Just as we can’t imagine Britain’s rise to dominance in the capitalist system without coal, it is impossible to imagine the rise of the United States as the 20th century successor of Britain without oil. Nor can fossil fuels be disassociated from capitalism. Fossil fuels and capitalism are completely intertwined and that embrace, as tight as ever, threatens to be a deadly grip as global warming has only begun to wreak havoc.

Oil consumption has drastically increased since 1950 — nearly three-quarters of the total increase in atmospheric carbon dioxide has occurred since that year and half since 1980. This increasingly steep upward slope must be seen in the context of capitalism. The system’s “internal raison d’être is one of endless accumulation — a drive to continually accumulate money that overrides all other considerations,” writes Adam Hanieh in his latest book, Crude Capitalism: Oil, Corporate Power and the Making of the World Market.* “This social logic differs from all preceding human societies and has a profound impact on energy use and energy systems.” Without “foregrounding capitalism as a social system with its own distinct logics, we lack any explanatory reason for why and how oil emerged as the dominant fossil fuel of the twentieth century (and even more importantly, what must be done about it).”

Thus begins a highly interesting and informative discussion, taking the reader through a history of oil, and the control of some of the world’s largest corporations over it, the development of the oil industry as a harbinger of corporate consolidation across industries, the decisive role of oil companies in the development of 20th century economies and geopolitics (even bigger than we might have suspected) and the dynamics of the fossil fuel/capitalism nexus that has throttled all attempts at dealing with the existential crisis of global warming. Humanity surely is capable of meeting the challenge of changing the economy so Earth remains livable but seemingly can’t. There are reasons for that failure, to which this review will return.

The bulk of Crude Capitalism is a brisk history of the oil industry and its intertwining with the development of capitalism from the start. The first oil boom was in Pennsylvania in 1859 and by 1870 John D. Rockefeller was already attempting to monopolize oil through his Standard Oil company that sought control over refining, transport, pipelines and marketing. This “vertical integration” would become the model for a handful of corporations to control the industry across the 20th century. The many small producers had little choice but to accept Standard’s price as the latter achieved a monopoly over refining, pipelines and kerosene marketing (at the time, kerosene was the primary end use for oil). Standard’s ability to do this was enhanced by the first “internal offshore corporate haven” (a role these days handled by Delaware) in the state of New Jersey.

Standard, in part due to growing through acquisitions, operated a myriad of technically separate companies. As antitrust law was beginning to catch up to it, and to get around state-level restrictions on business operations (companies were organized within states and subject to a variety of regulations), Standard decided to reorganize as a holding company with its separate companies becoming subsidiaries of the holding company. This was done by incorporating in New Jersey to take advantage of new laws there that allowed a company to have the sole purpose of owning other companies, legalizing New Jersey-registered companies to operate in other states without the approval of the state legislature, a first. New Jersey’s laws also reduced taxes to small amounts and allowed the issuing of stocks with different levels of voting power, consolidating control in a few hands. Thus the modern conglomerate was born. Standard was broken up in 1911 under antitrust law, but Rockefeller and a handful of plutocrats closely associated with him retained control over the new companies, rendering the breakup no more than a small nuisance.

World wars provide more profits

After the war, a crisis of overproduction haunted the U.S. oil industry; there was not enough demand to absorb all that was pulled out of the ground and European markets were closed by the companies that had become vertical behemoths there, Royal Dutch Shell and what would become BP. Large reserves were found in Venezuela and elites there gave generous terms to U.S. companies to produce and asked that refining be done outside Venezuela so as to avoid a concentration of workers who could assert themselves. There was still the problem of overproduction, but another 20th century staple had been established — elites in the Global South collaborating with Northern executives to keep themselves in wealth while keeping working people down. Across the Atlantic, Britain worked to dominate Middle East production; the British created the country of Iraq, installed a king and then negotiated a deal highly favorable to the oil industry. All this was backed by British military muscle.

More gifts were handed to the oil industry by government, next by the federal government during World War I. The adoption of the internal combustion engine in the early years of the 20th century dramatically increased demand for oil and just before the war broke out, the U.S. and  British navies shifted from fueling ships with coal to oil. This was a big boost for oil companies and, in 1917, the U.S. created a government advisory board that allowed oil companies to coordinate despite antitrust laws; this board would eventually become the American Petroleum Institute, a powerful lobby that exerts decisive influence over energy policy to this day. Incredible tax breaks, beyond what other industries received, were showered on the oil industry.

With the markets now under tight corporate control, seven giant firms — the famous “Seven Sisters” — dominated the oil industry globally.

World War II would provide another big boost for oil majors and as oil replaced coal around the world, oil consumption doubled worldwide from 1950 to 1965. The use of oil to heat homes increased greatly during these years, oil profits rebounded as the cost of oil fell below that of coal behind electrification expansion and a massive increase in automobiles and aviation fuel. U.S. policy to back the oil industry extended overseas: Occupation authorities banned Germany from using coal for energy feedstock and 10 percent of Marshall Plan money was spent on oil, mostly sourced from the Middle East as the U.S. moved to gain control in that region. Another factor that can’t be underestimated is the explosion in plastics; petrochemicals, a byproduct of oil refining, are the feedstock for plastics.

Dollar hegemony and oil profits go hand-in-hand

Oil, too, played a role in consolidating the U.S. dollar as the world’s reserve currency, the linchpin of U.S. domination of the world capitalist system and its ability to enforce its embargoes extraterritorially. When President Richard Nixon pulled out of the Bretton Woods agreement that allowed dollars to be exchanged for gold at a set price and pegged other currencies to the dollar, it was not preordained that dollar hegemony would continue. Nationalizations had somewhat loosened the grip of the Seven Sisters in the early 1970s, but the U.S. government ingratiated itself with the Saudi and Iranian ruling families, and Gulf monarchs, in order to put an end to some oil sales still being conducted in British pounds. This is intertwined with the rise of OPEC, the Organization of Petroleum Exporting Companies, which appeared to take control of oil pricing but did not actually do so.

The large increase in oil production by the Soviet Union across the 1960s, and the Soviet willingness to share its expertise with Global South countries, enabled expertise to spread; as movements toward nationalization rose the ability of newly formed state oil companies to successfully produce oil became sufficient. As Global South governments gained confidence, they decreed large increases in what they would take as their share of the revenues and the Seven Sisters had no choice but to agree. But what was it that OPEC governments raised? This was not the price at which oil is sold but rather the “posted price” — a “tax reference price” that governments set administratively to determine what companies (primarily the Seven Sisters) would pay to the governments. Large Western oil companies continued to control refining and thus could continue to set the price of oil products paid by consumers.

In essence, this was a tax increase on the oil companies, which was passed on to consumers. And because U.S. tax law allowed multinationals to deduct the tax paid to foreign jurisdictions, this simply meant some of the taxes previously paid to the U.S. went to other countries instead. Because of their vertical integration, controlling everything from refining to marketing, oil companies could manipulate pricing between stages to minimize their taxes. Shortages during the 1973 oil crisis in the U.S. were due to the largest integrated firms cutting refinery capacity and squeezing smaller independents. U.S. oil company profits tripled during 1973. “All in all, there was never really any real shortage of oil as a result of the [largely unobserved OPEC] embargo,” Professor Hanieh writes. “Indeed, to a significant degree, the embargo can be read as little more than a performative act, ultimately aimed at convincing Arab audiences that an anti-colonial front was possible between the oil-rich monarchies and the more radical nationalist movements of the region.”

At the same time, the U.S. was able to get all oil sales to be done in dollars, eliminating the use of sterling. When Nixon pulled the dollar off the gold peg, the value of the dollar declined in value against other major currencies; getting paid in dollars meant less money earned, and this was a critical factor in OPEC countries nationalizing to increase their cut of oil revenue. The U.S. sought to attract investment and for the glut of dollars earned by OPEC states to flow back to the United States. U.S. officials having cozied up to Saudi rulers, Saudi Arabia announced it would only accept dollars for its oil and used its influence to get other countries to do the same, cementing dollar hegemony. Gulf monarchies needed U.S. protection to stay in power and thus had an incentive to stabilize the U.S. by sending its reserves across the Atlantic. And with transactions done in dollars, large dollar reserves needed to be held, and this in turn helped solidify the dollar as the money used in other industries’ transactions. In turn, the big increases in oil from the 1973 and 1979 shocks put most of the Global South into deeper debt, enabling the International Monetary Fund and World Bank to impose their “structural adjustment programs” on them as the age of neoliberalism dawned. Neoliberalism was made possible by the interdependence of oil and finance, Crude Capitalism argues.

Using renewable energy to grow fossil fuel energy

More recently, oil companies are attempting to rebrand themselves as “energy companies,” seeking to take positions in renewable energy while at the same time working to continue to expand oil production and consumption. This attempt at “greening” themselves is nothing more than greenwashing to cover up their all-out efforts to head off attempts to reduce oil production, which will come as no surprise. But Professor Hanieh lays out in detail just how machiavellian these efforts are. The final chapter of Crude Capitalism combines a discussion of why combating global warming is impossible under capitalism with an informative analysis of the inadequacies of renewable energies and oil company efforts to co-opt those alternatives. One measure of where the economics of energy stand is that, in 2022, the five biggest Western oil companies (ExxonMobil, Chevron, Shell, BP and Total) earned a composite $161 billion in profits, and the Saudi national oil company, Saudi Aramco, reported a profit that year of $161 billion — the biggest yearly profit of any company in history. The ten biggest environmental disasters of 2022, Professor Hanieh reports, cost $170 billion, a fraction of oil company profits.

“Net zero” strategies are a key component of oil company greenwashing; the metrics that purport to show offsets to greenhouse-gas emissions are largely legerdemain and rest on carbon-capture technologies that largely don’t exist. The extremely limited carbon-capture technology that has been deployed is only partially effective and currently captures less than 0.1 percent of emissions, yet carbon capture is promoted to be a significant factor in offsetting emissions. Worse, most of the small amount of carbon captured is then used to frack oil, extracting oil that wouldn’t otherwise be viable to be taken — and this is counted as an offset from company emissions. Worse, only emissions from production are counted toward oil company statistics, not the actual use of them, which is a far bigger emitter than production. Professor Hanieh summarizes this as follows:

“The popular image of Big Oil as a dinosaur being dragged reluctantly towards the inevitable end of the fossil era is false; these companies are taking a leading role in determining future energy choices. There is no silver lining — the trajectories established by the oil industry serve to prioritise dubious technologies and policies, create false narratives, and foreclose the necessary alternatives that are now urgently demanded. Rather than being antithetical to their interests, these pathways further entrench the position of Big Oil at the heart of our energy system.”

A discussion of biofuels, electric vehicles and hydrogen technologies follow, delineating oil industry cooptation of these alternatives. Biofuels are the biggest source of alternative energy but much of this entails the use of crops for energy instead of food or the cutting down of forests. If biofuels were to supply one-fifth of the world’s energy in 2050, Crude Capitalism reports, an amount equivalent to all of today’s crops, wood and grasses would be needed, certainly an impossibility. Not mentioned in the book is that biomass electricity generation in Europe (where that is concentrated), which relies primarily on the burning of wood, is actually more polluting than coal- and gas-fired plants and are also significant sources of pollution. The electricity for electric vehicles is only as “clean” as the source for the electricity and mass production of batteries entails more mining of lithium, cobalt and other minerals, often done in destructive ways. And hydrogen, in contrast to the hype promoting it, causes more, not less, carbon emissions; most of the methods used to produce involve natural gas. Oil companies promote hydrogen fuels because it maintains demand for natural gas.

Trillions for new production doesn’t sound climate-friendly

The search for “savior technologies” leaves the current system in place, Professor Hanieh writes. Proposals to electrify transport do not address underlying structural issues in which transportation and the energy to fuel transport are individualized and commodified:

“This is an irrational system that is destructive of the biosphere, harmful to human health, and erodes the livability of urban spaces. A faster reduction in emissions (and dramatic improvement in city living) could be achieved through provision of free, clean, and well-funded green public transit — with urban spaces designed to prioritise and enable non-commodified modes of transport. Instead, the solutions offered by so-called clean fuels leave the underlying systems intact, reproducing many of the same problems of the internal combustion engine in a different form (and with no likelihood of substantially reducing emissions in the time required).”

At least two oil majors forecast that the oil industry will invest $11 trillion in new production through 2050. That is hardly an industry planning for dismantlement. And it is not only continuing consumption that drives the oil industry’s plans to continue business as usual for decades to come; the ubiquitous use of plastics will also drive consumption. Half of all plastics ever produced were made in the past 20 years.

“It is perhaps conceivable that some of the demand for oil and gas as an energy source can be reduced through alternative technologies and improved efficiencies, but there is no possibility of ending our reliance on oil as long as petroleum remains the fundamental material basis for commodity production. For this reason, industry analysts and oil firm representatives alike speak openly of petrochemicals as a solid guarantee for ‘the future of oil.’ The consumption of petrochemicals sits elephant-like in the ecological crisis of the present. The starkest illustration of this is the exponential growth in the most pervasive of all petroleum products: plastics.”

The wide use of petrochemicals is anchored in the logic of capital accumulation, facilitating a throwaway culture, placing plastics and petrochemicals “front and center” in the fight against global warming. Recycling on its own is far from adequate. Capitalism is a machine that no one controls, Professor Hanieh writes, a system that rests on oil. Oil companies are destructive but nonetheless are manifestations, not the cause, of environmental crisis. Global warming and the environmental crisis can only be solved “as part of broader social change,” the author writes, offering a list of suggestions including demilitarization, shifting investment to new technologies and “truly renewable energies,” ending the destructive consumption of the ultra-wealthy including confiscating their massively greenhouse-gas emitting yachts and private jets, ending planned obsolescence, and reorganizing public spaces around clean public transport.

Only by taking political and economic power from the logic of the market and ending an irrational system “will make it possible to build a different and better world,” Crude Capitalism concludes.

Does the book make its case? Decisively so. The discussion here has only scratched the surface of a highly informative and at the same time very readable history of oil and its dramatic impact on the development of capitalism. The two have gone hand-in-hand, and although the role of oil is perhaps a little overstated, that is no drawback — the role of oil, the giant corporations that control it and the governments that facilitate the power of oil companies is an aspect of history not often told and not in this detail. The book is a very much needed corrective in filling in this vital component of our understanding, and demonstrates clearly that solving global warming is impossible under capitalism. Professor Hanieh has marshaled his considerable expertise to provide this summary and succeeds marvelously in giving us the historical background to why the oil industry has such a deadly grip on today’s world and a clear-headed analysis in what that grip means for us and our descendants. Read this to learn. And then act.

* Adam Hanieh, Crude Capitalism: Oil, Corporate Power and the Making of the World Market [Verso, 2024]

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