(fwd from David Walters) Sports Utility Vehicles: They aren't going away

Mark Jones markjones011 at tiscali.co.uk
Sat Nov 30 12:03:19 MST 2002


[ Part I ]


David Walters wrote:
> in similar vein, here is an interesting bit on micro-chip production:

Thanks for this David. Remember all the bullshit about the 'weightless
economy'?

BP has renamed itself 'Beyond Petroleum'. It is the world's largest solar
company, and spent $45 million recently spent on its solar business
division. Big deal, huh? But BP is committed to spending $5 billion in the
next 5 years on oil exploration and production in the sensitive environment
of Alaska alone. BP ("Beyond Parody") is only interested in renewables for
PR purposes. It doesn't want forecourt campaigns against it like Exxon and
Shell, which damage gas sales.

Here's smthg I posted here two years ago. Some things are worng but mostly
it stands up.
-------------
Oil Reserves: The markets obey Liebig's Law.
Date: Sun, 19 Sep 1999 16:16:09 +0100

Justus, Baron von Liebig was the famous German agro-chemist who influenced
Marx more than any natural scientist, even Darwin, because it was Liebig who
persuaded Marx that capitalism has a long-run natural resource problem, and
that capitalist agriculture wrecks soil fertility. Liebig's Law states:
whatever necessity is least abundantly available (relative to per capita
requirements) sets an environment's carrying capacity, or an economy's
growth limit-point. And energy has always served that role in capitalism.
Oil production is self-limiting. Last year global production was around 27bn
bbls. Whatever level of potential demand exists, it cannot rise much above
that. This is an irony of capitalism, which to survive must grow: yet which
depends on a resource of which production is and always will be subject to
physical limitations.
This is why the 'oil model' cannot be generalised to some future semi-feudal
post-capitalism (and I agree that the feudalist insight is particularly
fruitful: how else can you explain contemporary Russia, for example, except
as a type of neo-feudalism?). The reason is clear: capitalist accumulation
is a discontinuous, open-ended historical process which depends upon a
secular rise in labour-productivity.
Oil is the only permissible exception to this rule.
'Replacement-only' equilibrium models are as old as capitalism itself;
Hilferding had a good one. But they are always wrong. Capitalism obeys one
iron law -- it has to continually revolutionise the means of production. And
it cannot 'regress' to feudalism. To do so would be to risk politicising its
fate in potentially catastrophic ways (the alternative to autarkic national
socialism, is always and can only be a revolutionary demarche).
Even if its immanent laws of motion didn't make it like that, history gives
world-capitalism little room to manoeuvre: Wallerstein is right, and the
system is caught in a three-way scissors, between resource-depletion,
environmental degradation, and a burgeoning 'reserve army'.
The world is suffering a long-term energy deficit and has been since 1971,
which is not coincidentally when all the trend-lines went bad, for example
productivity growth rates post 1973 were half pre-1973. Oil is cheap
currently but that's also part of the story and ought to worry us: since
1967, each time oil prices have nose-dived like this means war. Oil prices,
a middle-east war has followed within two years. 1979 (Iran hostage crisis),
1986 (Iran-Iraq) and 1991 wars all followed this pattern. Bush and Saddam
actually agreed that Kuwait was wrong to flood the world with cheap oil
(which it was, let us recall, poaching from reservoirs which underlie both
Iraq and Kuwait territory, so Saddam had justified grievance).
Oil can occasionally *seem* cheap but note: (1) at any price, however low,
there is no effective demand for it in the 75% of the world which is under-
or de-developed, because of lack of infrastructure, lack of ANY per cap
income etc -- this is one measure of the general shortage of capital which
lies behind the ongoing, and still-accelerating, global deflation: it is not
excess production of goods, but lack of markets, primarily efficient
capital-investment markets, which cause the problem. The surplus of capital,
however huge the overhang seems, is secondary and derivative. It results
from a lack of profitable outlets caused by a systemwide paralysis, itself
the result of a chronic lack capital going back over almost four decades and
resulting in huge systemic imbalances and infrastructural logjams which must
be broken before any new long-wave of investment can begin. (2) 2/3 of the
world's oil is in the Gulf, was discovered by 1966 and is very cheap to get
out, and the infrastructure was long-ago written off. So Gulf swing
producers always can flood the market but such shocks are always temporary
and relate only to coincidence of recessionary and political events; (3) oil
*seems* cheap because it is actually a form of usufruct shared out among
competing imperialisms, i.e. its price is 'mis-specified' as the
econometricians like to say; but its *real* cost is the cost of military
containment/control of the mid-east, which has to be at least $50 bn per
annum, thus doubling the total price of US oil imports at a stroke (not to
speak of the quadrupling of oil-induced costs when environmental and social
on-costs are factored in, and you could argue that if one globally-warmed
typhoon wrecks one big city and that is enough, as some insurance-market
analysts now speculate, to wipe out the world's stock markets, then the true
price of oil is incalculable, as it also would be if greenhouse leads to
runaway warming).
So there is NO true price for oil and no true market-clearing price either,
because the market is spurious, since oil is merely a form of
militarily-procured imperial tribute. And that agreement between Saddam and
Bush, which got lost in the actual Gulf War, proves it: all sides recognise
that the 'correct' price is about $25 per barrel, because that gives
'high-absorbers' like Iraq enough revenue to keep their masses quiet
(important to the West, obviously) and it gives non-Opec producers like
Britain, which this year will produce almost as much oil as Russia, a
profitable basis for their high-cost offshores.
What does all this mean? It means that although the effects are mildly
deflationary, taking about a percentage point of OECD growth rates (perhaps
a bit less, I just forget), the West nonetheless does not want its oil too
cheap.
Now, one of the reasons why oil is currently very cheap is because Saudi and
other Gulf producers have announced big planned increases and are investing
$100-150 bn to supply world markets with an additional 10-15m barrels per
diem in the next decade, and nobody, and I mean NOBODY that I can see, is
publicly asking why?
The reason is clear -- because non-OPEC oil production is going to decline
exponentially; US oil production is already collapsing -- and therefore the
world is going to badly need that new Gulf production, which, however will
not be cheap because all that new upstream investment works out about $16k
per barrel per day, about the same price for N Sea, or Orinoco heavy or
Athabasca tar-sands, which are not classified as conventional oil at all!
The world is in the first stages of a long-run decline in world oil
production. The signs are many. At this writing (late 1998) there are oil-
press reports that Britain's leading independents expro firm, Lasmo, is
teaming up with the Venezuelan government to spend big money on that famous
Venezuelan Orinoco heavy oil, which, like new investment in Alberta tar
mining, all adds up to one thing: that the age of cheap oil is already over.
Yet Lasmo's initiative is certain to go nowhere while oil prices are at
their present historic lows. There is no profit in investment in
alternatives. Thus, when the oil-shock comes it will find a world
doubly-unprepared, for while investment in new production is curtailed,
consumers are buying gas-guzzling four-wheel drives and abandoning
energy-conservation habits.
Liebig, the famous German agro-chemist writing in the mid-nineteenth
century, believed capitalism has a long-run natural resource problem, and
capitalist agriculture buggers up soil fertility -- Liebig's Law states that
whatever necessity is least abundantly available (relative to per capita
requirements) sets an environment's carrying capacity, or an economy's
growth limit-point. And energy has always served that role in capitalism.
Economists counter-argue that resources are not finite. Gregory Nowell [fn],
reminded me when we debated the future of energy on Doug Henwood's Left
Business Observer elist, about how when whale-oil ran out, Rockefeller
providing mineral kerosene instead. Whale-oil had been essential for
domestic lighting, lubricant and other purposes and was thought
irreplaceable. Rockefeller's achievement in creating a 'standard oil' is
supposed to show how substitutability is infinite, and that technology will
always save us.
In fact, there is an earlier example of energy-substitution which seems to
make that point even more clearly, which however is rarely mentioned. By
1750 English iron production had collapsed to a few thousand tonnes pa,
furnaces everywhere closed, and the future workshop of the world came to
depend on imports of iron from Sweden and Russia -- why? Because those
places still had plenty of forest, therefore charcoal. But Britain had just
enclosed its commons, the agrarian revolution was in full swing, and the
forests had been cleared.
Only when Abraham Darby and others learned how to make iron using pit-coal
instead of charcoal, was the bottleneck removed. That was about 1750. Then
iron supplies were plentiful and the Royal Navy had enough cannons and balls
to see off Napoleon, which Boney never expected, so there you are. And
because coalmines fill with water, James Watt or Newcomen invented the steam
engine to pump them out, and thus was the Industrial revolution born.
Darby's ironworks was in Shropshire, which overnight gave up using wood and
stone to build with and turned to cast and wrought iron. They suddenly had
so much iron they didn't know what to do with the stuff. They paved the
streets with it, made boats of it, which didn't sink, they made iron rails
for pit wagons to run on instead of wooden ones, thus birthing railways,
they made missionary cooking pots and floated them down the River Severn to
Bristol whence they went to Africa in exchange for slaves, who went to
America and sent back cotton to Liverpool and Manchester... They even made
the pulpits in the churches from iron (stern ironmanster patriarchs still
stare down from stainglass windows at the humble worshippers) and they even
buried themselves in iron coffins. Such breakthroughs are supposed to give
the lie to Malthusian doom and gloom. But the simple fact is that industrial
capitalism was and still is entropically based upon the use of non-renewable
hydrocarbon fossil fuels.
No-one has ever found a substitute. Oil replaced coal, and US hegemony
replaced British, but nothing can replace the industrial world's dependence
on fossil fuels. When the oil runs out, and the world's population includes
three billion teenagers (that will be the demography of 2020 AD), social
crises of a severe nature seem unavoidable. This is so despite present
glutted oil markets. The spot price is lower at this writing (January 1999)
than it was the last time prices crashed, in 1986. Then expro rates fell by
half, this time oil corps continue to invest heavily in new production. Why?
Several reasons:
1. Expro costs have fallen dramatically because of new technology (3D
seismic, satellite imaging, horizontal drilling, NMR drillhead sensors
etc.). Thus margins are higher and the economic cost of a new barrel of oil
has fallen below $15, which is the price the oil majors test out the
viability of new upstream investments.
2. In 1986 the market was still hampered by structural rigidities. The huge
wave of deregulation and privatisation had barely begun. This was to take
away most national controls, brought many new countries into the market, and
changed the balance of market power in favour of the oil majors and away
from national states. In Non-Opec (NOPEC) states, principally N Sea and
North America, deregulation of the oil and particularly natural gas markets
and reduced tax burdens liberalised the market and produced a wave on
investment and innovation. As socialism collapsed, whole new sources of
supply came on stream. Soviet production fell precipitously, by almost 50
percent within three years after 1989. But the collapse of socialist
industry reduced demand in the former socialist bloc by more than half, thus
freeing net production for the capitalist world market. Meanwhile the
creation of new states in the east, including Russia, Azerbaijan,
Turkmenistan and Kazakstan opened the door to a carnival of plunder of the
whole natural resource base of the FSU. Large previously-closed oil
provinces in Kazakstan, the Caspian Sea and the Russian Arctic North, have
been taken over by western oil majors under the strategic umbrella of US
imperialism. The fall in energy prices is one of the main benefits to world
capitalism of the collapse of the east. Each 10% fall in oil prices can
stimulate a net one percent increase in OECD GNP. The flood of capital
released by the fall of socialism and end of the Cold War and the sharp hike
in the profit rate has been insufficient however to launch a new cycle of
world growth; the glut in oil and fall of prices, celebrated by the Wall
Street Journal, the capitalist media and such oil-industry pundits as Daniel
Yergin, who celebrated the 'final victory' of free market capitalism in his
1997 book 'The Commanding Heights'  as proof that there are no 'Limits to
Growth', in fact is only evidence of the built-in limits to capitalist
growth.  Financial markets understand that the oil glut is temporary and
this is another reason why oil corps, taking a longer view, continue to
invest heavily in upstream production, as they scramble for position against
the inevitable future famines and price hikes which any real growth- spurt
will quickly produce. Energy-shortage remains a fundamental constraint on
capitalist accumulation, as it has been since the first oil-shocks of the
mid-1970s. Privatisation, deregulation and liberalisation are presented as
goods in themselves, as rational and logical policies signifying the final
victory of capitalism; but the oil industry shows the truth beneath the
hypnotic market-mantras: in fact there is no free market in energy. This
high-technology, highly-capitalised, strategic industry functions as an
important organisational, political and social nexus between capitalism as a
blind process of production, and imperialism as its political form. The
energy complex is a materialisation of capitalist production relations in
the stage of late imperialism, imperialism in necrosis. It combines military
might, unconstrained imperial predatoriness and a fantastic technological
armoury plunder. The capitalist energy complex is a historically unexampled
form of natural rapacity. As with the world fishing industry, it applies
ever-heightened technological powers to the problem of growing resource
shortage. The world fishing industry has compensated for falling catches by
investing more and more heavily in big new factory-trawlers fleets, in
satellite monitoring and advanced ship-borne fish detection sensors. Thus
global fish harvests rose until the early 1990s to an annual catch of 87m
tonnes and has since remained at that level. But overfishing, exhaustion of
fish stocks and the substitution of inferior types of fish is the price
paid. And the horrific future is symbolised by the fate of the Newfoundland
cod fisheries, which collapsed in [?check date]. The huge investment in the
Newfoundland cod industry has been written off; the machinery, technology
and fishing fleets reduced to useless rusting junk within the space of two
years. Overshoot and die-off is the true name of the game. The same fate
awaits other major fisheries, and the complete collapse of the fishing
industry in its high-technology, high-capitalised incarnation has already
begun. The same fate awaits the world oil industry. The present glut, which
may continue for some time, is the direct consequence of imperialism's
successful offensive. All doors have been opened; the unrestrained pillaging
of the energy resource-base has begun. The consequence will be famine
following the feast. Instead of the planned exploitation of oil for the
economic and social development of the world's people, maximum deployment of
extractive technology will continue until the industry crashes and
production just falls off a cliff. That is the real meaning of privatisation
and deregulation. When the collapse comes the vast tanker fleets, the huge
refinery complexes, the pipelines and distribution networks will be just so
much rusting metal. The communities which serviced this industry will be
left to die, just as the Canadian fishing communities have been abandoned.
The inheritors of this wasteland may not even understand what criminality
produced such a catastrophe, the more so since the collapse of the oil
industry has a different and more serious significance than the collapse of
the fishing industry, ominous though that is both as a portent of things to
come and for its direct effects on the dietary standards of billions of
people. Because oil is at the heart of the capitalist world system. Take
that away and inevitable industrial collapse will follow. And more: the
destruction of transportation systems will destroy the lives of hundreds of
millions of people, especially in North America where suburbanisation and
the construction of the built environment has been premised upon private,
gasoline-powered transport.
More: the collapse of oil will severely impact agribusiness. To take one
example: the loss of major world fisheries has been substituted by the huge
growth in fish farming. The terrible effects on coastal regions, loss of
biodiversity, spread of disease and pollution are sufficient answer to those
who argue that the rise of fish-farming proves that there are no 'limits to
growth' and that human ingenuity can always and easily find substitutes for
any scarce resource (in this case wild fish extracted from its native
habitat).  Thus the critics of 'limits to growth' arguments point out that
while annual fishing yields may be declining, aquaculture now produces 20m
tonnes of fish a year. But this yield, as with all forms of modern farming,
is dependent of fossil-fuel energy inputs. Fish that is fed on land-grown
cereal crops is just as dependent on the petrochem, fertiliser, pesticide,
insecticide and energy-inputs as any other kind of farming. The collapse of
the oil industry will just as surely entail the liquidation of much of the
world fish-farming industry. Oil is the basis of life. Yet this essential
resource is being pillaged and squandered in the party at the end of
history.


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