Michael T. Klare is a professor of peace and world security studies at Hampshire College and the author of Blood and Oil: The Dangers and Consequences of America's Growing Dependency on Imported Petroleum (Owl Books, 2005).
To explain the current run-up in gasoline prices, pundits throw out many reasons, including concern over a possible war with Iran, insatiable demand from China, inadequate refinery capacity, greedy oil companies and the gradual depletion of the world’s oilfields. All of these do bear some degree of responsibility, but they are not the fundamental cause. There has been a historic shift in the center of gravity of world oil production from the global North—the older industrialized countries—to conflict-plagued areas of the global South—the developing world. Because this shift is all-encompassing and irreversible, global oil output will remain vulnerable to overseas instability and gasoline prices will remain high.
What explains this shift in production, and why does it cause perennially high gasoline prices?
Although we tend to think of Middle Eastern deserts when hearing the term “oil production,” the global oil industry arose in the United States in the middle of the 19th century. It then concentrated in other early-to-industrialize nations. Up until 1950, most of the world’s oil was produced in the global North. This meant that the sites of production were located relatively close to the sites of demand, and that any outbreaks of disorder in the oilfields (never entirely absent in the global North) could swiftly be suppressed.
The early concentration of oil production in North America, in particular, had an especially profound impact on critical developments of the 20th century. It helped make possible the early emergence of automobile culture and suburbia in the United States after World War I, and its full-blown effervescence after 1945. During World War II it gave the Allies an enormous advantage over Germany and Japan—neither of which possessed domestic sources of petroleum and had to fight for whatever meager supplies they could acquire from abroad. After the war, North American oil helped rebuild European economies under the Marshall Plan.
After 1950 the United States could rely on domestic petroleum plus Canadian and Mexican resources petroleum to satisfy most of its net requirements—an enormous boon to our economy. When President Bush and others say that we have become “addicted” to oil, they are really speaking of those earlier decades when newly-affluent American families bought their first cars and suburban homes and became habituated to cheap, abundant and reliable petroleum.
But the conditions that made this possible no longer prevail. Because the oilfields of the global North were among the first to be developed on an intense commercial basis, they were also among the first to face large-scale depletion. In the United States domestic production “peaked”—reached its highest level of daily output—in 1971, and is now delivering only about half as much crude as it did then. The development of fields in ANWR might slow the ongoing descent a tiny bit, but would have no meaningful impact on the long-term trend. Production of conventional oil in Canada and Mexico is at or near peak levels of output, and output from the North Sea area of Europe is facing a steep downward slide.
Meanwhile, the share supplied by producers in the developing world is growing larger by the day. Some of these countries’ reserves were bigger to start with—notably those in Saudi Arabia, Iran, Iraq and Kuwait—and most of their fields were developed later in the industrial cycle. The Persian Gulf area, for example, accounted for a relatively minor share of global output prior to World War II, but now supplies 26 percent of world oil—and is expected to see its share rise to 32 percent or more by 2025. Add Africa, Latin America and Central Asia to this pot, and the developing world’s share of total world output will grow from about 60 percent today to 70 percent or more in 2025.
Why does this matter? Most of the producers on which we are becoming ever more dependent are unsafe, unfriendly, corrupt, undemocratic and deeply divided—and are likely to remain so for years to come. This is not a mere coincidence,: oil production in developing countries tends to exacerbate existing social cleavages and to produce new ones; it also tends to amplify the voices of those who rage against a foreign—some would say imperial—presence in their midst.
The empires which colonized most of the major oil-producing regions of the world created modern oil-producing countries out of previously separate (and mutually antagonistic) entities by drawing arbitrary lines through their territories. They practiced divide-and-conquer tactics, favoring some groups over others—the Sunnis in Iraq, the Hausa in Nigeria—creating (or deepening) schisms that fester to this day.
In many cases, traditional modes of governance were swept aside in favor of centralized, autocratic regimes that persist in varied form, such as the ex-Soviet apparatchik kleptocracies that now rule Azerbaijan and Kazakhstan. Imperial invasion and domination also sparked the emergence of anti-imperialist movements—and these, too, still play a role in many oil-producing areas.
Add oil into this volatile mix and the risk of explosion grows. In most of these countries, control over the distribution of petroleum revenues has been monopolized by a particular clan, tribe, or clique—, while other groups have been excluded from the economic benefits of production (but often subjected to its environmental damages). Needless to say, this only adds to the grievances of the less-favored groups, adding to their determination to alter the balance of power.
And because the oil-besotted elites are equally determined to retain their hold on power and wealth, the stage is set for recurring strife, rebellion and civil war—precisely the situation we see today.
Any prolonged outbreak of violence in the oilfields is bound to result in lowered output as oil workers flee the region and critical infrastructure—pipelines, pumping stations, refineries, loading platforms, and so on—is damaged or destroyed. Iraqi output is now running at about 1.5 million barrels per day—1 million less than before the U.S. invasion, and far lower than in earlier, calmer periods. Fighting in Nigeria’s oil-rich Delta region—an area long excluded from the economic benefits of oil production but exposed to all its hazards—has also lowered output by several hundred-thousand barrels per day.
Higher prices also arise from the fact that oil traders and speculators believe that instability is likely to persist and even spread in key producing areas, leading them to bid up the price of oil slated for future delivery. Thus the $70-plus per barrel posted in recent weeks for future delivery is a reflection, to some extent, of widespread fears that the United States will attack Iranian nuclear facilities in the months ahead, and that this will spark chaos throughout the Middle East—further constricting the availability of supply. Chronic instability also discourages oil companies and lending institutions from investing in infrastructure improvement or repairs in these countries, thereby ensuring that net supplies will never grow and prices will remain high.
None of these conditions are likely to evaporate in the years ahead. Rather, the continuing shift in the center of gravity of world oil production from global North to global South—combined with rising international demand and higher prices—will tend to enhance the perceived stakes in future struggles over the control of oil revenues, leading to more frequent and intense outbreaks of violence. There can be no hope of increased supplies or lower gasoline prices under these circumstances.
It should be obvious that there are no easy policy solutions to this predicament. Sending more U.S. troops to areas of instability—as advocated by some—will only make the situation worse, because of the anti-imperial sentiments that abide exist in so many of these countries. Nor can we assume that exploiting untapped reserves in Alaska or in the hurricane-prone waters of the Gulf of Mexico will fix the problem—these deposits are too small to satisfy even a tiny percentage of our current requirements.
The only practical way to protect ourselves from economic trauma caused by inadequate and unreliable supplies of oil is to use less petroleum—period. Because so much of our consumption is tied to ground transportation, this means driving fewer miles and trading in gas-guzzlers for more fuel-efficient vehicles, or using other alternative modes of travel altogether.
Ultimately, we will have to develop alternatives to petroleum—preferably of a renewable sort—but in the meantime, we must all work together to overcome the nation’s oil habit.