Hi there,

If you think Democracy Now!’s reporting is a critical line of defense against war, climate catastrophe and authoritarianism, please make your donation of $10 or more right now. Today, a generous donor will DOUBLE your donation, which means it’ll go 2x as far to support our independent journalism. Democracy Now! is funded by you, and that’s why we’re counting on your donation to keep us going strong. Please give today. Every dollar makes a difference—in fact, gets doubled! Thank you so much.
-Amy Goodman

Non-commercial news needs your support.

We rely on contributions from you, our viewers and listeners to do our work. If you visit us daily or weekly or even just once a month, now is a great time to make your monthly contribution.

Please do your part today.


As Oil Hits Another Record High, a Look at the New Geopolitics of Energy

Media Options

Oil prices have jumped to yet another record high, nearing $142 a barrel in Asian trading today. The latest price surge comes a day after OPEC’s president said crude prices could reach $170 this summer. Meanwhile, Libya has threatened to cut oil production in response to US threats against oil producers. We speak with Michael Klare, author of Rising Powers, Shrinking Planet,” and Arun Gupta of The Indypendent. [includes rush transcript]

Related Story

StoryMay 24, 2024Northwestern Professor Steven Thrasher: You Are Being Lied to About Pro-Palestine Protests on Campus
This is a rush transcript. Copy may not be in its final form.

JUAN GONZALEZ: Oil prices have jumped to yet another record high, nearing $142 a barrel in Asian trading today. Meanwhile, the Dow Jones Industrial Average on Thursday fell to its lowest mark in more than a year and General Motors stock prices to its lowest levels in more than a quarter-century at the close of trading on Thursday. At over $140 a barrel, oil prices have more than doubled from $70 just one year ago. The latest price surge comes a day after OPEC’s president said crude prices could reach $170 this summer.

Meanwhile, Libya has threatened to cut oil production in response to the US threats against oil producers. The House recently passed a bill that would allow the Justice Department to sue members of OPEC for limiting supplies of oil and setting prices. Meanwhile, OPEC, which produces 40 percent of the world’s oil, says speculators are responsible for pushing up crude in reaction to a falling dollar and tensions in oil-producing countries, such as Iran, Iraq and Nigeria.

AMY GOODMAN: For more on oil, we’re joined by Michael Klare, author of thirteen books, including Resource Wars and Blood and Oil, which was just made into a documentary. His latest book is called Rising Powers, Shrinking Planet: The New Geopolitics of Energy. He’s a defense analyst for The Nation and director of the Five College Program in Peace and World Security Studies at Hampshire College in Amherst.

We’re also joined by Arun Gupta, editor of The Indypendent newspaper, who’s written extensively on the political economy of the global oil order.

We welcome you both to Democracy Now! Michael Klare, lay out your thesis in Rising Powers, Shrinking Planet.

MICHAEL KLARE: Well, the title helps, which is that we’re in a world where there are new players on the world stage — China, India, other developing countries — with a vast appetite for resources, especially oil, at the same time that the world supply of energy, in particular, is shrinking. I should add there’s a third set of players, that is the older industrial countries, the United States, in particular, that don’t want to consume less. So you have a collision of demand, which is not shrinking, and a supply that is, and that’s what’s pushing up prices. And in the competition for what’s left, these countries are militarizing their pursuit of energy, and that’s leading to geopolitical struggle around the world — in Africa, in the Middle East and in Central Asia. And I fear that unless we change our energy habits, this competition could lead to military friction, to crisis and to war.

JUAN GONZALEZ: And to what degree, though, are these battles new? Because aren’t battles over resources and energy — I mean, Yergin’s book, The Prize — going back throughout the history of all the major wars and the central role that control over energy resources have played for major powers. To what degree is this new from prior eras?

MICHAEL KLARE: Well, of course, resource competition has been a central feature in world’s history, in warfare, from the beginning of time. What’s new is that you have not only the traditional powers — the European empires of the past — which were responsible for World War I, World War II, the Cold War, but now you have the rise of India and especially China, with a ravenous need for resources, just an extraordinary need. And this is changing everything on the planet. China is in Africa, in Latin America — everywhere. And this really is a new dynamic. And at the same time, we see, all of a sudden, all of the major resources in demand beginning to shrink — oil, copper, iron ore, coal. All of these resources on which the world’s industrial economies depend suddenly appear to be at risk. And this is unprecedented. So you have this extraordinary collision, which we see at the gas pump, but I think it will affect everything on the planet.

AMY GOODMAN: And yet, Arun Gupta, you have the oil companies — Chevron, Exxon Mobil, the others — making more money than they’ve ever in history. How do you explain that?

ARUN GUPTA: Well, that has to do with the rising prices. And I think there’s other factors at play. Supply and demand are somewhat of an issue, but speculation is an enormous issue. We’ve seen oil prices rise by nearly sixfold from 2003. And yet, there are no gas lines. Oil inventories are at eight-year highs. Gasoline stocks are at three-years highs. So you can’t say that it’s this supply and demand issue fundamentally. It has much more to do with speculation. But the speculators couldn’t be doing this if supplies weren’t tight. And so, we need to ask, why exactly are supplies tight?

And Michael’s book is enormously informative and insightful, but I do want to take issue with the notion of shrinking planet, because I don’t think it’s actually supported by the data that’s out there. One of the most important concepts to understand is what’s known as the reserve-to-production ratio. That is, what is the total of global proven reserves of oil, and how many years would that last at current production rate? Now, if we look at the last twenty years, it’s basically unchanged. Global proven reserves keep actually rising year after year. They’re now at 1.24 trillion barrels, according to latest BP statistical review. And you could also say the same about natural gas. There’s about sixty, sixty-two years of natural gas supplies. That’s also virtually unchanged since 1987. During the '90s, this went up a little, and it's gone down a little recently, but this has to do with the legacy of the late '90s. In the late ’90s, there was an absolute collapse in the oil industry and oil prices, when it went down to $10 a barrel following the Asian financial crisis. And so, what you had was all these oil wells going offline. You had all this oil exploration grounding to a halt. You had an enormous loss of human know-how as engineers and technicians went out of the industry. It takes seven to ten years to bring mega projects online. And so, what we are, in a way, reaping is the legacy of that collapse in exploration. It's only in the last year or two that you’re starting to see a rise in exploration.

There was a good article in the Times about what’s known as drillships. These are the ships that do offshore exploration, which has increased dramatically. Offshore exploration now accounts for about a third of global oil production. In the previous six years, only eight drillships came onto the market. This year alone, sixteen drillships are coming onto the market. What it means is, finally, oil exploration is beginning to ramp up. And I don’t want to suggest that’s a good thing, but the fact of the matter is that there is a lot of oil out there.

There’s also the factor of US foreign policy, that in 2003, what’s known as the excess global capacity collapsed, and that was because of two big factors: Venezuela, we tried to — we supported the 2002 coup, then we supported the oil sector strike later that year, and their oil industry virtually collapsed, and they’re still one million barrels below their daily production; and then, of course, we invaded Iraq. So you saw excess global production capacity shrink from six million barrels a day to about three million barrels a day and then, in 2006, to one million barrels a day. And that’s how the speculators are able to take advantage of this.

AMY GOODMAN: Michael Klare?

MICHAEL KLARE: Well, I agree that there’s been times when the rate of exploration dropped, but with all the money that’s being spent on exploration, they’re coming up empty, and the few new wells that have come online, like off the shore of Brazil, are going to be far more costly to develop than any in history. And the one big new field that has been discovered, the Kashagan field in the Caspian Sea, has been an unmitigated disaster. So, yes, there is more oil in the world, but it’s of the tough oil variety, extremely difficult and hazardous to produce. And so, my basic thesis that the supply of oil is increasingly inadequate to satisfy the needs of the rising powers, and the older powers, I think is correct. And it’s in this environment of tight supplies that any crisis that emerges — the fighting in Nigeria, the fighting in Iraq, the possibility of a hurricane season that’s upon us, and the possibility, more than anything else, of a US strike on Iran, which I think is more than 50 percent likely — that’s what’s fueling the speculative frenzy that Arun has been speaking about. The speculators believe that more crises, more chaos in the Middle East, is likely. That’s what’s lifting oil prices.

JUAN GONZALEZ: Well, I’d like to ask about that, in particular, because obviously, you’re raising the issue, not just a question of the total supply of oil, but how easy and cheap it is to get to it, but then the other issue is, who controls that oil? Isn’t that? And isn’t that the issue here at hand, that there could be a lot of oil in the world, but if the United States or if Europe can’t control it, then the question of the price, the supply, then is an issue?

MICHAEL KLARE: Yes, indeed, especially in that the major producing countries in the Middle East and Africa are run by state-owned companies. And I’m sure Arun could say more about this. And they don’t have the same incentive that we do to produce, produce, produce, get it out there on the market. They want to keep it producing for as long as possible. That’s their only source of wealth. So they want to keep it in the ground as long as they possibly can, and that’s another reason why supplies are not as adequate as they might be.

AMY GOODMAN: You talk about the global assault on Africa’s vital resources. Lay out the picture of Africa.

MICHAEL KLARE: Well, Africa is important, not because of the magnitude of its supplies, Amy, but because it’s the one area in the world that has growth potential. And in a world of shrinking resources, anywhere that has growth potential is going to be a magnet for oil companies and oil consumers. So you have the Europeans going in there. You have the United States flocking to Africa. And now China is going into Africa, as well. And because this is an area of instability, all these countries, but especially the US and China, are seeking to secure this oil by also providing arms and military assistance as a way of cementing their ties. So there’s an arms race underway in Africa fueled by this pursuit of energy.

JUAN GONZALEZ: And Arun, I’d like to ask you specifically, in terms of the role of Russia, Michael talks in his book that it produces enough oil for itself, but it’s increasingly seeking to dominate supplies in other parts of the world.

ARUN GUPTA: Well, a lot of that has to do with, actually, its natural gas production. The former Soviet Union, you know, when you include countries like Kazakhstan and Azerbaijan, they’re actually at a peak. Russia’s oil production is looking like it will probably decline a bit. But this has to do with investment. And the important thing is that there are not these absolute natural limits. These have to do with relations of production. And there is a lot of cheap, easy oil out there. We have to remember that. It’s locked up in Iran and Iraq because of US foreign policy. And, you know, both these countries could be massive producers. Again, not that that’s a good thing, but there is lots of oil out there. And there is also a lot of other countries, apart from Africa, that can bring a lot of oil online. Canada is developing its tar sands, the Athabasca tar sands in Alberta. They just released a report expecting daily production to increase by two million barrels a day. It’s God awful and highly destructive, but they’re receiving a tremendous amount of investment. Brazil now projects that they’re going to become an oil producer. Angola is increasing its oil production. The Saudis just brought a new field online. They’re going to be up to 12.5 million barrels a day and 15 million barrels a day in a few years.

AMY GOODMAN: We’re going to have to leave it there, but we thank you both very much for being with us. Anrun Gupta is an editor at The Indypendent, and Michael Klare’s latest book is Rising Powers, Shrinking Planet: The New Geopolitics of Energy.

The original content of this program is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License. Please attribute legal copies of this work to democracynow.org. Some of the work(s) that this program incorporates, however, may be separately licensed. For further information or additional permissions, contact us.

Up Next

Northwestern Professor Steven Thrasher: You Are Being Lied to About Pro-Palestine Protests on Campus

Non-commercial news needs your support

We rely on contributions from our viewers and listeners to do our work.
Please do your part today.
Make a donation