Next time you fill up your gas tank, consider the argument that the gas you’re putting in your car, might have been stolen.
“It’s the same as back in the days of the slave trade,” says professor Leif Wenar, chair of philosophy and law at King’s College in London, and author of the book Blood Oil: Tyranny, Resources, and the Rules that Run the World. It was taken for granted that this was the way the world always worked. In our day, the world works in a very strange way that we take for granted. We’ll make it legal to buy natural resources, essentially from anyone who can control them by force.”
Mary Kay Magistad
”We in North America don’t need to buy authoritarian oil anymore,” he says. “Even as we transition away from fossil fuels, we have enough of our own energy right now. We don’t need to send our money to those guys.”
Many of the 20th century’s conflicts, and politics, were drenched in oil. We fought wars, made unsavory alliances, and spent many billions of dollars protecting our access to foreign oil. We needed it for our cars, our flights, our heating, our plastics. Others around the world saw this modern American way of life, and started to copy it — and then, they needed lots of oil, too. That made countries with oil very powerful. If you’re of a certain age, you may remember the long lines at the pumps in the ‘70s, because OPEC was putting the squeeze on supply.
In fact, Wenar says, the average American household sends about $275 a year to such people, just by filling up at the pump. But it doesn’t have to be that way, he says, and both his book and his cleantrade.org website are a call to action, for Americans to put their dollars in service of their highest principles, and their pragmatic interests.
Wenar: Think about the worst threats and crises our country has faced in the last 40 years. They all are coming from oil states. So like you say I saw, ISIS, al-Qaeda, 9/11, Assad, Saddam, Gadhafi, Iran with its spread of terrorism, Darfur. All of those threats and crises were funded with oil money, meaning that they were also merely funded with our money, what we've been paying at the pump for gasoline.
Magistad: So is that a correlation or is it causation or you know how do you prove the latter?
Wenar: It's not an accident that places that export a lot of oil, have a lot of problems which end up spilling back on to us. There's something called the oil curse. Countries that export a lot of oil, especially the ones that are not democratic, have a much higher risk of authoritarianism. They're much more likely to be at war with themselves. They're much more corrupt. They have more poverty. There're some really deep problems.
Magistad: When you say they're much more likely to be authoritarian, it's by quite a large margin, right?
Wenar: It is. Countries in the developing world are 50 percent more likely to be authoritarian and their chance of civil war is even more than that, 200 percent more likely. And now we’re paying for both sides of the War on Terror. Of course, we’re paying for our own military, to go after groups like ISIS, and in Iraq, and Syria, and Libya. But we’re also sending a huge amount of money to regimes that directly and indirectly fund these extremists.
Magistad: You're clearly very passionate about it and you put a lot of deep thinking into it. What drew you to this topic? Was there an a-ha moment where you thought 'oh my goodness, so much is tied up in this. I need to spend more time thinking about a way out of the many problems that this causes'?
Wenar: Yeah, there was. And it just happened that I went to Nigeria. And I went with friends. And I just started asking about oil, because I could see this huge country, by far the biggest population in Africa teeming with young entrepreneurial energetic people who wanted a chance to live their dreams, to get ahead and were thwarted by this incredibly corrupt, violent government, which was just stealing all the oil money and using it for the purposes of the elite. That's when I saw the oil curse, and I saw it firsthand, people living in really desperate poverty, preyed upon by their own police, not provided with electricity, running water, education, even being bulldozed off of their land when some corrupt official wanted to build some new project on it. And then as I kept working, I kept seeing how the oil curse over there, comes to bite us back. When we feed misery and oppression overseas, we shouldn't be surprised when that comes and bites us back, as it has again and again especially from the Middle East. So it's their problem and it becomes our problem too.
Magistad: OK so if someone listens to that and says, well, alright, that's bad. But what can I do about that? We need to put oil in our cars. As you've said, oil is in so many other things that we use, in our clothes made of synthetic fibers, in our children's plastic toys, in cosmetics. What do you do?
Wenar: Oil is everywhere. And even as we get off fossil fuels as fast as we possibly can, it is going to take us awhile to get off of oil in particular. I mean 95 percent of the world's transportation right now runs on oil. That's almost every car, truck, plane, boat. The world's fleet is oil-powered, and even as we switch over the fleet, we're going to be using this mud for a long time to come. So we do need oil, especially for transportation, energy. But here's the big message. We in North America do not need to buy for authoritarian oil anymore. Even as we transitional way from fossils. We have enough of our own energy right now. We don't need to send our money to those guys.
Magistad: So how do you tell where the oil is coming from? Doesn't it all get mixed together in the refineries?
Wenar: It does. But actually, that's the easy part. There used to be a problem, not with blood oil but with blood diamonds, where diamonds were funding these terrible militias, for example, in Sierra Leone. You might have seen that DiCaprio movie Blood Diamond.
Well, it turns out even for diamonds we can trace them well enough to put a regime in place where we no longer buy blood diamonds. Oil is a lot easier than diamonds. Oil is big. It's heavy. It's moved around on these gigantic tankers, which are kept track of by satellites. We know where the oil is coming from. And as you say, actually we need to know where the oil is coming from because to refine it correctly, you essentially have to know where it comes from. So in the United States, if you go to the Energy Information Administration website, there is just a big spreadsheet every month that says for every barrel of oil that comes into the country, where was its country of origin. We can track the oil. That's the easy part.
Magistad: And as an example you mentioned blood diamonds. There's a very interesting story as to how the United States found the political will to track blood diamonds.
Wenar: That's right. And this is such an encouraging story especially for people who think that the system is rigged and we can't do anything, and for idealistic young people who want to change the way the world works at its foundations. So there's this terrible problem of blood diamonds in Sierra Leone and Liberia. And there were a group of idealistic actors who knew that this is a big problem and we needed to put an international regime in place to stop the flow of diamonds from these militias and consumer's money back to them. And they had a plan. And they knew it was the right plan, a registration scheme. And they put it forward. But it was the late ‘90s, and we had a lot else going on, and no one really paid that much attention to them because it was just some crisis in Western Africa. But then. Then, blood diamonds were found in possession of al-Qaida after 9/11. And that was the window of opportunity.
Magistad: And why, why did they have diamonds?
Wenar: It turns out the diamonds are the best store of value in the world. And al Qaeda knew that after 9/11, their bank accounts would be frozen. So they needed some place to put their assets, and they bought these diamonds from those terrible militias in Sierra Leone, from the [then-]dictator of Liberia, Charles Taylor. And that's how they got their financial assets secured. Once the United States found out that al-Qaeda was buying blood diamonds, it became a priority one national security problem for the United States of America. Eighteen months later, the plan of that group of activists was put into effect. The US Congress passed the Clean Diamond Trade Act, and led the world to pass similar acts banning the importation of blood diamonds in all major countries. So we've done it for blood diamonds. We could do it for blood oil as well.
Magistad: For diamonds for various kinds of rare earths and metals, and for oil, you make a case, a philosophical case, for this being theft, and theft in a way that I think a lot of people who are putting gas in their cars and buying toys that might have indirectly used oil that came from conflict zones, they don't necessarily think of it in these terms.
Wenar: It's one of these ways the world works that we inherit and we don't think about. It's the same as back in the days of the slave trade. You know people were selling other people as property, and it was taken for granted as the way the world had always worked. In our day, the world works in a very strange way that we take for granted. We’ll make it legal for us to buy natural resources, essentially from whoever can control them by force.
So when those diamonds came from Sierra Leone those terrible militias that were amputating thousands of people to get control of the diamond fields, well, they went through the world's supply chains. And when they got here, to the United States, they were bought legally in diamond rings and earrings. That was a case of might in one country making right here.
Sometimes, whoever it is that's got the might is in control of the whole country. So, for example, when Gadhafi took over Libya in a coup, the laws of the United States started making it legal to buy Libya's oil from Gadhafi. If you and I went and overthrew the government of Angola tomorrow by force the next day we would have the legal right to sell Angola’s oil to Americans. But that rule makes no sense. This is the thing about our global system, because if you and I went and took control of a gas station by down the street by force, no one thinks we should get the legal right to sell off the gas and keep the money. So the obvious rules that work at home are just the rules that we're violating when it comes to the natural resources of other countries.
Magistad: And weirdly, this applies to ISIS, right? They grabbed territory. And now they’re selling oil and gas.
Wenar: That's right. It was legal, when ISIS first took over, to buy Iraq's oil from ISIS. And it looks like some of ISIS's oil did actually get into European markets. Now we then went and put sanctions on ISIS. But that means that we went against our default rule, which is the default rule of every country in the world: whoever controls it by force there, can sell it to us here, and we'll have the legal right to own it.
Screenshot from YouTube
Magistad: So at this point, what's happening to ISIS's oil? I mean ISIS's — I'm putting this in quotation marks in the air here — what's happening to the oil that's in the territory that ISIS controls?
Wenar: Mostly, that oil is sold within Iraq. Some of it is sold on to Syria. All major powers now officially have sanctions on ISIS. So it's not legal to buy oil from ISIS anymore. But it's not a big market for them to sell their oil outside of the war zones. Essentially, they're still making their money from selling oil to the people in the conflict itself. We're attacking the oil facilities to try to dry up their sources of revenue. But they're still making a fair amount of money from that oil.
Magistad: So let's continue with your argument so this is theft, because?
Wenar: It violates a very basic rule of the market. Coercion should violate property rights, of course. But in our world, coercion actually creates property rights. I mean, ask it this way if we must. Why does the US government say that it's legal for Americans to buy Saudi Arabia's oil from the Saudi government?
Now it seems to be the way the world must work but it actually isn't. We're a sovereign state. We decide for ourselves who have the right to buy oil from. And sometimes you can see the United States switching away from the recognized government of a country, when it decides who to buy oil from.
So, for example, to take Libya again, in 2011, when Gadhafi started shooting up the rebels in Benghazi, the US executive branch just released an order that said, from this day onward it will be legal for Americans to buy Libya's oil only from the rebels, only from those guys over there, so long, the order said, as no money goes to the government of Libya. That shows the United States government deciding for itself ,who it's going to be legal to buy another country's oil from.
Magistad: But another part of your argument, a quite compelling part, is quoting philosophers including John Locke. You say, resources belong to the people you know and you can either look at that as you know the resources on earth belong to all the people on earth. But then you say yeah but it's kind of hard to get people to get behind the idea of having one universal government. So at the very least if you're going to recognize borders and the resources within them, you also have to recognize that the people who live within those borders, and not just their leaders, particularly if they're not elected leaders, have the right to say what happens to those resources.
Wenar: That’s exactly right, Mary Kay. It's a principle that our leaders now reflexively say. George W. Bush said Iraq's oil belongs to the people of Iraq, right? It's also a principle that's embedded in major documents of international law.
So, for example, the two major human rights covenants both say in Article 1, "all peoples may, for their own ends, freely dispose of their natural wealth and resources." The world has already converged on this better, very natural rule that resources ultimately belong to the people. Our challenge now is to switch away from the bad old rule of "might makes right" to the better modern rule, and recognize the ultimate ownership of resources by the people of each country.
Magistad: OK, so I'm going to do here what a journalist does, and I'm going to be a little bit of a skeptic. I lived in China for many years, and the Chinese government says it acts on behalf of the people; it is the people's government.
But it certainly makes a lot of decisions that I don't think people have actually had much say in saying whether they like it or not. And I also know the Chinese government's response to this argument would be, you can't interfere in the internal affairs of other countries. So how would you persuade the Chinese government, or others who need to be persuaded, to put the right kind of incentives before the Chinese government, that what you're saying has validity and actually is in the best long term interests of pretty much everyone?
Wenar: So, it is in the best interests of everyone to recognize the people's control over the resources. And the Chinese, who are long-term thinkers, in a way that we are not in our governments, should see this. It's not in the interests of the people of China or their government to be dependent, for their energy, on the Middle East.
Do the Chinese want to buy oil from whoever has the most guns in the Middle East? Do they want to buy oil from ISIS 2.0.? Is that their strategy for energy security for their country? It can't be. So the Chinese should see that a different system is needed. And here's the political science part of the story. The reason that oil causes so much trouble is that essentially, this huge amount of money just comes out of the ground and it never has to be paid back.
It comes with no strings attached, and whoever can control it by force escapes accountability to the people of the country who have to watch while their natural resources are sold off. Oil is almost entirely unaccountable power. And that's why when authoritarians get it they can use it to oppress their people and buy off resistance when armed groups like ISIS get it they can use it to buy more weapons and engage in atrocities.
The power of oil is almost entirely unaccountable and we foreigners can't control it from the outside. That's the big result we should see from the past 40 years. Look at the strategies the West has tried to use to control the power of oil from the outside. Basically we've tried three different things. First, we've tried to make an alliance with an oil powered authoritarian. So they've tried that with the Shah of Iran. How did that go? We tried it with Saddam. We tried it with Gaddafi. We're still trying it with the Saudis, who are spreading that extreme intolerant version of Islam around the world.
OK, we have a second strategy. Military action. Gulf War 1. Gulf War 2. Libya. Cover the region with drones. How's that going? Alright. We try sanctions. Russia. Iran. Iraq. Syria. Sudan. How are these strategies going? Well, the director of the CIA stood up in front of Congress in March and said, the Middle East is the worst it's been in 50 years, and the region faces unprecedented bloodshed. The only source of accountability over oil has to be the people of the country itself having minimal accountability over their own government. That's got to be the solution.
Magistad: And when you say minimal, what do you mean?
Wenar: Yeah that's important. All it would mean is that the people need minimal bare bones political rights and civil liberties to be able to find out what's happening to their resources. Who's selling off the oil? Who's getting the money from it? Can the people find that out? Can they talk to each other about that? And if a majority of citizens feel strongly that the government's doing the wrong thing with their resources, can they protest and make government policy change?
Magistad: But this is sort of on a sliding scale, right? So if someone is somewhere in the middle, or 40 percent of the way there, then what happens?
Wenar: It’s a great question, and it's really important for us to be able to draw a bright line about which countries have accountability and which countries don't. Right? And these are big questions, a huge amount of money at stake, investments take a long time. Luckily we have metrics that measure exactly the kinds of things we're looking for. There's a number of well-established long-lived metrics that tell us in each country what is the situation with political rights and civil liberties. There's different ones. They tend to say the same thing. Polity has one. The Economist has one. Freedom House has one. We could make a metric of metrics to get extra objectivity and say, look, below this line, the people just could not possibly be authorizing their government to do what it's doing with the natural resources.
Magistad. In terms of what's in China's best interest just go back there for a second, since I am particularly focused on China quite a bit, even these days. There was this cycle that happened where China was buying its oil from the Sudan and then the Sudan was using the money it got from China to buy weapons and helicopters from China. And the Chinese government seemed to think that was a perfectly profitable cycle for it to be involved in.
Wenar: We both saw the big push of China, especially into Africa in the past 15 years. And a lot of Chinese money went into Africa, and a lot of African natural resources went back to China. And the Chinese were making deals with everyone, not only Bashir of Sudan, but even seemingly, as far as we can tell, the security services of Zimbabwe, independently of the rest of the government.
That hasn't been working out so well for the Chinese. There's a second wave of thinking in China. The Chinese are realizing, simply for return on investment, that they have to care about governance, too. Governance actually is better for their business. They put a lot of money into these places, and in fact, they got burned in a lot of places, either because they were outwitted by the locals who reneged on the deals, or because the places were so chaotic or so corrupt they actually couldn't get the returns that they were expecting.
So now China, for return on investment, is looking to for example putting human rights standards into their internal lending to their own corporations, which is a big development there. Let me also say, it seems the Chinese are, for independent reasons, also looking to governance standards so they can be accepted as players in the world economy on the same playing field as the West. They want to show that they can do business at a higher standard also, and they can still win.
Magistad: Do you see then though that their previous way of doing things is just moving elsewhere, moving to markets that are still sort of lower in the trajectory of going from having their equivalent of the China Price of cheap goods that Westerners want to buy in the equivalent of Wal-Marts, so they'll get resources however they can get them?
Wenar: There are places like that, and we should talk about India, when it comes to that. India is also buying resources from everywhere. What we need to do is to change the world's rule. We need to change it from this terrible rule of might makes right, which is bad for everybody except for the dictators. We need to change it to the rule that the people can hold their governments accountable.
The West is all set up to make that change. Like I said, we do not need authoritarian oil anymore. And actually the West making the change would have a huge soft power impact on the rest of the world. Imagine if the United States of America stood up and said look who rules in other countries is none of our business.
But these regimes qualify for none of our business, and we're not going to buy oil or conflict minerals from them anymore. The ideological impact of that would be great, in empowering the democratic forces in other countries. But we also do need to convince the Chinese and the Indians, what we need is for China or India just to announce, I mean just announce, that at some point in the future they will no longer be buying authoritarian oil.
If it's known that at some point down the line the oil rich states of the Middle East will be losing their major customers, then the change agents that are waiting in those countries outside the palaces, and even inside the palaces, will get their day. If the only way for those countries to sell their resources is for there to be a minimally accountable government, then there will be a minimally accountable government in those countries.
Magistad: Staying with China just for one more moment, they're deeply insecure about the prospect of a future where they don't know where their energy is coming from. They don't believe in sort of the international pool of oil, that it'll all be there and everyone sort of takes what they need in whatever. They want to secure their supply. And so they've done deals with Russia with Central Asian countries and you know if they can find a way of securing oil from the Middle East it feels like that trumps or has trumped up until now any ethical considerations, certainly the idea of ‘oh, this is an authoritarian government, so we can't do business with them.’
Wenar:. Let's talk about bare national interest in the medium term. Where is China going to get its energy from? The Middle East is as bad as it's been in 50 years. It faces unprecedented bloodshed and things look like they're going to get worse in a number of ways. The region is going through a youth bulge. The median age in Saudi right now I think is around 23, 24, just the age at which youth tend to revolt there aren't jobs for these youth.
And the region from the Middle East into North Africa, is exactly the reason region that's predicted to get hotter and drier because of climate change, at the same time as it's getting more crowded. So that arc of oil looks like it will be getting more unstable in the next 10 to 15 years, especially if we keep sending our money to whoever has the most guns. The Chinese should see that as a recipe for disaster. If they want energy security, they should work for a peaceful gradual transition to better governance in the oil producing countries.
Magistad: You mention climate change. Of course, this is another issue and concern that's connected to oil. And it's interesting how terrorism, war, climate change, you know, when you think about how all of these pieces interact, and you come back to why are we so dependent on oil, and on getting oil in the ways we've been getting it — if you can solve for that, for those two things, which are huge things, it starts to solve a lot of the biggest, thorniest problems we're dealing with, as a population on earth.
Wenar: That’s so true, and you know, we just need to do both things at once. Think of the big stories that came out of Paris last fall. One was the Climate Agreement which was at least more hopeful than the Copenhagen Agreement before it. And the other was a story of those terrible terrorist attacks. We need to work on both of these problems at the same time, both the climate heating up, and the spread of radical views around the world. There is a plan, where we could go from authoritarians to alternatives. We could tackle both problems at once and make it a win-win.
Magistad: So, in your book, and in your arguments, you've been focusing on more ethical sourcing of oil. But are you also advocating, are you also weaving into your argument, moving more rapidly to renewables moving more rapidly away from oil so that it's not even really – it’s in the equation, but it's not as important a part of the equation.
Wenar: Yeah, everyone can see that the best thing for both of these problems, both climate and authoritarian extremism, civil war, the best thing for both problems is getting off fossil fuels. And we’ve lived with fossils for a long time. They've done amazing things for our economy, and now it's time to move away from them to better energy sources. It's very plain that this is the solution. It just takes a while for humanity to get the collective will, and the collective intelligence to move from what we've been doing to what we need to do now. I'm confident it will happen. If it happens more quickly, it will be better for everybody.
Magistad: Well, and it does seem to be kind of hard for people to get their head at least some people to get their heads around a future where oil wouldn't matter, or wouldn't matter anywhere near as much, that this could be a century where oil ceases to be such a central point of contention, and sort of an instigator of you know authoritarian regimes acting in their own interests and exploiting their populations and buying up weapons so that they can better control their populations, and seizing more land so they have more oil and so on.
Wenar: It’s true. But we just have to imagine, and I'm so encouraged, actually, after working on these terrible issues for so long, I'm so encouraged that a better future is possible. Because again and again in our history, you see these momentous changes coming through. They seem impossible until they happen.
I mean, imagine that I was an idealistic young person going into the marble halls of London or Paris or Amsterdam 70 years ago and saying, you know, ‘look this colonial system is unsustainable. And it really must stop.’ What do you think that they would have said, ‘young man, surely you must see that the colonies are essential for our economy.’ And it did seem that way until we changed, with all of these big transformations, of the slave trade, and of apartheid, the liberation of the colonies. It seems impossible until it happens. We will get off oil and fossil fuels…and the people who come after will look back at us and wonder why it took us so long to get our act together.
Magistad: Yeah. What kind of response have you gotten from government officials you talk to particularly here in the United States and also from oil executives?
Wenar: The government's been very encouraging I just came back from Capitol Hill, talking with people on both sides of the aisle and both Houses. People can see that what we've been doing is not working. We are spending a tremendous amount on our military keeping the world's oil supply safe. One figure I just saw is $67.5 billion a year, just to secure the world's oil supply militarily. It's a huge amount of money. Why are we spending that money? People are really starting to question that.
You can see that in this political season. Why are we spending all of this for foreign oil when we have our own energy now? Why do we have the Fifth Fleet sitting there in the Persian Gulf? So the politicians can see, just from a national security perspective, from a dollars and cents perspective, we may need to make a change. If they see that there's a way to do it peacefully by changing our own laws on our own soil so that they align with our own deepest principles, our army can stay home this time. So the politicians are listening. The problem, of course is unlike China our politicians are very short term. And in the short term it's always easier to keep our alliances with our old Saudi friends as we always have. But in the long term everyone sees we need to make a change.
Magistad: Ok, so if someone's listening to this podcast who thinks, "Yeah I'm in. I believe in what you're talking about. I want to see this happen," what are first steps? What should citizens do? What can people do to start to move things in the right direction?
Wenar: The first thing is just to find out a bit more about these issues. If you get oil on the brain, you will find oil everywhere, and you'll see oil coming through the newspapers every day. You'll see that oil has been a part of our biggest threats and crises for all of our lifetimes. When you become informed, you can see that a change has to be made. And I put a website up called Clean Trade. That's cleantrade.org. And at Clean Trade, you'll see a lot of things that people can do to help push the political agenda.
So, for example, here is a declaration of principles that people can sign that we can take to Washington, and say look we believe in these founding principles that the resources every country belong to are their people; we should make that our law in our own country. There's also consumer action that people can take. So in a few weeks we'll have an index up, of which are the major oil companies that buy the most of their oil from authoritarian regimes you can use that index to decide where to buy your gasoline. It it Exxon or is it Shell, for example. There are some boycotts we can engage in to try to convince our Chinese friends also to stop buying authoritarian oil. One of them is called the ‘toycotts.’ As you said, mostly, toys are made of plastic, and plastic is made of oil. So there's lots of things we can do every day to help make this change so that we're no longer in business with the amount of blood abroad.
Magistad: So to the extent that we need to continue to rely on oil in the 21st century, there are countries like Norway that export oil and do it relatively in a relatively ethical way. Do you think that you can actually incentivize authoritarian governments, "we want to continue to export oil. OK we'll change our government structure." Or do you think it'll just be that those guys will be you know sort of shunned from the market they won't be able to profit anymore and those who are already kind of doing things in a way that's more acceptable to the global community will do better?
Wenar: The key difference with Norway and even US, UK is that in these countries, the oil came in after the government was accountable to the people and when that happens then of course the people make the government use the money for public goods, like they have in Norway spectacularly.
Magistad: They set up a sovereign fund so the money is available for social services, and infrastructure, and pensions.
Or even worse, armed groups get the money and then they start a civil war. We have seen various authoritarian regimes make the transition to democracy. So think about Mexico, or Indonesia. We're now seeing actually even Nigeria making that transition. Now, that's not quite as encouraging as you might think, because what's happening in all of those countries is essentially that they're running out of oil, so they become more democratic when they have lower oil revenues per capita.
Once your oil revenues per capita start going down, then of course, the supply of power for the authoritarian isn't there anymore, and the democratic transition begins. What we need to do is to take our business away from very big oil rich authoritarian states, until they become more democratic. Now you ask whether they would just be shunned from the world market. No. I mean that energy is going to flow. The world needs that energy in the Middle East.
Humanity's primary energy supply comes right from that region. So that energy will flow. The question is, who is it going to flow through? Is it going to flow through the men with the guns, or is it going to flow through minimally accountable governance? And what we need to do is to encourage the world, only to buy from people who could possibly have the authorization of their citizens to sell off those resources.
Magistad: And how are the lower oil prices at the moment coming into play, in trying to achieve this goal? Making it easier? Making it harder?
Wenar: It’s making it easier. And the world keeps making this project easier and easier, I have to say. I mean when I started this 10 years ago, you remember, everyone was talking about peak oil and now they don't talk about peak oil anymore.
North America has enough energy now for its own needs. A lot of people think that we're going to get off authoritarian oil, no matter what, even without my stuff, even without Clean Trade. Lower oil prices also are making it easier to do this, not least because the authoritarians have less power today. It's harder for them to keep a grip on their own people, to keep their own people oppressed and in check. Even the Saudis, the biggest oil state of them all. You can see them having trouble balancing the books.
Magistad: My understanding of the price is going down at the moment is that this was part of a strategy by the Saudis to try to basically drive fracking out of the market, to try to make other alternatives to oil so expensive that businesses wouldn't be able to continue, and then they could jack the prices of oil back up again. Is that the case, or were other market forces at play that have been driving the prices down?
Wenar: So the big story in oil of the past seven years has been fracking, shale, especially in North America, where all this oil and gas is now available in the North American market. And the Saudis saw that, and the drop in price that that really helped to cause. And the Saudis said, "We are going to keep pumping, in the hopes that the price will go down so far that these frackers in America will go out of business."
And to some extent, we are seeing that rig counts are way down. Lots of bankruptcies, consolidations. But Yankee ingenuity is stronger than the Saudis thought. And there's a real, real battle between Texas and Saudi Arabia right now. Who's going to blink first? Are the Saudis going to be able to keep their prices down at the expense, possibly, of their own internal security, keeping their population quiescent? Or are the Texans going to have to go out of business? It looks like the American energy industry is much more robust than the Saudis thought. And even if companies go out of business now with a low oil price, they're going to come right back and get back into business once the price goes up even a little bit.
Magistad: Doesn’t this also incentivize governments like ours to increase the funding of renewable energy resources, put more money into wind and solar and say you know, "Look, let's be done with it." In the past, we said it wasn't economically viable, or there were oil company interests that were lobbying, "Let's just keep things the way they are." But if we're going to have this kind of yo yo effect with the Saudis and their allies you know basically trying to play the market. Let's just get out of you know being part of the yoyo effect.
Matt Mills McKnight/Reuters
Wenar: It’s true, and the yo-yo is very dangerous. Almost every US recession since World War II has been preceded by an oil price spike. Oil is a very volatile commodity. It's more volatile than 95 percent of the products on the market in the United States. It goes up and down, and way up and way down. And the price affects everything we buy.
And it's hard for our economy to handle these shocks. And yes, in fact we should find alternative sources of energy for sure as fast as we can. The oil companies never like this to be said but we should also look at our oil subsidies. We like everybody else give special treatment to our oil companies. And that's a lot of money which is not going into the development of alternative fuels. There are a lot of things we can do in our domestic politics to change the stability in our energy supply. That's definitely things we should be looking into.
Magistad: There are things we should be looking into. But I mean the oil lobby has been pretty powerful for a very long time. Do you think it's actually going to happen?
Wenar: Let me say two things about that. One, if there are any of our friends in the oil industry listening, I'm just going to ask you, how much money have you made in Iran since 1979? How is it looking for your investments in Iraq? How are you feeling about stability in Libya? What's your prognosis long-term for Algeria? How's it going in Yemen? How much money have you made in Sudan since you were chased out in the ‘90s?
The biggest oil countries are tough for our companies, because of political instability and authoritarians that are hostile to us. So simply for the oil companies, bottom line, if that's what you care about out there you should think about governance in the countries where you want to produce.
But, let me also say for the people who are not particularly in favor of the bottom-line of oil companies. Again there's so many times where activists, if they have stuff ready to go, can win these David and Goliath battles even against the oil companies. There was an example really recently, which is encouraging. One problem with oil is that it's a fantastically opaque market. The people of the country where the oil is, can't find out how much money is coming into the country, how much money the government is getting. The contracts are completely opaque, it's terrible.
So again, some activists, all skilled up, knew that they had a solution in terms of oil company transparency. And they got a couple of senators on their side. And the senators introduced a bill, say in 2007-2008, and it went nowhere, because oil was very strong. But then, as with blood diamonds, the window of opportunity opened. And it happened that window of opportunity was that terrible BP spill in the Gulf of Mexico, where that platform blew up and killed those people.
That was a terrible incident, but the silver lining is that the oil companies were toxic in Washington that summer. They couldn't get their phone calls returned. In that summer, these two senators reintroduced their bill as part of that massive Dodd-Frank legislation.
At the last minute, on the last hour of the last day, the Oil Transparency Law was put into the United States legal code. And the inspiring thing about that is, once the Americans moved first, other countries immediately followed. So, Norway, the European Union, Canada now have oil transparency laws for their companies, which are the same as ours. Now there's oil transparency required of all companies based in major Western countries. That's a tremendous advance. We didn't think we were going to get that for years, and now it's the law.
Magistad: So if you were going to answer the question related to the issues you care about here, at Whose Century Is It, what would you say?
Mary Kay Magistad
Wenar: It’s the century of the peoples of the world. You can see this in the last 300 years. Individuals, networks, populations, nations are getting more power. And I mean, power in terms of economic power, coercive power, more information, better linked together. With that power, they're demanding more political rights. Why do we still have authoritarians in the 21st century? How many would there be without oil and foreign aid in the largest sense?
There would be some — China for sure. My strong suspicion is, as the peoples of the world gain more power, they will finally, everywhere, come to rule their own countries. And that will make them much better able to deal with each other on a level footing.
Magistad: It really is a pleasure to hear an idealist imagine a better world. The skeptic in me wonders what it‘s going to take to convince China‘s leaders that it‘s better to support countries moving toward democracy, rather than authoritarian states. They‘ve been very comfortable dealing with authoritarian states and less comfortable with democracy, especially if it proves contagious within China‘s borders.
China‘s done quite well for itself, rushing in to do business with authoritarian regimes, while the West imposes sanctions. I doubt that‘s going to stop anytime soon.
But — the idealist in me likes the reminder that many huge changes have seemed impossible until they happened — like, the end of slavery, or colonialism, or the Iron Curtain. We‘ve certainly got some incentives to change our relationship with oil — wanting a livable planet to pass on to our descendants, in an age of climate change, wanting to avoid arming extremists, or getting into unnecessary wars. I‘m not sure authoritarianism and oppression will end, because I choose to buy my gas from a place that I know screens out authoritarian oil — but it sounds like a step in the right direction.