Nature's Evil [calibre 5.27.0]

The banks and stock markets need a globally shared fiction, an analogue for the gold standard. The price of a barrel is as fluid as oil itself, but it has strong backing. Geologists took care of the fact that, for every barrel of oil consumed, another two were added to the ‘proven reserves’ of the planet. The replacement of solid, limited gold with flowing, growing oil added a shot of dynamism to the neoliberal world view. But oil prices fluctuated wildly, as Keynes had predicted they would. Post-war governments limited this volatility either by establishing ‘price corridors’ or by creating national reserves. The first method usually failed to work; the second led, for example, to the creation of the Strategic Petroleum Reserve, giant oil-storage facilities in salt mines in Louisiana and Texas. Oil has been stored there since 1975; now this reserve has so much oil that it would take six months to take it all out if ever the need arose. The creation of this giant storage system coincided with the widely circulated idea of ‘peak oil’. A sort of resource panic, it was articulated by the American geologist Marion King Hubbert. Repeating Jevons’s fallacy, Hubbert wrote in 1948 that oil would soon run out; his forecast was that oil extraction would reach its peak in 1970 and then fall because of depletion, rising costs and diminishing returns. People discussed this prediction in 1973, when the price of oil rocketed for quite different reasons. 31 In response to the American oil reserve, the Soviet Union created massive underground storage facilities for natural gas; ironically, they all happened to be on the territory of Ukraine and now belong to Russia’s rival.

Since the 1970s, there has been no decade that has not seen the price of oil changing by a factor of two, or even five in some decades. No ‘stabilisation of the markets’ was achieved. Instead, we have been moving from one crisis to another – military, financial, political, ecological and epidemiological. If the gold standard was a successful but temporary measure, the oil standard was a non-starter. The majority of fossil resources will never be used. In 2015, British Petroleum released a forecast according to which only a third of proven stocks of oil, gas and coal will ever be extracted and used. If more carbon is burnt it will lead to a rise in average temperature of more than 2º Celsius, and this will be fatal for civilisation as we know it. Since then, the growth of proven energy reserves and the decline of realistic energy needs have decoupled still further. As long as the capitalisation of oil majors depends on their reserves, this decoupling means huge financial losses. American shale has added new volumes of oil, and this oil has a different, non-conventional dynamic: more resilient to price changes, shale oil acts as a shock absorber for the oil market. 32 But for any absorber there is a shock that it cannot withstand. The year 2020 saw the collapse of oil consumption and the inability of the Russian and Saudi producers to agree on supporting the oil price. It also saw a renewed commitment from the European countries to the ‘green recovery’. The consequences of the pandemic have meant that the price of oil has lost its informative value. Decoupled from the global economy, the price of a barrel will continue fluctuating, but its unpredictable moves will make decreasing impacts on the markets. In 2020, Germany was already producing the major part of its energy from renewable sources. Many other European countries have also set the dates for their ‘carbon neutrality’, which largely means a ban on burning coal and oil.