Thompson oil and the western economic crisis (2017)

Building a Sustainable Political Economy: SPERI Research & Policy Series Editors Colin Hay Centre d’études européennes de Sciences Sciences Po Paris France Anthony Payne SPERI University of Sheffield Sheffield United Kingdom The Sheffield Political Economy Research Institute (SPERI) is an innovation in higher education research and outreach It brings together leading international researchers in the social sciences, policy makers, journalists and opinion formers to reassess and develop proposals in response to the political and economic issues posed by the current combination of financial crisis, shifting economic power and environmental threat Building a Sustainable Political Economy: SPERI Research & Policy will serve as a key outlet for SPERI’s published work Each title will summarise and disseminate to an academic and postgraduate student audience, as well as directly to policy-makers and journalists, key policy-oriented research findings designed to further the development of a more sustainable future for the national, regional and world economy following the global financial crisis It takes a holistic and interdisciplinary view of political economy in which the local, national, regional and global interact at all times and in complex ways The SPERI research agenda, and hence the focus of the series, seeks to explore the core economic and political questions that require us to develop a new sustainable model of political economy at all times and in complex ways More information about this series at http://www.springer.com/series/14879 Helen Thompson Oil and the Western Economic Crisis Helen Thompson University of Cambridge Cambridge, United Kingdom Building a Sustainable Political Economy: SPERI Research & Policy ISBN 978-3-319-52508-2 ISBN 978-3-319-52509-9 (eBook) DOI 10.1007/978-3-319-52509-9 Library of Congress Control Number: 2017935963 © The Editor(s) (if applicable) and The Author(s) 2017 This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations Cover illustration: Pattern adapted from an Indian cotton print produced in the 19th century Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Springer International Publishing AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland To John Dunn, who quite rightly insisted that I should try to think seriously about politics PREFACE Over the past eight years I have written about different aspects of the economic crisis that has unfolded in the West since 2008 For much of that time I thought little about oil’s relationship to the crisis even though I was strongly conscious of the massive rise in oil prices that took place from 2002 to mid-2008 But the harder I tried to think through the idea of writing a book that captured the extraordinary nature of the post-2008 economic and political world, I found myself coming back on issue after issue to oil At first I thought it would be possible to add oil into an analysis of the origins and aftermath of the 2008 crisis only to realise that actually there is a story to tell about oil that can explain a significant part of the end of the pre-2008 world and something about the nature of the one western economies and states now inhabit The more I reflected on that story the more I saw parallels between the economic and political crises of the 1970s and today’s economic and political predicaments even as the monetary landscape has been transformed beyond recognition This book is the result of that intellectual journey in which I have endeavoured to put the present western economic crisis in its apposite historical context As with any book I have incurred debts Tony Payne gave me the opportunity to turn what was a set of emerging thoughts into a book and did so with an enthusiasm that overtook what would otherwise have been my caution Colin Hay encouraged me when I first mentioned to him that I thought that oil was much more important to the 2008 crisis than most scholars and commentators allowed Amber Husain and Christina Brian at Palgrave have been very helpful Josh Simons provided me with excellent research assistance in collecting material on quantitative vii viii PREFACE easing, the financial problems of the shale oil sector, and commodity prices He also offered acute insight in conversation on these subjects and others Christopher Hill and Glen Rangwala gave me some guidance on the issue of US and EU sanctions against Iran Matt King at Citigroup engaged with me with extreme generosity and analytical sharpness on the post-2008 monetary and financial environment I have learned a great deal from him, and my understanding of the post-2008 monetary and financial world would be significantly diminished if I did not know him My debt to my late friend Geoff Hawthorn is long-lasting In the penultimate conversation I enjoyed with him I articulated the main argument of this book for the first time As I have set that argument to the written word, I have been strengthened by the memory of Geoff’s lifelong intellectual bravery in venturing into new subjects in the faith that one has to try to get better and better at understanding the world and that our old ways of thinking never suffice Without his example I would not have got here CONTENTS Introduction The Spectres of Peak Conventional Oil and Stagflation Salvation and Damnation: The Rise of Non-conventional Oil and Quantitative Easing 47 Revisiting the 1970s 93 Conclusions 107 Index 115 ix LIST BoE bpd CPI ECB EEC EIA ERM EU FOMC FRB G7 GDP HICP IEA IMF ISIL MPC NATO NICE NGPL OECD OMT ONS OPEC PDVSA OF ABBREVIATIONS Bank of England barrels per day Consumer Price Index European Central Bank European Economic Community Energy Information Administration Exchange Rate Mechanism European Union Federal Open Market Committee Federal Reserve Board Group of Gross Domestic Product Harmonised Index of Consumer Prices International Energy Agency International Monetary Fund Islamic State of Iraq and the Levant Monetary Policy Committee North Atlantic Treaty Organisation Non-inflationary consistently expansionary economic growth Natural gas plant liquids Organization of Economic Development and Co-operation Outright Monetary Transactions Office for National Statistics Organization of Petroleum Exporting Countries Petróleos de Venezuela xi 104 H THOMPSON policies in the 1970s were pursued in good part to prevent On the supply side non-conventional oil production is much more expensive than the output from Alaska, North Sea and Mexico has been, and requires the extremely cheap credit that QE and ZIRP have provided with all their accompanying macro-economic and financial-market pathologies US shale production has also damaged the US-Saudi relationship in a way that the surge in Alaskan output in the 1980s did not In part this deterioration has arisen because it looks as if under market conditions where there is both non-conventional and conventional oil production there is no equilibrium price Either prices are too high to sustain demand or they are too low to cover producers’ cost, particularly in the non-conventional sector Moreover, the very credit conditions that have made shale production possible have ensured that a large conventional oil producer like Saudi Arabia has struggled to inflict sufficient harm on the non-conventional sector to stop production and push the price back upwards The war of attrition between conventional and non-conventional producers has weakened the US-Saudi relationship in a world in which parts of the Saudi government are apparently giving tacit support to anti-western terrorist action, and Saudi-Iranian relations have become increasingly confrontational Meanwhile lower prices are not proving the macro-economic release they did after 1981 Most simply, falling prices have not produced a monetary payoff because interest rates were already so low that further reductions meant a descent into the territory of negative rates and QE has had little effect in the real economy outside the energy sector, not least because existing high-levels of debt have so impaired the capacity of many households to take on new credit Indeed, by the time low oil prices arrived in 2015 monetary policy had been rendered largely ineffective as a macro-economic tool and had created asset bubbles so strongly correlated that they have created unprecedented conditions for a systematic financial crash Indeed, so distorted have financial markets become in the wake of QE and ZIRP that oil prices themselves are now at the mercy of the massive risks embedded in the markets not least through oil’s relationship to the dollar Put differently, the relationship of the present crisis to the 1970s crisis is a vicious one The crisis of the 1970s has returned in the wake of the stagnation of conventional oil production Following the same path that was taken out of the 1970s crisis, through generating more expensive supply in the West has produced a geo-political crisis around REVISITING THE 1970S 105 the US-Saudi relationship It has required the medium- to long-term economic and political disaster of QE and ZIRP In this entirely new and near dystopian monetary world growth prospects appear poor and deep inequalities between asset holders and all others must be fuelled to avoid financial collapse Yet if growth were to return to the levels seen from the mid-1980s to the mid-2000s, the result would almost certainly be supply shortages and higher prices than western economies can withstand REFERENCES Bill, James A 1988 The Eagle and the Lion: The Tragedy of American-Iranian Relations New Haven: Yale University Press Bromley, Simon 1991 American Hegemony and World Oil: The Industry, the State and the World Economy Cambridge: Polity Press Bush, George W 2006 State of the Union Address, 31 January http://www washingtonpost.com/wp-dyn/content/article/2006/01/31/ AR2006013101468.html Accessed 19 October 2016 Carter, J 1977 Speech on Proposed Energy Policy, 18 April http://www.pbs org/wgbh/americanexperience/features/primary-resources/carter-energy/ Carter, J 1979 Speech Delivered to the Nation, July 15 http://www.pbs.org/ wgbh/americanexperience/features/primary-resources/carter-crisis/ Accessed 19 October 2016 CIA 1985 “USSR Energy Atlas.” CIA Historical Programme, Release in Full, 1999 Gaidar, Yegor 2007 “The Soviet Collapse: Grain and Oil.” American Enterprise Institute for Public Policy Research, April Galpern, Steven G 2009 Money, Oil and Empire in the Middle East: Sterling and Post-War Imperialism, 1944–1971 Cambridge: Cambridge University Press Hamilton, James D 2013 “Historical Oil Shocks.” In Routledge Handbook of Major Events in Economic History, edited by Randall E Parker and Robert M Whaples, 239–265 New York: Routledge Kennan, George 1995 “Witness to the Fall.” New York Review of Books, 16 November Kotkin, Stephen 2001 Armageddon Averted: The Soviet Collapse, 1970–2000 New York: Oxford University Press Mitchell, Timothy 2013 Carbon Democracy: Political Power in the Age of Oil London: Verso Sampson, Anthony 1993 The Seven Sisters: The History, the Companies and the Politics of Oil, new edition London: Coronet 106 H THOMPSON Schobert, Harald H 2014 Energy and Society: An Introduction, second edition Boca Raton, FL: CRC Press Spiro, David 1999 The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets Ithaca: Cornell University Press Thompson, Helen 1994 The British Conservative Government and the European Exchange Rate Mechanism London: Pinter UK Cabinet 1976 “Conclusions of a Meeting of the Cabinet Held at 10 Downing Street on 10 June 1976.” National Archives, CAB/128/59/8 UK Oil & Gas Authority 2016 “Complete Production History for Oil Fields (from 1975) and Gas Fields (from 1995).” https://www.ogauthority.co.uk/ data-centre/data-downloads-and-publications/production-data/ Accessed 19 October2016 US EIA 2016a International Energy Statistics http://www.eia.gov/beta/inter national/data/browser/#/?ord=CR&cy=2015&v=H&vo=0&so=0ι0&start= 1980&end=2015&vs=INTL.44-1-AFRC-QBTU.A~INTL.44-1-ASOCQBTU.A~INTL.44-1-CSAM-QBTU.A~INTL.44-1-EURA-QBTU.A~ INTL.44-1-EURO-QBTU.A~INTL.44-1-MIDE-QBTU.A~INTL.44-1NOAM-QBTU.A~INTL.44-1-WORL-QBTU.A&s= Accessed on 14 October 2016 US EIA 2016b Petroleum & Other Liquids: US Field Production of Oil https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s= mcrfpus2&f=a Accessed 19 October 2016 US EIA 2016c Petroleum & Other Liquids: US Imports of Crude Oil https:// www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRIMUS2&f=A Accessed 19 October 2016 US EIA 2016d Petroleum & Other Liquids: US Imports from OPEC of Crude Oil and Petroleum Products https://www.eia.gov/dnav/pet/hist/ LeafHandler.ashx?n=PET&s=MTTIMXX2&f=A Accessed 19 October 2016 US EIA 2016e Petroleum and Other Liquids: Alaska Field Production of Oil http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?f=A&n=PET&s= MCRFPAK2 Accessed 19 October 2016 Wong, Andrea 2016 “US Discloses Saudi Holdings of US Treasuries for First Time,” Bloomberg, 16 May CHAPTER Conclusions Abstract There is in much economic and political discourse a strong belief that there remains a guarantee of rising living standards so long as policy is correctly set in the circumstances of the new world to achieve them Yet any assumption that there must be a way out of the present economic crisis that returns the West to steady year-on-year growth punctured only by relatively short recessions is hard to justify Such a faith rests on denying even the possibility that the ongoing rise in material living standards witnessed over the past two centuries is coming to an end, or indeed that the carrying capacity of the earth may be less than the material expectations of the world’s sharply rising population History suggests such a faith has no foundations in past experience What happens to this presumption as the fallout of the multiple problems around oil at work play out will challenge expectations of democracy and the idea that time guarantees progress Keywords Oil Á Growth Á Progress The 1970s demonstrated the limits that resource questions ultimately impose on economic possibilities through the cost of energy commodities and the geo-politics of accessing them The political response to the 1970s crises also exposed the huge difficulties of realising a future-oriented © The Author(s) 2017 H Thompson, Oil and the Western Economic Crisis, Building a Sustainable Political Economy: SPERI Research & Policy, DOI 10.1007/978-3-319-52509-9_5 107 108 H THOMPSON politics of sacrifice that significantly adjusts material expectations to any recognition of those limits The eventual move beyond the immediate economic and political difficulties of the 1970s arose because oil itself produced a way out High prices produced new supply and the mutual interests of the US and Saudi governments allowed the US to reconstruct an alternative international monetary order around the dollar-oil relationship Finding a remedy to the problems of the 1970s in a manner that allowed a sustained period of largely non-inflationary growth could not, however, restore the economic and geo-political conditions that existed before the 1970s crises Whilst cheap oil returned in the 1980s and the 1990s most western economies remained reliant on oil from parts of the world where, as in the Middle East western influence was diminished, or where, as in Russia, import dependency weakened western unity Economically, much of the growth that ensued in a number of western economies from the mid-1980s became increasingly tied to credit and asset bubbles and from the late 1990s cross-border banking flows When those bubbles were reaching their peak in the mid-2000s, oil prices began to rise sharply again as non-western demand rose and supply stagnated at the same time as an American effort to reshape the Middle East by military intervention failed In this sense the crisis of 2008 was inescapable and over-determined An oil crisis and a financial crisis in which large financial corporations had made themselves hugely vulnerable to the interruption of short-term capital flows came together to destroy the reinvented western economic order that had taken shape from the late 1970s In terms of oil itself high prices and the stagnation of conventional oil supply generated the same response within the oil sector as the oil shocks of the 1970s had done The advance of non-conventional oil production has, however, wrought rather more problems than the rise of North Sea and Alaskan production furnished Whilst shale production did not itself incite monetary change, it has, nonetheless, required the historically extraordinary, and ultimately pathological, credit environment created by quantitative easing (QE) and zero interest rates (ZIRP) It has also yielded a strong counter-reaction from the world’s leading oil-producing state, which risked declining market share in the face of the new supply at the same time as its own production looked to be in sight of its peak In further depressing oil prices since late 2014 that counter-reaction has created a deflationary pressure in economies that were already weakened by weak demand and the exchange rate fallout of QE, and rendered CONCLUSIONS 109 impossible the attempt by the Fed to normalise monetary policy before the next recession begins In a context in which each of these economic problems have enormously difficult implications, any assumption that there must be a way out of the present crisis that returns the West to steady year-on-year growth punctured only by relatively short recessions is hard to justify, as Mervyn King in good part recognised when he pronounced the end of NICE Nonetheless, there is in much economic and political discourse a strong belief that there remains a guarantee of rising living standards so long as policy is correctly set in the circumstances of the new world to achieve them This hope is particularly evident in recent arguments that western economies can prosper again if they remedy secular stagnation In this vein Larry Summers (2016), for example, begins from the intrinsically plausible claim that both the poor performance of western economies since 2009 and the non-inflationary consequences of QE and ZIRP require significant explanation only to find a relatively easy solution to poor growth in internationally co-ordinated fiscal expansion and reduced savings to address deficient demand, supported if necessary by negative interest rates Yet the economic problems now at issue for western states when there is no possible equilibrium price of oil are clearly not only a matter of consumer and investment demand, and the consequences of the existing credit environment around QE and ZIRP are already palpably deleterious, even without the lethal way they have interacted since mid-2014 with falling oil prices Of course, unqualified fatalism about the future also distorts the picture of western economies over the past decade Quite clearly, the different monetary responses of the Fed and the Bank of England on one side and the ECB on the other to the problem of rising oil prices in 2011 yielded an acutely consequential divergence of outcomes The amount of the short- to medium-term harm that monetary policy-makers have inflicted on growth prospects, whatever the long-term deleterious consequences of QE and ZIRP, has been differential The individual euro zone states are also, as Streeck (2014, 182–84) has argued, at a very considerable disadvantage in macro-economic decision-making in having eliminated national currency devaluation as a possible policy instrument in times of economic crisis If it renders nothing else, national monetary sovereignty does provide a means of reconfiguring the balance of political winners and losers at any particular time in ways that can be responsive to national democratic politics Nonetheless, any presumption that solutions must exist 110 H THOMPSON to the fundamental problems now at work if only they are steadfastly pursued either ignores the depth of the unintended consequences of the responses made to the 2008 crisis hitherto, or requires immense confidence that the pre-2008 monetary environment can be restored and oil consumption can be rapidly reduced Put differently, this faith rests on denying even the possibility that the ongoing rise in material living standards witnessed over the past two centuries is coming to an end, or indeed that the carrying capacity of the earth may be less than the material expectations of the world’s sharply rising population History suggests such a faith has no foundations in past experience The micro history of the fossil-fuel age in the West is far from one of continual growth or even steady-state growth during the periods of expansion Periodic crises of one kind or another have been an ongoing feature of Western economies since the early nineteenth century The postNapoleonic war depression in Britain lasted for around a decade, and the British economy grew significantly more slowly from the 1870s to the First World War than it had in the previous four decades As Robert Gordon (2016, ix) has shown American growth has ‘varied systematically over time’, reaching a peak in 1970 that it has not matched since These economic crises have also long had profound political consequences Just as the political turbulence of the 1930s followed the 1929 economic crash, the European revolutions of 1848 came after several years of massive crop failure that produced a shortage of food These problems have always elicited deep fears about the sustainability of industrial economies and the huge increase in populations they have made possible Retrospectively the nineteenth century might look like a time of successful economic transformation, but for at least the first half of the century ‘no one knew’, as Robert Tombs (2015, 453) has said, ‘whether [industrialisation] would end in wider prosperity or mass starvation’ That it ended in the former has a historically specific explanation, which includes the economic and geo-political turbulence that eventually led to the catastrophe of the First World War Looked at from such a historical perspective, the period between the end of the Second World War and the early 1970s appears dependent on a set of exhausted geo-political contingencies around oil With the US’ massive oil capacity having allowed the Allies to pursue the unconditional surrender of Germany and Japan, the US could after the war absorb these two large oil consuming states into its security orbit and take responsibility for ensuring those states’ access to oil in an environment in which, as a consequence of CONCLUSIONS 111 the war, the Soviet Union was temporarily removed as a significant oil producer Now the US has nothing like the power it had in the post-war period in providing other states access to oil Shale oil has proved consequential, not least in disrupting the incentives facing conventional producers But it cannot change the fact that the largest reserves of cheaply accessible oil lie in the Middle East and Russia, or that China and others’ rise has fundamentally changed the volume of demand for oil in the world In the thermonuclear age in which there is once again a rising power with independent energy interests there has to be accommodation not war This reality will almost certainly entail western governments having to accept an increasingly co-operative relationship between Russia and China, and it will put significant pressure on the West’s internal unity in dealing with Russia, particularly in regard to the conflicting interests of Germany and the US Neither China nor Germany will repeat Nazi Germany’s attempted conquest of the Soviet Union to procure oil, but neither can either allow its relations with Russia to be significantly circumscribed by the US For its part the disappearance of the post-war international monetary order did create opportunities to deal with some of the economic problems at work by the 1970s Under conditions of open capital flows and without a fixed exchange rate system anchored by a currency convertible to gold, credit can be accessed and created much more readily than was the case during the Bretton Woods years Easily available debt made it possible for households to maintain consumer demand even as real wages stagnated or fell, and it also allowed governments to maintain spending commitments without raising sufficient taxes to pay for them as they had done during the post-war era The shift, however, from high debt to high debt sustained by QE and ZIRP has taken western states into unprecedented territory that would appear, among other outcomes, to replace the entire price discovery foundations of financial markets with signifiers generated by central banks There is no way of knowing from historical experience what the likely consequences of this transformation will be, or whether it is remotely sustainable for any length of time More clearly, the geo-political underpinnings of the post-Bretton Woods monetary order in which this new Fed-led monetary environment emerged are badly fraying For several decades oil has acted via the US-Saudi relationship as the effective anchor of the dollar’s credibility as the world’s premier currency But oil cannot permanently perform this role for the dollar when the need for non-conventional oil production divides American and Saudi interests 112 H THOMPSON and all of Russia, China and Iran have strong incentives to see the dollar supplanted in oil transactions Under these conditions any presumption that economic problems can ultimately always be addressed is likely to be tested to destruction over the next few decades What happens to this presumption as the fallout of the multiple problems around oil at work play out will also challenge expectations of democracy From its eighteenth century origins representative democracy became tied to the Enlightenment idea of progress Even though the first idea of democracy came from a time in which time was seen cyclically and all forms of government were perceived as subject to inevitable decay, much rhetoric around representative democracy made the realisation of modern democracy an act guided and blessed by historical providence in which time proved its superiority over alternative arrangements of governance, (Dunn 1993, 2006) Citizens and governments may be persistently allayed with fear about democracy’s performance, but it succeeds over time, its proponents argue, because democratic citizens somewhere retain faith in the better future it can create (Runciman 2013) Whether it was ever plausible to expect so much from representative democracy, or indeed any form of the rule of human beings over human beings, is very much open to question The historical success of representative democracy in western Europe and North America mirrors the economic progress made by fossil-fuel civilisation, as its crisis periods in the twentieth and twenty-first centuries correspond with acute geopolitical or economic problems at least in part generated in one way or another by resources The end of the crises of the 1930s and 1970s are not obviously the result of western democracies’ experimentation creating a new path forward to the future War production resurrected western economies in the 1930s, first and foremost the American, not least by significantly increasing labour productivity (Gordon 2016, 18–19, 564) Similarly, it was not the adaptability of democratic citizens or the responsiveness of democratic elites to citizens’ preferences that rendered profitable oil discovered in the North Sea and Alaska or covertly reconfigured the US relationship with Saudi Arabia to remake the international monetary order in the 1970s Taking advantage of high oil prices to make geologically difficult oil production viable and renewing alliances around energy needs and their financial corollaries is what modern states with economies dependent on resource consumption under any form of government seek to Certainly, democratic societies like that in the US may well better in creating the kind of technological innovation utilised in CONCLUSIONS 113 the shale boom than those ruled over by authoritarian states But democracy cannot stay the geological limits of shale production or alter the credit requirements they engender Moreover, the predicaments that now confront democratic governments around oil are significantly more difficult than those they faced in the twentieth century before conventional oil production stagnated Since there can be no return to an oil price that is sustainable in relation to the economic capacity and political power of netconsuming and net-producing states, managing oil and its fallout has become a permanent economic and political problem, with the capacity to engender economic and geo-political crises at any time in a near dystopian-looking monetary world Nonetheless, if the stagnation of conventional oil production around the middle of the last decade has yielded immense predicaments for western democracies to navigate we should, not be surprised For several centuries the material viability of human life as lived in western societies has depended on access to energy sources created millions of years before human life began It is a supreme irony that the concept of progress with its near metaphysical inflation of human agency to providential status has been sustained through a time of vastly increased material living standards that was made possible by the geological storage of ancient sunlight Many hope that human ingenuity will provide an escape from the possibility that the West’s material progress is ultimately bound by limits dictated by that energy supply, whether those limits arise from its physical production or the disruption to the biosphere of burning it However, whether this hope is plausible or not, the economic and geopolitical world that oil dependency has hitherto made cannot be undone, and its consequences will endure across the spheres of collective life for many years to come REFERENCES Dunn, John 1993 “Conclusions.” In Democracy: The Unfinished Journey 508 BC to AD 1993, edited by John Dunn, 239–266 Oxford: Oxford University Press Dunn, John 2006 Setting the People Free: The Story of Democracy London: Atlantic Books Gordon, Robert J 2016 The Rise and Fall of American Growth: The US Standard of Living Since the Civil War Princeton: Princeton University Press Runciman, David 2013 The Confidence Trap: A History of Democracy in Crisis from World War to the Present Princeton: Princeton University Press 114 H THOMPSON Streeck, Wolfgang 2014 Buying Time: The Delayed Crisis of Democratic Capitalism London: Verso Summers, Lawrence H 2016 “The Age of Secular Stagnation: What it is and What to Do About it.” Foreign Affairs 95: 2–9 Tombs, Robert 2015 The English and Their History London: Penguin INDEX A Alaskan oil production, 14, 100, 103, 104, 108 Asset price correlation, 51 Azerbaijan, 13, 17, 21 B Bakken, 54, 73 Baku to Ceyhan pipeline, 17 Bank of England, 27–28, 30, 32, 34, 37, 49, 61, 67, 75 Bernanke, Ben, 34, 37, 65, 66 Brazil currency depreciation, 71 oil production, 53 Britain, 2, 18, 49, 94, 98, 110 economy 19th century, 110 economy 1970s, 97, 98 economy 1980s, 100–101 economy 2004–8, 27–28, 33, 34, 36 economy 2009–mid-2014, 61–62, 63–64, 66 economy mid-2014–2016, 75 oil consumption, 11, 37, 52, 54, 100 oil production, 14, 15, 97, 100 relations with US, 56 Bush Jr administration, 18–20, 49 Bush Sr administration, 15 C Canada oil consumption, 11, 23, 38, 52 oil production, 14, 23, 53 Caspian sea oil production, 2, 17, 21 Cheney report, 19 China, 9, 17, 23, 49, 83, 112 capital outflows, 75–77 oil consumption, 5, 11, 23, 58, 75, 80, 111, 112 relations with OPEC, 57 relations with Russia, 58, 111 renminbi, 58 Commodity prices, 23, 30, 33, 34, 59, 60, 69 © The Author(s) 2017 H Thompson, Oil and the Western Economic Crisis, Building a Sustainable Political Economy: SPERI Research & Policy, DOI 10.1007/978-3-319-52509-9 115 116 INDEX D Deflation fears, 74–75, 83–84 Democracy, 112 Dollar, 9, 24, 66, 68, 71, 72, 77, 98, 101, 104, 108, 111, 112 the dollar and oil, 24, 32, 37, 51, 58, 69, 70, 77, 79, 94, 104 the end of Bretton Woods, 95, 97, 111 petro-dollars, 96–98 Draghi, Mario, 63, 64, 67, 78 E Eagle Ford, 53, 73 European Central Bank (ECB), 29–30, 32, 37, 39, 49, 51, 63, 67–68, 69, 78–79, 84, 109 European Union (and European Economic Community and European Community), 52, 57, 97, 98 sanctions against Iran, 18, 53, 55, 56 Euro zone, 56, 62–64, 77, 83, 109 economy 2004–8, 29–30, 33, 36, 39 economy 2009–mid-2014, 62, 67 economy mid-2014–2016, 78 F Federal Reserve Board, 26, 27, 31, 32, 35, 59, 60, 66, 76, 77 France, 18 economy 1980s, 98 economy 2004–8, 36 economy 2009–mid-2014, 72, 73 and the ERM, 101 oil consumption, 11, 22, 37, 56 relations with US, 63 G Georgia, 17–19, 22 Germany, 18, 78, 101 economy 2004–8, 37 economy 2009–mid-2014, 68 economy mid-2014–2016 monetary policy, 96, 98, 101–102 oil consumption, 11, 22, 37, 51 relations with US, 63 Second World War, 2, 110 Greece, 55, 63, 64, 78, 79 H High-yield bond markets, 50, 51, 73 Hubbert, Marion King, 13, 48 I India, 5, 10–11, 12, 23, 52, 56, 57, 103 International Energy Agency, 38, 52 Iran, 15, 17, 18, 19, 70, 81, 83, 104, 112 Iranian revolution, 15, 98 oil production, 15, 52, 73 relations with the US, 15, 19, 98, 104 sanctions against Iran, 18, 55–56 Iraq, 102 Iraq war, 15, 21 Oil for Food programme, 15 oil production, 15, 16, 20, 52, 57, 58, 100, 102 relations with the US, 15, 19, 104 sanctions against Iraq, 18 Italy, 55 economy 2004–8, 33, 36 economy 2009–mid-2014, 71 economy mid-2014 to 2016, 79 oil consumption, 11, 37, 62 INDEX K Kazakhstan, 16, 21, 53 King, Mervyn, 28, 37, 109 Kuwait, 15, 20, 95, 102 L Libya, 103 oil production, 20, 53 sanctions against Libya, 18, 19 M Merkel, Angela, 68 Mexico, 13, 27, 53, 57, 100, 104 Monetary policy 2004–2008, 26–34 2009–2014, 49–51, 58–68 2014–2016, 74–80, 83, 84 N Netherlands, 63, 65, 68, 79 Nigeria, 21, 53, 70 Nixon administration, 94, 96, 98, 103 Non-inflationary consistently expansionary economic growth (NICE), 29, 37, 109 North Dakota, 54, 73, 74 North Sea oil, 13, 97, 100, 103, 104, 108, 112 O Obama administration, 48, 54–57, 80–81, 83 Oil consumption, 2, 10–12, 52–53, 69 Chinese, 5, 11–12, 23, 56, 69, 79, 103, 111 Indian, 10–12, 23, 52, 56, 57, 103 Middle Eastern, 53 Western, 18, 22, 37, 51, 54, 100 117 Oil financialisation, 3, 23–25 Oil prices, 2, 26, 82–84, 97 1973–74, 95 1978–1980, 112 1982–1998, 115–7 1999–2001, 2002–8, 9, 11, 22–26 2009–2014, 57–9, 63, 65–77 2014–2016, 68–72, 79 Oil production conventional oil stagnation, 4, 5, 83, 102–104, 108 non-conventional oil production, 23, 47, 49, 50, 51, 73, 80, 83, 103, 104, 108, 111 peak oil arguments, 13–14 OPEC, 20–21, 38, 57, 68, 70–72, 80, 82, 94–96, 98, 100, 102 P Progress, idea of, 112 Putin, Vladimir, 16, 22 Q Quantitative easing (QE), 48–51, 59, 83, 104 British QE, 49, 62 euro zone QE, 67, 79, 83 QE and exchange rates, 51 QE and financial markets, 50, 65 US QE, 49–51 R Reagan administration, 101, 102 Russia, 4, 16–17, 55, 71, 72, 94, 112 intervention in Syria, 81 118 INDEX Russia (cont.) oil production, 13, 15, 16, 22, 23, 53, 57 relations with China, 58, 103, 111 relations with the US, 16, 22, 58, 103 relations with west European states, 18, 22 Ukrainian crisis, 57–58 S Saudi Arabia, 55, 80–82, 94, 96, 98, 100 dollar reserves, 81, 96, 99, 102 Ghawar, 20 oil production, 14, 15, 20, 38, 53, 70, 100, 102 and OPEC, 21, 70, 72, 82 relations with the US, 6, 15, 16, 58, 80–84, 98, 104, 111, 112 Saudi Aramco, 15, 82 Secular stagnation, 109 Shale oil, 53–58, 73–74, 83, 104, 108, 111 company bankruptcies, 73 production, 4, 5, 48, 53–55, 69, 70, 73–74, 81 Soviet Union, 2, 16, 94, 97, 99, 100, 111 Spain, 33, 55, 63, 64, 79 Stagflation, 5, 31–34, 39, 61, 95, 99, 101 Syria, 57, 80, 81 T Texas, 53, 54, 73, 74 Trichet, Jean Claude, 29–30, 33–34, 37, 62–64 United States, 2, 3, 11, 15, 55 conventional oil production, 13, 14, 94, 95, 98, 100, 102 economy 1970s, 95–96, 99 economy 1980s, 100–102 economy 2004–8, 21, 37 economy 2009–mid-2014, 103 economy mid-2014–2016, 79 oil consumption, 11, 12, 22, 37, 52 relations with west European states, 18, 55, 97 relations with Iran, 15, 94–95, 103 relations with Iraq, 15, 19, 103 relations with Russia, 16, 22, 58, 103 relations with Saudi Arabia, 6, 15, 16, 58, 80–84, 98, 104, 111, 112 shale oil production, 5, 23, 47, 48, 54, 69, 70 V Venezuela, 21, 23, 53, 70 Y Yellen, Janet, 76–77 Z Zero interest rates policy (ZIRP), 48–51, 61, 65, 74, 77, 83, 104, 105, 108, 109, 111 ... understand the macro -economic landscape and geo-political world that western states now inhabit This book aspires to tell the story of the western economic crisis through the lens of oil and in... through the lens of oil and in doing so connect the present set of economic and political predicaments facing western countries to the older crises of the 1970s Keywords Oil Á Western economic crisis. .. despite the fact that the two oil price shocks are routinely described in virtually all accounts of the crisis of the 1970s The relative absence of oil in the macro historiography of the western economic