“Peak Oil” and “Resource Curses” from a Class Perspective George Caffentzis

[From a presentation at the Historical Materialism Conference, CUNY Grad Center, New York, NY, Jan. 14-16, 2010.]

The intention of these notes is simple: to strip both the peak oil hypothesis of its apocalyptic pathos and the “resource curse” conjecture of its apologetic halo and examine them in the light of historical materialist categories. This translation from the realms of apocalypse and apology to a class analysis is a modest but, I believe, necessary step in fashioning an anti-capitalist energy politics.

I do this not because I am an adherent of what I call the “peak oil complex,” or of the “resource curse” hypothesis, but because they have become major features of contemporary energy politics, and in order to enter into the discussion, one must recognize the milestones along the way.

Let me begin with “peak oil,” or what I like to call the “peak oil complex” which I defined in a recent pieces as: “(a) an empirical prediction of planetary oil production projected into the next century and a “retrodiction” of planetary oil production since 1859, (b) an explanation of this curve that traces out approximately 300 years of oil production, and (c) an emotional “aura,” ideology and politics reacting to this prediction and explanation” (Caffentzis 2008). The geological-economic hypothesis in the peak oil complex claims that world oil production from the mid-nineteenth century to the middle of the twenty-second century is best charted by a bell-shaped (normal distribution) curve whose peak is to be reached sometime in the beginning of the twenty-first (i.e., NOW). This recognition of the price effects of the finitude of petroleum deposits long before reaching the exhaustion point somewhat differentiated this foray into the future from the limits to growth analysis of the Club of Rome in the 1970s, which did not focus on the immediate consequences of the wide recognition and acceptance of these “limits.”

One consequence of the “peak oil” hypothesis would be an astronomical increase in the price of petroleum until alternative sources of energy become available in massive enough quantities and cheap enough prices. Supporters of the hypothesis predict that this period of energy crisis and transition would have a “devastating effect” on the economies and standard of living of those in the so-called developed world (Western Europe, North America, and Japan). Indeed, there is a rich and growing apocalyptic literature on the post-peak-oil world where “civilization as we know” grinds to a halt and no one knows how to get to work! But is that the only possible outcome of this crisis?

The main claim of the peak oil hypothesis phrased in Marxist language is that the costs of production (especially in terms of constant capital) of extracting oil are going to increase dramatically in the next few decades. Hence there will be an increase in the organic composition of capital (OCC) in the oil industry in general, an industry where the OCC is already high relatively speaking, where OCC is the ratio of constant capital to living labor (a Marxist measure of the “value composition of capital, in so far as it is determined by its technical composition and mirrors the changers in the later” (Marx 1976: 763).

What also follows from the hypothesis is that there will be an increase in the rents paid to the owners of those fields where the costs of production are much lower than the fields where the costs of production are high (though not high enough to make them unprofitable).

Thus from the Marxist point of view the Peak Oil hypothesis implies that there will be an increase in both the transformation of surplus value into profit of the oil industry as well as the transformation of surplus value into oil rents. Surplus value being the unowned extra value produced in the capitalist system as a whole that is differentially appropriated according to rule by specific profit, rent and interest owners. Here lies the capitalists’ formation of a “veritable freemason society vis-à-vis the whole working class” since they share the surplus value among themselves according to the hieratic rules of the system, as Marx ironically expressed it (Marx 1966: 198).

Put in this way, the Peak Oil hypothesis can have positive consequences for workers in the oil-producing areas on two counts, i.e., Peak Oil is not all gloom and doom for everyone. First, class struggles over wages in these areas can dramatically increase and, second, class disputes over the ownership of oil fields (especially claims for common ownership) are becoming pivotal and the source of a tremendous struggle (cf. (Caffentzis 2004)). These political consequences are exactly what are shaping the class struggle in Bolivia, Venezuela, and Ecuador independent of the literal truth of the peak oil hypothesis, i.e., the peak of world oil production bell curve has been recently reached or will be reached in the next few years.

This translation into Marxist categories can help us counter the ideological fog that now pervades the discussion of the oil industry as the dour apocalypticians of “peak oil” meet the clever ideologues of “neoliberalism’s Plan B” like Jeffrey Sachs. Perhaps the most recent sally into this territory is to be found in the thesis of Peter Maass’ book, Crude World: continued oil extraction will be disastrous for both people in the advanced capitalist countries as well as the people of the oil producing countries in Middle East, Africa and South America (Maass 2009). Maass supports this conclusion by employing the concepts of peak oil and the resource curse.

One would think that this “peak oil” situation, however, might be just fine for those on the receiving end of the high prices for petroleum in the crisis/transition period. Wouldn’t a ten-fold increase in the price of oil have a powerful effect on the economies and standard of living of those in the oil-producing countries of Africa, the Middle East, Central Asia, Oceania and Latin America? Here is where the paradoxical notion of the “resource curse” comes into Maass’ argument. Economists have noted that an increase in wealth occasioned by discoveries and extraction of precious natural resources (from silver and gold to uranium and petroleum) often leads to “lower growth, higher corruption, less freedom and more warfare” (Sachs and Warner 1995).

A classic example of the resource curse is Spain in the time of its conquest of the indigenous Americans and the formation of the silver mines there. After a century of huge budget increases backed by floods of silver from the Americas going directly into the monarch’s treasure chests, there was little to show for it. The great imperial ventures (e.g., the Spanish Armada’s attack on England) as well as the petty vices and pleasures accumulated, but the “industrial capacity” of Spain was severely underdeveloped. Thus, in bit of literary criticism inspired by the resource curse, Don Quixote’s sense of living in false, slightly mad world of early seventeenth century Spain is the product of almost of century of wealth never “staying put,” but continually moving through Spanish fingers into the vaults of the German bankers.

In effect, Maass’ argues that the oil-producing countries of today are cursed in the same way Spain was in the sixteenth century. Oil-derived revenues create economic incentives toward conspicuous consumption, corruption, civil war, and catastrophe (with a few exceptions like Kuwait, Brunei and the United Arab Emirates--huge reserves and small citizen population--or like Norway --“a country with abundant oil and gas as well as a vibrant economy and an open political system”) (Maass 2009: 6). For most countries and peoples “everything would be better if oil had not been found” (Maass 2009: 222).

In his conclusion, he draws global warming, peak oil and the resource curse together to urge a set of technological, social and moral changes that would make petroleum “less valuable.” Perhaps Maass is hoping that something like what happened with Sperm Whale oil in the 1850s--when Moby Dick (1855) was written and petroleum was “discovered” in 1859 in Titusville, Pennsylvania--will occur to petroleum. For whale oil’s production curve peaking led to the development of alternatives (like, ironically, petroleum for lighting).

But a few cautions are in order when considering this argument. First, someone is going to collect the rents and the transferred value that will be created with the extraction and sale of the oil as long as capitalism continues. The question is “Who?” During the energy transition period, demands will grow for reparations for the environmental and social damage imposed in the last century of oil exploitation throughout the planet. Are these reparations to be financed from this increasing prices, profits and rents? It is clear that the oil-producing proletariats are not going to abandon their claims (even if, like the U’wa, they merely want to keep the oil in the ground, which also is a “cost” in a capitalist economy). The peoples of Nigeria, Iraq, Equatorial Guinea, Russia, Iran and other resource-rich nations are not going to give up their patrimony now that it is going to be more valuable (at least according to Maass). Their regimes will not necessarily be the sort that has been typical of some of these states in the past. Moreover, there will be a temptation to reject the reparation claim on the part of the former colonial powers.

That is why, in such a political situation, I find Maass’ book problematic. For he seems to be saying: reducing the future income of these countries would actually be doing the people of those countries a favor. One doesn’t have to be a cynic to question such a claim and see that if a similar logic were applied to other countries and peoples, there would be much anger. After all, one can say that reducing the income of the US would be great since it can lead to a reduction of US’s dangerous military expenditures; but those of us who live in the US might respond, “let us try to reduce our dangerous military without putting us into poverty’s doorstep, thank you!”

Second, there is a danger of fetishism here, since the emphasis is on the resource aspect of the “curse” and not its commodity aspect. The problem is not that oil or other resources can be very useful and very damaging at the same time (the Janus-faced or “pharmakon” aspect of all boons). That is the nature of things. But to attribute a long list of negative social characteristics like corruption and unbalanced sectorial development to resource extraction is to forget the intermediary: the fact that the resource is a commodity in the first place and not just any commodity, but one that must make a profit on the international market.

It is worth thinking of the comparison of oil with water at this moment (Caffentzis 2004). Water is also a resource (infinitely more important than petroleum in fact), but with water we already recognize its common aspect. We can recognize that there is a fundamental conflict between water’s commodity aspect and its all important use value. Neoliberalism has been attempting to create a full-fledged commodity out of water. Indeed, many are willing to fight for its status as a common resource that should be available as a non-commodity to the community defined as a set of commoners.

Why can’t we imagine petroleum being something like water, i.e., as being a common resource? Would that not transform the relationship between the commoners and the fields of petroleum? I believe that there are such views throughout the world going by all sorts of ideological banners from U’wa cosmology to Islamic fundamentalism.

Third, the resource curse is hardly a mono-causal explanation of “corruption, mal-development, civil war, etc.” After all, the horrors that capitalist colonialism created were not all due to the resource curse. (For example, “corruption” is a standard item of the political economy of Italy, but that nation is hardly suffering from a resource curse.) Is it true that “to exorcise the resource curse, you would almost need to get rid of the resources”? (Maass 2009: 222) There is room for doubt. One might be rid of the curse and still have the corruption or one might be rid of the curse and still have the genocide. We should remember that the resource curse of American silver in Hispanic America was not adequate to explain the genocide of the indigenous people of the Americas. After all, the indigenous of North America suffered a worse demographic calamity than did the Southern indigenous peoples and there was no gold to be found in the British North American colonies nor in the United States until 1848.

Fourth, the full development of “green” capitalism will still have all the elements of primitive accumulation and new enclosures that leads to a dramatic devaluation of labor power. Historically, we should remember that capitalism began its trail of tears long before the “hydrocarbon” age. In fact, capitalism begins as a “green” mode of production (water drove the mills, wind drove the slave ships, wood and peat moss warmed the hearths and fired the artisans’ furnaces, etc.) This was capitalism’s most savage, genocidal, and rapacious period. It only turns to coal in the 19th and later on in the 20th century to petroleum to energize its machines. Therefore, there is no reason to think that the new mode of production dependent on “sustainable,” “clean,” “renewable” energy will be irenic. On the contrary, if the bio-fuel rage that is fueling the “Scramble for African land” is any indication, the “green” world will be as bloody as the “crude” world...though with more apologies.

One source of financial-economic crisis, then, is the growing resistance of the workers in the oil-producing world to the exploitation of their land and labor. The wars stretching from Peru through Chiapas through the Niger Delta through Iraq are examples of this resistance that is pushing for the energy transition. Constant capital’s value (especially raw material) is dependent upon the ability to externalize its cost. Reducing externationalization by internalizing the cost of basic commodities leads to a reduction of average profit that affects all of the system and must be compensated for by increased exploitation in some branches of industry (especially at the lower end of the organic composition ladder). Thus the worldwide resistance can be seen in the reduction of the average profit rate that has been experienced in the recent crisis.

In conclusion then, the translation of peak oil and resource curse hypotheses into Marxist categories creates a clarity that dissipates the power of the moral moods surrounding these hypotheses whatever their epistemic value. I hope my effort today has contributed to furthering this translation process.

Bibliography

Caffentzis, George (2004). The Petroleum Common: Local, Islamic and Global. In No Blood For Oil! accessed at www.radicalpolytics.org. Caffentzis, George (2008). Peak Oil, Commodity Fetishism, and Class Struggle,” Rethinking Marxism, Vol. 20, no. 2 (April), pp. 313-320. Marx, Karl (1966). Capital, Vol. III. Moscow: Progress Publishers. Maass, Peter (2009). Crude World: The Violent Twilight of Oil. New York: Alfred A. Knopf. Sachs, Jeffrey, and Andrew Warner. 1995. ―Natural Resource Abundance and Economic Growth‖ National Bureau for Economic Research (NBER) Working Paper 5398. Cambridge, Massachusetts.

Further discussion on similiar found here https://groups.google.com/group/socialwar-energy-climatewar/topics?hl=en