Agitate: Oily Capitalism

How did we get here? The picture to the right has become an icon of corporate malfeasance, greed and profound ambivalence for the stewardship of the commons as well as the lives and livelihoods of millions of people. So as we watch the billowing columns of crude flowing uncontrolled into one of America’s greatest (and most endangered) water bodies we are left to ponder just how we arrived at this state of political-economic decrepitude.

It is now painfully clear that our current political-economy is not only unsustainable in every regard, ecologically, economically, politically and socially, but also unresponsive to the expectations of a democratic society. Our pseudo-representative government has allowed oil corporations to operate with near absolute freedom, to practice ever riskier extraction methods with nothing more than a wink and a nod and a cross-fingered promise that they’ll be really, really careful, that nothing can possibly go wrong. Yet common sense dictates that things which float…can sink, that fluids pumped from the ground…can leak, that ultra-complex technologies…can break down.

What’s more, the evidence is overwhelming that despite the riskier projects and the complexity of the technology, and the billions of dollars invested in each, almost no forethought, let alone investment, was put into dealing with a possible (read probable) emergency. How arrogant of our oil executives! How shortsighted of our bureaucrats! How idiotic of our politicians!

So just how did we get here? There are plenty of explanations. There are the liberals suggesting that this is what happens when corporations are not regulated. Thirty years of government deregulation confirms this theory. There are the conservatives suggesting that this is the result of government incompetence. Scandals involving the Minerals Management Service (MMS) joining oil lobbyists and executives in lavish cocaine parties and sexual trysts certainly betray corruption and incompetence on the part of government regulators. There are free market capitalists who suggest that BP’s actions represent greed rather than true capitalism. All of the assertions being made from all sides of the issue have some legitimacy, but none of them suggest the true revelations of this catastrophe.

In fact, the BP oil spill is just one more symptom of the disease that is postmodern capitalism, just one more running lesion of a greater cancer rotting the social body and manifesting in the unraveling of global social and economic structures. Consequently, the actions of our political and economic elite and the co-opted social commentators is nothing more than desperate and futile attempts to treat the symptoms, while at the same time hide the rot of the larger malady.

The Insanity of Petrodollars

In 1949, geophysicist Dr. M. King Hubbert predicted that the age of oil would “[represent] but a moment in the total of human history.” In his groundbreaking study, Energy from Fossil Fuels, Hubbert concluded that “the progressive exhaustion of the mineral fuels,” would happen almost as quickly as their rise. Of course, this makes sense as fossil fuels are non-renewable resources on a finite planet. Eventually humanity will have to face an era without oil.

Yet Dr. Hubbert (pictured at left) was not done. In 1956 he predicted that US oil production would peak in the early 1970’s. Despite the fact that he did his research for Shell Oil his conclusions were scoffed by the oil elite. At least they were scoffed until 1971 when the United States did, in fact, reach its peak production. As predicted, there was nothing that could be done about it—no new oil strikes, no advances in technology. If oil was to continue as a growth sector in the United States it would have to come from somewhere else. After 120 years of drilling the US oil reserves had maxed out.

Nineteen seventy-one was an inconvenient year for the United States to reach peak oil production. It was also the year that the United States, having printed too much money, devalued the dollar by abandoning the gold standard. Two years later the OPEC nations placed an embargo on all shipments of oil to the United States furthering economic instability. With the debacle of Vietnam growing worse and civil strife rampant on the home front the early seventies seemed an inopportune time to consolidate the American empire.

Yet that is exactly what the Nixon Administration, via Henry Kissinger and Dick Cheney, did in pulling off the greatest economic coup in history. In 1974, Nixon’s envoys as well as major players from oil, banking, investment and other private sector interests, negotiated an agreement with Saudi Arabia known as JECOR, the Joint Economic Commission Office of Riyadh. After some Olympian negotiations, not without their share of military coercion, the United States agreed to guarantee the perpetuation of the House of Saud on the throne of Saudi Arabia. The United States was also good enough to agree to modernize Saudi Arabia in exchange for Saudi investment in US securities.

In exchange for such gracious terms, Saudi Arabia agreed to use its significant power in OPEC to guarantee an affordable flow of oil to the United States. Most significantly, however, Saudi Arabia also swung its weight to ensure that OPEC would exchange its oil for dollars only. Any country in the world that wanted to purchase oil from OPEC would have to do it in dollars. In essence, the gold standard was replaced by the oil standard, and the dollar remained the dominant currency in the world—so long as such nations agree to the “dollar-only” standard (but that’s another essay).

JECOR has been referred to by John Perkins and others as SAMA, the Saudi Arabian Money-Laundering Affair. The outcome of SAMA established that oil was not merely a resource by which investors could become wealthy. Rather oil, translated in petrodollars, was wealth itself.

In summary, the Corporate Elite of the United States conspired to align the value of the dollar, and thus the economy of the entire world, with a finite, non-renewable resource (a resource which we actually set fire to). This dwindling resource was largely in the hands of totalitarian and theocratic states that hated us…

…What could possibly go wrong?


If the above events seem short-sighted, unsustainable and irresponsible, you are correct. No responsible leadership would ever have constructed such a self destructive policy. Of course, we are not talking about responsible leadership. We are talking about a corporatocracy, a political economy in which the elite serve the interests of the elite only. The elite are largely driven by corporate interests.

Corporate interests are not “social” interests. As an institution, the function of the corporation is to enrich the shareholders, providing returns on their investment as quickly as possible. Anything that increases the profit margin is good business. Anything that extends the power of the corporation to make decisions in the best interest of the shareholders despite opposition from outside forces, such as common citizens, is good business.

Sound social policy is not the function of the corporation, nor should we expect such decisions. Sound social policy should be the expectation of a representative government. When the government is co-opted by corporate interests, however, it can no longer be understood as representative—at least not representative of the society as a whole.

It is obvious to any rational analyst that a petrodollar system can only collapse upon itself. It’s just a question of when. Thanks to Princeton University’s Dr. Kenneth Deffeyes we now know when. In 2001, Deffeyes wrote Hubbert’s Peak: The Impending World Oil Shortage. He applied Hubbert’s formulas to world oil production. He concluded that world oil production would peak in the first decade of the twenty-first century. Like Hubbert, he was scoffed by the oil elite. Scoffed until 2008, when the accuracy of his prediction appeared to have been proven.

Not to worry. Peak oil is not a problem for the oil industry. Scarcity increases value, and this is good for the shareholders. The increased value of oil justifies ever riskier exploration and drilling projects, such as deep water drilling, and the associated technologies that drive it. Desperation for more oil also justifies the destruction of treasured environmental resources like Arches National Park and the Arctic National Wildlife Reserve. However, there is no corporate justification for developing the technologies protecting these environments or for dealing with catastrophes that result from taking such risks.

You see, the only risk that is of interest to the corporation is that which ends in profit. And corporate ties to government ensure that all risks end in profit or taxpayer bailouts. Destruction of the environment, hazards to the health of the citizens, elimination of livelihoods, is of no interest as it has no immediate bearing on quarterly projections. It is this kind of boardroom narcissism that has made oil companies the most profitable endeavor in history. Peak oil is only a problem for working people like you.

It’s a mistake to believe that the BP disaster is a separate phenomenon from, say, the Upper Big Branch Coal Mine explosion, or the Kingston TVA coal slurry spill, or even the economic meltdown of 2008. They are all part and parcel of a corporatocratic society, no less expected than serfdom in a feudal state.

It is also a mistake to believe that BP will be “held accountable” for this catastrophe. Yes, there will be some Senate hearings and corporate mea culpa‘s, perhaps some fines and punitive damages will be demanded. But BP will certainly challenge these damages as “unreasonable” (you notice that BP always states that they will pay “all reasonable claims.” Of course who becomes the arbiter of what’s reasonable?). Think Exxon Mobil. Think Goldman Sachs. Think of any of a number of corporations like Raytheon and Lockheed Martin convicted multiple times for defrauding the government—still receiving government contracts.

There will be no real accountability, and ultimately the taxpayers will end up paying for the cleanup. If your negligence resulted in the deaths of eleven people you would be imprisoned, but there will be no jail time for BP execs. What’s more, you will see a return to deep water drilling in six months. You can also count on corporate conservatives in both parties fighting tooth and nail against a real alternative energy policy.

These things will happen unless we rebuild the democracy that we lie to our children about when we describe the United States.

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15 thoughts on “Agitate: Oily Capitalism

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  1. No sooner did I post this blog than I read about Rep. Joe Barton APOLOGIZING TO BP for President Obama forcing the company to put aside $20 billion in escrow for cleaning up the Gulf. Wow!


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