It’s past is long and exotic, filled with decades of geopolitical intrigue, war, murder, espionage, treason, power — and best of all, religious fundamentalism. It’s colossal footprint on the world has been likened to the invention of the wheel, the rise of the microchip, and the discovery of the human genome. But how exactly did oil get so quintessentially “slick”?
The American Dream
Like any great tale of American success, oil began with absolutely nothing. In the beginning, it was a smelly, black, gaseous sort of nothing. As we’ve come to learn, petrochemicals are derived from ancient vegetation and marine life, trapped for eons within the sedimentary rock of the Earth’s firey mantle. Over time, under immense pressure and heat, all that carbon was eventually converted into the form we’re familiar with today.
There it lay for millions of years, until the Chinese started using it to refine their salt in the 4th century A.D. Even still, oil was essentially ignored until the early 1800s, when the Polish scientist Ignacy Lukasiewicz first discovered how to distill the sweet crude into a more usable configuration (i.e. kerosene). A slight improvement to be sure, but this time, it was only to light the wick lanterns of the great Industrial Revolution (fueled, at the time, by the limited potential of fossil coal). From such inauspicious beginnings, it wouldn’t take long before the nascent petroleum industry found itself a new source of virtually limitless demand, eventually giving rise to many of the modern conveniences of our everyday life.
That demand came in the form of the internal combustion engine, an innovation first born in the great carbon fires of the Industrial Revolution, when the West was finally hitting its stride. Wealth was being hoarded by those fortunate countries with the greatest natural complement of the day’s important resources (originally coal and steel, but eventually oil and its various petrochemical derivatives), and Britain and Germany were obvious benefactors of this great industrial reorganization. As the only regional powers at the time, they became natural geopolitical rivals. In hindsight, the entire first World War seems virtually inevitable; an unfortunate global casualty of the dawning petrochemical age. Not surprisingly, it was the same black liquid at the centre of all the rage.
In the early days of the 20th century, oil was our slave. It helped build all of the tremendous urban infrastructure we see around us today. It’s the asphalt in our roads, the gas in our tanks, and the jobs in our suburban communities. It’s the rubber in our tires and the plastic in our cups. But then one day, when we first decided that we couldn’t live without it, oil very quickly became the master.
As the nascent industry was beginning to take off, any region on the planet with even the slightest hint of oil was being “speculated” through the roof. Those first few monster oil fields in Texas, Oklahoma and Pennsylvania caused such flurry of economic activity that governments around the globe quickly got themselves involved. Before the first Model T rolled off the Ford assembly line back in 1908, oil was already on the wish list of every major President, Prime Minister, Kaiser and King on the planet. The rush was definitely on.
Drilling rigs doubled and then tripled in value over night (read: Texas, the Dutch East Indies, and eventually most of sprawling Persia). The slick new kid on the block finally replaced its older, less-efficient fossil brother — only 100 years later and one giant leap forward in basic industrial technology.
Feast or Famine
The new combustion engine feasted principally on gasoline, straight from mother nature’s bountiful bosom. So begins every case study on global petrochemical demand. With the internal combuster in tow, oil marched on to win two great wars for the democratic West, and in the process, sowed the seeds of virtually every military conflict that exists on the planet today. During the Second World War, America and Russia were countries of petro-feast, rescuing britain and the rest of allied Western Europe from their inevitable petro-famine. Conversely, the Germans and the Japanese managed to choke themselves into a desperate submission as their fuel supplies steadily declined. At one point, the Japanese became so despondent that they actually developed the infamous “kamikaze” program as a way to combat their crippling shortage of fuel (i.e. it only takes half a tank of gas to make a one-way trip). In its simplest form, those pilots were originally conscripted to help the Japanese make the most of a dwindling stock of fuel, a surplus of idle aircraft, and a growing surplus of idle aircraft pilots.
In the midst of all that literally suicidal desperation, the Allies were able to cut off most access to the enemy’s major supply lines, effectively strangling their wartime economies from any external petrochemical rescue. At the same time, the Allies fortified Hawaii with their own source of virtually unlimited oil (with armoured tankers arriving almost daily from America’s west coast), and Oahu became a critical refueling station for the entire Pacific Fleet.
Meanwhile in northern Africa, the Germans were facing the same basic problem: as the western rim of the war continued to expand, it became increasingly difficult to get fuel to the distant front lines, effectively stranding most of their heavy artillery and tipping the scales in favour of the relatively well-supplied Allied forces. I often find it strange to think that oil, more so than the frozen winters of Russia or the desolate sands of Africa, might have ultimately brought the Nazi empire down.
Until that point, most of the world’s petroleum reserves were under principally Western control. But the west’s bargaining power within the oil-rich kingdoms of the Middle East was quickly beginning to fade. At the time, the U.K. (and to a lesser extent, the U.S.) was happy with their arrangements in the Persian Gulf. Only years before, it was those very same arrangements that had rescued the Arab monarchs from near bankruptcy (at the time, Saudi Arabia’s principle export was still pearls. That’s right…pearls). But in post-war Arabia, the tables were quickly turning.
Despite their own considerable production capacity, the Allies still relied on Arab oil to push back the Nazi’s final thrust into north Africa. Unfortunately for companies like Standard Oil and Royal Dutch, they couldn’t fuel such a massive rush to war all by themselves (and thus, had to share some of the windfall returns). In fact, they relied quite heavily on a select group of their largest Arab suppliers, who would always step up production to meet any surplus Allied demand. Once the war was over, however, many of these now financially solvent kingdoms began to question the economic “equality” of their traditionally lop-sided concessions, and the resulting shift in the control of pricing power eventually played its part in that other degenerate byproduct of the great petrochemical revolution: the Great Depression.
So began a string of petro-nationalizations that swept through most of the Middle East, Mexico, and even parts of Central America. The West had grown too used to the sweet taste of crude, and the tables had finally turned. The slave had finally become the master, and this reallocation of power meant that big-C Capitalism, for the first time in its long and storied history, had actually failed. For the first time in its history, the West was beholden to someone outside its own borders to fuel its favourite industrial past-time — i.e. unbridled technological growth. And as any lover knows, the only thing worse than wanting something else, is wanting something else and not getting it.
The First Twin Towers
Spike one occurred during the oil crisis of 1973, when Arab members of the Organization of Petroleum Exporting Countries (O.P.E.C.) stopped shipping their supplies to countries that supported Israel in its ongoing conflict with Egypt. The oil card was actually played for the very first time, and it’s impact was surprisingly effective. American foreign policy had finally come home to roost, and with one quick tug on the proverbial reigns, most western economies quickly ground to a halt. Inflation would soar and lines would form at the pump, as the West first came to terms with its burgeoning petroleum addiction. But what could have caused such a fundamental shift in the national demand supply dynamic? Why were its citizens consuming so much, even during times of relative international peace?
With the end of the second great war, modern suburbia was blissfully brought into being. low-density residential neighbourhoods spread throughout rural American landscapes at a rate even developers could never have expected. As these major suburban centres continued to expand, a growing number of people began to leave the inner cities and start their new life in what would eventually become the Greater Metropolitan Areas of the nation’s biggest urban centers. Naturally, everyone began to buy cars, and consequently, America’s real consumption of petroleum exploded. For the first time in its history, America became a net importer of fossil fuels, and it was thanks, once again, to the internal combustion engine.
After some extremely careful American diplomacy, the price of oil eventually returned to its pre-embargo levels. That is, until the Iranian Revolution began and the Grand Aytollah’s exports were far less than the thirsty American economy needed in order to power its unprecedented economic expansion.
During the second oil crisis in 1979, Iranian supplies were initially reduced by the spiteful Ayatollah, then production nearly stopped altogether when Saddam Hussein decided, with full American support, to invade his Persian neighbours to the east. A successful military campaign by the Iraqis would ultimately elevate their country’s position as a major geopolitical force in the region, and policies friendly to the U.S. were promised by Hussein in exchange for modern tactical weaponry and advanced military support (it was those same weapons that Saddam fired back at his one-time allies during his march into Kuwait back in 1991).
After two high-tech wars with Hussein and one (almost) successful invasion of Afghanistan, America is now steps closer to controlling, both directly and indirectly, a major portion of the world’s strategic oil reserves as well as their total production capacity. U.S. foreign policy had addressed one half of the equation, but what would happen when all that capacity was absorbed? Under the banner of “energy conservation”, the world’s last barrel of oil is now a few years further from being pumped out of the ground, but the fact still remains: one day, the taps will run dry.
Without a doubt, today’s relatively cheap and available fossil fuels are the undisputed lifeblood of our global economy. Not surprisingly, the prospect of that “lifeblood” running out is becoming increasingly problematic, particularly with China and India now joining the hunt. Hubbert Peak deals with this tricky but inevitable concept, by assuming that world oil reserves will soon hit a theoretical “peak” (where new discoveries are exactly offset by increased consumption). Beyond the peak, economic growth can be expected to slow as inflationary pressure chokes off any additional gains in industrial productivity. Basically, Hubbert suggests that the world economy will likely grind to a halt sometime in the course of the next 50 years.
That is, unless we find an alternate source of steady and available power.
The Hydrogen Economy
Like rough fossil coal and slick fossil oil before it, hydrogen promises to be the next great bastion of industrial growth. But such cutting-edge technology isn’t without its challenges, and companies like Ballard Power are still years away from any practical (and somehow profitable) commercial applications. That said, every system on the planet needs some sort of fuel to run, and there’s no fuel more readily abundant (in the entire universe, in fact) than the simple hydrogen atom.
And that’s really the biggest difference. In the end, fossil fuels are a finite commodity; a non-reusable resource that we’re burning through at a very alarming rate. And while consumption of that magnitude isn’t typically considered to be the “sexiest” attribute in a potential mate, there’s something to be said for controlling the fate of the entire planet from the distant sands of an ancient desert kingdom, or the nearby halls of a great White House.
There’s also something to be said for the rational consumption of a definitively finite resource, something we as a species desperately need to learn. But in humanity’s simple and often thankless defense, self-control is never easy around the sexiest of material things.