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Tuesday, August 8

The "Oil Hunger"

by Mike on Tue 08 Aug 2006 11:17 PM EDT

A week or so ago, I was thumbing through a collection of works by V.I. Lenin (vol. 19 of Collected Works, to be exact) and I discovered a relatively obscure gem entitled The “Oil Hunger” (full text) I had a quick read of the piece and I had all but forgotten about it for a while, but yesterday’s news that BP has closed the biggest oil pipeline in North America prompted me to have another look.

The text was written in 1913 during a rather critical time in the development of the Russian economy, so some of the facts in the work are obviously rather dated, to say the least. It is a sure sign of the times when Lenin quotes statistics of his day regarding oil production: “In 1900 Russia and America together produced over nine-tenths of the world’s oil and in 1910 they produced over eight-tenths.” Compare this to the figures regarding the top oil producers for 2004 and you’ll find that Russia is presently still in the position of the second-largest producer behind Saudi Arabia, although it is important to note that prior to its disintegration, the USSR was consistently the number one producer for an extended period. The United States ranked third in annual production in 2004. (source)

But while the facts of Lenin's text may be somewhat dated, the key concepts and rhetoric of the piece deserve a closer look.

In Lenin’s piece, he notes, “America now extracts three times more oil...(than Russia)” but he also stresses that it was Russia who felt the pinch of the “‘world-wide’ phenomenon of price increase” much more so than the United States. The U.S. was still the largest consumer of oil in 2004 (for non-OPEC countries), using 20.5 million barrels per day. Russia was ranked fifth, behind China, Japan and Germany. The difference in daily consumption between the U.S. and Russia was a difference of almost 19 million barrels per day. (source)

There is, of course, a new worldwide phenomenon of price increase and each record high oil price is somewhat of a predictable surprise, so to speak. But the imbalance of the market remains the same – The US produces less, uses more and pays less than much of the rest of the world. And while the US feeds its ravenous “oil hunger,” developing nations survive on crumbs to curb their own pangs of hunger.

Although Lenin’s work was written almost a century ago, certain passages still accurately describe the current global superstructure which guides and shapes world petroleum production and supply. Consider Lenin’s mirror-image “portrait” of the Duma’s Markov the Second, drawn from the very image of the Russia’s oil tycoons and millionaires. He describes the tension between the two sides as “a quarrel between two plunderers of the people’s property.” How similar is this image to the scene earlier this year when the heads of US oil companies were before a government inquiry to explain their record profits? And what, exactly, was the explanation that was provided by the magnates? Does anybody remember? The mantra of the day for the US oil companies back in March 2006 was that a significant proportion of their profit went back into “research and development.” Very clever.

That’s all good and well for the American companies (if you really believe it), but evidently, research and development is does not extend to oil industry infrastructure for British-owned BP. BP’s decision to close the Prudhoe pipeline is purportedly necessary due to extensive corrosion...caused by years of neglect and disrepair, to be more precise. BP claims that the poor timing of this issue is simply an unfortunate coincidence (with respect to recent surges in oil prices due to wars and the 2005 hurricane season) and that the necessity of the closure is somewhat of a surprise. But perhaps Lenin’s words from 1913 still ring true, both for the American oil companies and BP:

What lies at the bottom of the oil question?

First of all it is the shameless inflation of oil prices by the oil kings accompanied by the artificial curtailment of oil-well and refinery productivity by these “knights” of capitalist profit.

The more things change, the more they stay the same. We don’t need any more inquiries, testimony or market research to understand the ‘oil hunger’. We know what —– and who — drives the market. It is what we do with this information — from here onward — that really matters.