations but ultimately tempted by rivalry and market share into making deals with them—reminds me of Lenin’s old line about capitalists selling us the rope with which we will hang them. Is it fair to say that this didn’t quite work out as planned? Are there parallels to how Western investments in China or post-Soviet Russia have played out? Is there any potential to exploit inter-capitalist rivalry for an actual anti-capitalist project or are such attempts doomed to become part of the problem?

Hanieh: There is a widespread belief that the first countries fully to nationalize oil were in Latin America, but it was actually Russia in 1918. Oil reserves in Baku were crucial to the Soviet state’s ability to industrialize, and Lenin and the other Bolshevik leaders were very cognizant of this need. This fact is essential to understanding some of the early Bolshevik debates around the rights of national minorities, worker control, and foreign concessions. And they managed to upgrade their technology and know-how without relinquishing control to Western firms.

The later collapse of the Soviet oil industry had much more to do with the inefficiencies of the Soviet bureaucratic system and the particular global conjuncture of the time. The interplay between world oil and the eventual collapse of the Soviet Union is a really interesting story, which I enjoyed writing very much. Later Western investments in Russian oil were largely about making money—in 2019, about one-fifth of BP’s total profits came from the company’s investment in the now-sanctioned Russian oil giant, Rosneft.

In comparison with the 1920s, much of the technical knowledge needed for oil extraction and refining is no longer concentrated in the hands of the big Western firms. It is much more diffuse (the oil-to-chemicals technology I mentioned above was developed out of a Saudi and Japanese joint venture). The bigger problem is the huge upfront costs for exploration and fossil fuel infrastructure, and attracting those investments requires opening up to foreign ownership or other kinds of access rights. It’s a very different situation from 1918, when the Bolsheviks nationalized Western oil firms in Baku without any compensation.

Rail: What strikes me throughout the book is how well it concretely illustrates the internal contradictions of capitalism. Oil firms drive the exploration and discovery of new oil fields in order to gain market share and get ahead of rivals, but these same discoveries immediately become problems by raising the possibility of overproduction; meanwhile governments in producer countries that rely on oil tax revenues want to keep supply high, but not too high. Every entity involved seems to be working both for and against its own interests simultaneously. And yet, time and again, you show how multiple firms have been able to come together to act in their collective class interest by establishing a stable price regime and averting a race to the bottom. Two questions arise: 1) Are firms still able to do this as effectively today, especially with the fragmentation of the US-led global order? and 2) If capitalists can do this, why can’t anti-capitalist movements?

Hanieh: The ability of the big Western firms to coordinate amongst themselves for most of the twentieth century was largely due to their control over the whole of the oil value-chain—they were vertically integrated and controlled every step from the underground extraction of crude through to the gas pump. Today, the biggest players continue to be vertically integrated, but they are no longer simply found in the US and Western Europe; they include Saudi, Chinese, and other non-Western oil firms. There is also the question of oil pricing that I mentioned earlier, no single actor controls the oil price because that is set in the financial markets (not by OPEC!).

The place where you do see quite deep intra-industry coordination is delay and obfuscation around climate policy. The playbook followed by ExxonMobil is the same as Saudi Aramco’s. I really think the climate movement needs to take this fact seriously. We face a bloc of the biggest oil companies, that also includes huge non-Western firms, and in many ways the latter’s influence is much more insidious, because of their links to the state. One recent example of this was the way that Saudi Arabia and Russia led the charge against the plastic treaty discussions in Busan, South Korea. They had the same message as ExxonMobil—i.e., the problem is pollution, not the production of plastics—but they had a direct seat at the negotiating table, and they blocked the agreement.

And yes, climate and anti-capitalist movements must coordinate better transnationally in the light of all of this. I think one of the problems here is that so much of the climate debate tends to be nationally-focused, and doesn’t take into account the global nature of energy and other kinds of commodity production.

Rail: Probably my favorite part of the book was the last chapter, which provides a detailed walkthrough of the accounting tricks that fossil fuel companies have used to present their industry as carbon-neutral. The way that carbon tax credits based on speculative offsets of carbon production in the future are used to enable increased emissions in the present reminds me somewhat of the pre-2008 credit default swaps. Do you foresee some kind of carbon market bubble?

Hanieh: There will undoubtedly be bubbles and crashes, in part because these credits are traded on financial markets and are thus open to speculative flows of capital. But I think the problem posed by the offsetting market is much bigger—especially the so-called Voluntary Carbon Market, where companies can buy credits on an optional basis to offset their pollution. Relying on these kinds of offsets to achieve emissions reduction is disastrous, a sure path to climate collapse. To give one example: A common way of generating these credits is “forest protection”—yet for this to be effective, the forest must remain standing for hundreds of years. If it goes up in smoke or is cut down during that period—obviously an extremely likely event, especially given climate warming—then you not only lose any supposed benefit of emissions reduction, you actually end up with a net increase in emissions. These offsets are a scam designed to continue business as usual—and that’s why the world’s biggest polluters are promoting them so enthusiastically as a response to the climate crisis.

Rail: You mention Russia’s war in Ukraine a few times in the book but only in passing—am I right to assume that much of it was written prior to the start of the war? Is there anything you would’ve added to expand on the war’s impact on global fossil fuel circulation, and is there any way in which the aftermath has challenged any of the points made in the book? For instance, what do you make of Saudi Arabia’s refusal of America’s request in 2022 to raise oil production in order to lower prices and hamper Russia’s ability to fund the war?

Hanieh: A lot of the book was written after the war began, but I tried hard to resist the temptation to play “catch-up” with fast-moving current events. The war obviously illustrates how reliant Europe remains on fossil fuel imports, and it has also confirmed the centrality of oil and gas exports to Russia’s economy. One thing I note is that despite European attempts to block the import of Russian oil, the EU is still importing huge amounts of refined fuel made from Russian oil—it’s just doing so from third countries like India and Turkey. Again, this shows how important it is to follow how oil moves through the entire value chain—not just control of the underground reserves.

I think that Saudi Arabia’s refusal to raise production in 2022 did not stem from diplomatic reasons, but from their assessment of the state of the oil market. At that time, we were emerging out of COVID, and there were serious uncertainties about the global economic situation and demand for oil (remember China remained largely closed off then). There was increasing production coming from non-OPEC sources, especially the US. Saudi Arabia was also trying to reduce spending on oil expansion in order to fund some hugely expensive domestic projects, like the NEOM project. These were the primary considerations of the Saudi government—not some supposed affront to the US. I think the media coverage of that 2022 moment got it mostly wrong.

Rail: Do you think the recent US election and subsequent withdrawal from the Paris Agreement significantly alters the course of climate action, or was the Agreement unlikely to have much impact anyway?

Hanieh: There is no doubt it is hugely symbolic and sets out clearly the agenda of the Trump administration around fossil fuels and the climate emergency. But as I point out in the last chapter of my book, these international efforts have already failed—we can’t keep acting like they are any path to a solution. Last year set a record for each of global oil, gas, and coal production. The US is the largest oil producer in the world. In many ways I think things like the COP summits are actually part of the problem and we need to start treating them as such: they provide a pretense that something is happening and efforts are being made, but in reality they facilitate business as usual.

Rail: Throughout the book, you highlight the role that colonialism and imperialism have played in shaping the fossil fuel industry while cautioning against a simplistic narrative that ignores the complicity of Global South governments benefiting from extractive arrangements. Given the prevalence that the idea of “multipolarity” enjoys on the anti-imperialist left and support for energy-intensive developmentalist policies by existing governments that are considered leftist or progressive, what room do you see for intervening in the discourse or imagining a different alternative?

Hanieh: Obviously, there are multiple centers of capital accumulation at play in the world today, and the world is much more fragmented—at least politically—than before. That might open up different spaces to challenge a US-centric world order. But I think we need to be consistently anti-capitalist in how we approach these changes, not just cheerlead national governments led by capitalist elites who want to gain a bigger piece of the pie—especially when the core ingredients of that pie mean certain destruction of the planet. Given the subject matter of my book, I’m of course particularly interested in places like the Gulf Arab countries. I find it remarkable how shallow so much of the discussions around Saudi Arabia and the other Gulf states are in the debates on multipolarity.

Rail: I’ve heard the argument that the successful banning of CFCs to address ozone depletion shows that capitalism might be able to eventually muddle through lowering carbon emissions without any radical systemic change—do you think this is at all plausible? If not, what are the key differences?

Hanieh: Yes, the example of the CFC ban is often put forward but I think it misses the point completely. There is a massive difference between CFCs and the systemic significance of oil and other fossil fuels to capitalism. Oil is bound up with how the contemporary global financial architecture emerged in the 1970s and how it operates today. It underpins the nature of material production, food, war-making—it’s not just a liquid fuel that we put in our cars. To understand this pervasiveness, we need to start with the imperatives of capitalism that give oil its apparent power—name the system, in other words, not just pretend it doesn’t exist. The problem goes far beyond the huge influence of the oil industry; that is a symptom, not the cause.