In the latest issue:

Real Men Go to Tehran

Adam Shatz

What Trump doesn’t know about Iran

Patrick Cockburn

Kaiser Karl V

Thomas Penn

The Hostile Environment

Catherine Hall

Social Mobilities

Adam Swift

Short Cuts: So much for England

Tariq Ali

What the jihadis left behind

Nelly Lahoud

Ray Strachey

Francesca Wade

C.J. Sansom

Malcolm Gaskill

At the British Museum: ‘Troy: Myth and Reality’

James Davidson

Poem: ‘The Lion Tree’

Jamie McKendrick

SurrogacyTM

Jenny Turner

Boys in Motion

Nicholas Penny

Jia Tolentino

Lauren Oyler

Diary: What really happened in Yancheng?

Long Ling

Short Cuts: Harry Goes Rogue

Jonathan Parry

Past Its PeakMichael Klare
Close

Terms and Conditions

These terms and conditions of use refer to the London Review of Books and the London Review Bookshop website (www.lrb.co.uk — hereafter ‘LRB Website’). These terms and conditions apply to all users of the LRB Website ("you"), including individual subscribers to the print edition of the LRB who wish to take advantage of our free 'subscriber only' access to archived material ("individual users") and users who are authorised to access the LRB Website by subscribing institutions ("institutional users").

Each time you use the LRB Website you signify your acceptance of these terms and conditions. If you do not agree, or are not comfortable with any part of this document, your only remedy is not to use the LRB Website.


  1. By registering for access to the LRB Website and/or entering the LRB Website by whatever route of access, you agree to be bound by the terms and conditions currently prevailing.
  2. The London Review of Books ("LRB") reserves the right to change these terms and conditions at any time and you should check for any alterations regularly. Continued usage of the LRB Website subsequent to a change in the terms and conditions constitutes acceptance of the current terms and conditions.
  3. The terms and conditions of any subscription agreements which educational and other institutions have entered into with the LRB apply in addition to these terms and conditions.
  4. You undertake to indemnify the LRB fully for all losses damages and costs incurred as a result of your breaching these terms and conditions.
  5. The information you supply on registration to the LRB Website shall be accurate and complete. You will notify the LRB promptly of any changes of relevant details by emailing the registrar. You will not assist a non-registered person to gain access to the LRB Website by supplying them with your password. In the event that the LRB considers that you have breached the requirements governing registration, that you are in breach of these terms and conditions or that your or your institution's subscription to the LRB lapses, your registration to the LRB Website will be terminated.
  6. Each individual subscriber to the LRB (whether a person or organisation) is entitled to the registration of one person to use the 'subscriber only' content on the web site. This user is an 'individual user'.
  7. The London Review of Books operates a ‘no questions asked’ cancellation policy in accordance with UK legislation. Please contact us to cancel your subscription and receive a full refund for the cost of all unposted issues.
  8. Use of the 'subscriber only' content on the LRB Website is strictly for the personal use of each individual user who may read the content on the screen, download, store or print single copies for their own personal private non-commercial use only, and is not to be made available to or used by any other person for any purpose.
  9. Each institution which subscribes to the LRB is entitled to grant access to persons to register on and use the 'subscriber only' content on the web site under the terms and conditions of its subscription agreement with the LRB. These users are 'institutional users'.
  10. Each institutional user of the LRB may access and search the LRB database and view its entire contents, and may also reproduce insubstantial extracts from individual articles or other works in the database to which their institution's subscription provides access, including in academic assignments and theses, online and/or in print. All quotations must be credited to the author and the LRB. Institutional users are not permitted to reproduce any entire article or other work, or to make any commercial use of any LRB material (including sale, licensing or publication) without the LRB's prior written permission. Institutions may notify institutional users of any additional or different conditions of use which they have agreed with the LRB.
  11. Users may use any one computer to access the LRB web site 'subscriber only' content at any time, so long as that connection does not allow any other computer, networked or otherwise connected, to access 'subscriber only' content.
  12. The LRB Website and its contents are protected by copyright and other intellectual property rights. You acknowledge that all intellectual property rights including copyright in the LRB Website and its contents belong to or have been licensed to the LRB or are otherwise used by the LRB as permitted by applicable law.
  13. All intellectual property rights in articles, reviews and essays originally published in the print edition of the LRB and subsequently included on the LRB Website belong to or have been licensed to the LRB. This material is made available to you for use as set out in paragraph 8 (if you are an individual user) or paragraph 10 (if you are an institutional user) only. Save for such permitted use, you may not download, store, disseminate, republish, post, reproduce, translate or adapt such material in whole or in part in any form without the prior written permission of the LRB. To obtain such permission and the terms and conditions applying, contact the Rights and Permissions department.
  14. All intellectual property rights in images on the LRB Website are owned by the LRB except where another copyright holder is specifically attributed or credited. Save for such material taken for permitted use set out above, you may not download, store, disseminate, republish, post, reproduce, translate or adapt LRB’s images in whole or in part in any form without the prior written permission of the LRB. To obtain such permission and the terms and conditions applying, contact the Rights and Permissions department. Where another copyright holder is specifically attributed or credited you may not download, store, disseminate, republish, reproduce or translate such images in whole or in part in any form without the prior written permission of the copyright holder. The LRB will not undertake to supply contact details of any attributed or credited copyright holder.
  15. The LRB Website is provided on an 'as is' basis and the LRB gives no warranty that the LRB Website will be accessible by any particular browser, operating system or device.
  16. The LRB makes no express or implied representation and gives no warranty of any kind in relation to any content available on the LRB Website including as to the accuracy or reliability of any information either in its articles, essays and reviews or in the letters printed in its letter page or material supplied by third parties. The LRB excludes to the fullest extent permitted by law all liability of any kind (including liability for any losses, damages or costs) arising from the publication of any materials on the LRB Website or incurred as a consequence of using or relying on such materials.
  17. The LRB excludes to the fullest extent permitted by law all liability of any kind (including liability for any losses, damages or costs) for any legal or other consequences (including infringement of third party rights) of any links made to the LRB Website.
  18. The LRB is not responsible for the content of any material you encounter after leaving the LRB Website site via a link in it or otherwise. The LRB gives no warranty as to the accuracy or reliability of any such material and to the fullest extent permitted by law excludes all liability that may arise in respect of or as a consequence of using or relying on such material.
  19. This site may be used only for lawful purposes and in a manner which does not infringe the rights of, or restrict the use and enjoyment of the site by, any third party. In the event of a chat room, message board, forum and/or news group being set up on the LRB Website, the LRB will not undertake to monitor any material supplied and will give no warranty as to its accuracy, reliability, originality or decency. By posting any material you agree that you are solely responsible for ensuring that it is accurate and not obscene, defamatory, plagiarised or in breach of copyright, confidentiality or any other right of any person, and you undertake to indemnify the LRB against all claims, losses, damages and costs incurred in consequence of your posting of such material. The LRB will reserve the right to remove any such material posted at any time and without notice or explanation. The LRB will reserve the right to disclose the provenance of such material, republish it in any form it deems fit or edit or censor it. The LRB will reserve the right to terminate the registration of any person it considers to abuse access to any chat room, message board, forum or news group provided by the LRB.
  20. Any e-mail services supplied via the LRB Website are subject to these terms and conditions.
  21. You will not knowingly transmit any virus, malware, trojan or other harmful matter to the LRB Website. The LRB gives no warranty that the LRB Website is free from contaminating matter, viruses or other malicious software and to the fullest extent permitted by law disclaims all liability of any kind including liability for any damages, losses or costs resulting from damage to your computer or other property arising from access to the LRB Website, use of it or downloading material from it.
  22. The LRB does not warrant that the use of the LRB Website will be uninterrupted, and disclaims all liability to the fullest extent permitted by law for any damages, losses or costs incurred as a result of access to the LRB Website being interrupted, modified or discontinued.
  23. The LRB Website contains advertisements and promotional links to websites and other resources operated by third parties. While we would never knowingly link to a site which we believed to be trading in bad faith, the LRB makes no express or implied representations or warranties of any kind in respect of any third party websites or resources or their contents, and we take no responsibility for the content, privacy practices, goods or services offered by these websites and resources. The LRB excludes to the fullest extent permitted by law all liability for any damages or losses arising from access to such websites and resources. Any transaction effected with such a third party contacted via the LRB Website are subject to the terms and conditions imposed by the third party involved and the LRB accepts no responsibility or liability resulting from such transactions.
  24. The LRB disclaims liability to the fullest extent permitted by law for any damages, losses or costs incurred for unauthorised access or alterations of transmissions or data by third parties as consequence of visit to the LRB Website.
  25. While 'subscriber only' content on the LRB Website is currently provided free to subscribers to the print edition of the LRB, the LRB reserves the right to impose a charge for access to some or all areas of the LRB Website without notice.
  26. These terms and conditions are governed by and will be interpreted in accordance with English law and any disputes relating to these terms and conditions will be subject to the non-exclusive jurisdiction of the courts of England and Wales.
  27. The various provisions of these terms and conditions are severable and if any provision is held to be invalid or unenforceable by any court of competent jurisdiction then such invalidity or unenforceability shall not affect the remaining provisions.
  28. If these terms and conditions are not accepted in full, use of the LRB Website must be terminated immediately.
Close

Unlike the oil ‘shocks’ of the 1970s, the current energy crisis is almost certain to be long-lasting. None of the quick fixes proposed by pundits and politicians – drilling in protected wilderness and maritime areas, curbs on commodity speculators, pressure on members of Opec to increase output – is likely to have much impact. In 1973-74 and again in 1979-80, events in the Middle East led to a sharp reduction in the flow of oil from the Persian Gulf, causing a contraction in global supplies and a rise in energy prices, and thus sparking a global recession. But when equilibrium of a sort was restored to the region, the oil began to flow again and the crisis passed. Now, however, the imbalance between supply and demand is largely due to factors inherent in oil commerce itself – and so is less easily solved.

The oil crisis is the product of three developments: an unexpected surge in demand, much of it from Asian countries; a slowing in the growth of world supply; and a shift in the centre of gravity of production from the global North to the global South. But the situation has been made far worse by the 1994 decision by Jiang Zemin’s government to make car production and ownership a ‘pillar’ of the Chinese economy; and by the Bush administration’s National Energy Policy of 2001, which backed the continued production and consumption of oil rather than the development of alternative sources of energy. Both policies ensured that the global demand for oil would rise just at the moment when the industry’s capacity to boost supply was beginning to falter.

According to the Statistical Review of World Energy, published every June by BP, oil consumption jumped from 69.5 million barrels a day at the end of 1995 to 85.2 million barrels at the end of 2007. Some of this huge rise was generated by increased fuel consumption in the United States (where giant SUVs had become all the rage), but most was the result of increased demand from the rapidly industrialising nations of the developing world. Of those 15.7 million extra barrels, 4.6 million were added by China, and 2.7 million by other Asian states, including India.

These trends are likely to continue. In its 2008 Medium-Term Oil Market Report, the International Energy Agency (IEA) predicts that global consumption will rise from 86.9 million barrels a day in 2008 to 94.1 million in 2013. Almost all of this growth is expected to come from non-OECD countries, with Asia generating the largest share. According to the report, China alone will account for nearly a third of the increase in global consumption over the next five years. Although some progress has been made in Europe and Japan towards reining in demand, this has been more than offset by rising consumption elsewhere. And the growing signs that the industry is no longer capable of keeping pace with the surge in demand are helping to drive prices even higher.

The essential cause of the slowdown in the growth of output is that many large and easy to exploit fields have already been substantially depleted, while those yet to be developed are, in general, smaller, more remote and harder to bring into operation (whether for political, environmental or technical reasons). Various methods, such as the use of ‘enhanced oil recovery’ techniques, have been developed by the industry to prolong production at fields that are beginning to show signs of decline. Offshore drilling, meanwhile, has moved into ever deeper waters in the search for promising deposits. But these efforts can’t compensate for the exhaustion of the major fields that have sustained global consumption for the past half-century.

Although there are tens of thousands of producing oilfields in the world, nearly half of our daily intake comes from just 116 enormous fields. Of these, all but four were discovered more than a quarter of a century ago, and many are showing signs of exhaustion. In May, for example, the Mexican state oil company, Pemex, announced that output at Cantarell – the country’s biggest field – had declined by nearly 40 per cent since 2006. Similar problems are affecting some of Russia and Norway’s major fields.

In the 2008 report IEA analysts increased their estimate of decline rates in mature fields to 5.2 per cent a year, up from 4 per cent in 2007. This means that 3.5 million more barrels a day would have to be generated elsewhere every year just to hold production levels steady. By 2013, the industry will have to generate 24.7 million barrels a day in additional capacity in order to reach the predicted target of 94.1 million barrels: a nearly impossible task.

As the IEA report points out, although the major oil companies are eager to bring new projects online (and thereby increase their take from the current surge in prices), the only options that remain are those that cost more, take longer to complete or require complex technology, and the major companies are reluctant to invest the many billions of dollars required. Although a number of major projects undertaken in the late 1990s and early 2000s will come on stream in 2009 and 2010, there are very few waiting in line behind them, and the IEA predicts a sharp fall-off in new capacity in 2011 and after – just when demand from China, India and other developing countries will take off in earnest. Mainstream energy analysts and industry officials are now coming to agree that conventional oil production will soon peak and then begin an irreversible decline – a view that was until recently held only by a group of unorthodox oil geologists, many associated with the Association for the Study of Peak Oil and Gas.

When the Petroleum Age began in the late 19th century, production was concentrated in the United States, Mexico, Romania and the Russian empire. This remained the case until well after the Second World War, with the US still providing half of the world’s oil in 1955. But the centre of production has moved ever southwards, to the Middle East, Africa, Central Asia and South America. Today, the US accounts for only 9.6 per cent of output; the Middle East for 30.1 per cent; Africa for 12.5 per cent and Latin America for 12.4 per cent. All told, the non-OECD countries now supply approximately three-quarters of the world’s oil.

This shift is important because most of the major developing-world producers were at one time or another ruled by the imperial powers and continue to bear the scars. Some, like Iraq, have borders that were devised by the imperial powers to meet their own needs and bear little relation to ethnic, religious or linguistic realities. Such regions are susceptible to involvement in violent struggles for regional autonomy or secession. The spoils of oil production often exacerbate these problems, by enhancing the attractions of separatism (especially if the oil fields are located in the ethnic territory involved, as in Angola’s Cabinda province or Iraqi Kurdistan) or of seizing national power (and thus taking control of the allocation of oil revenues).

All this means that the major oil-consuming nations are more dependent than ever on supplies from countries that are prone to rebellion, ethnic strife, separatism, sabotage and coups d’état – often instigated by the lure of oil wealth. Attacks on oil rigs, pipelines, refineries, loading platforms, tankers and other exposed elements of infrastructure cause temporary reductions in global supplies and lead to price spikes: recently, refinery explosions in Iraq, insurgent attacks in Nigeria and pipeline sabotage in Mexico have all had this effect. This would be bad enough if the industry possessed substantial spare capacity, which would allow it to compensate for a temporary drop in output, but major producers no longer have significant reserves such as Saudi Arabia deployed in 1990 to avert an energy crisis after Iraq invaded Kuwait. While price spikes don’t tend to last long, their frequency seems to be increasing, tempting speculators to buy oil futures at ever higher prices in expectation of higher returns.

Until 1994, China manufactured very few cars (in 1990, it was producing only 42,000 a year) and discouraged imports of foreign-made vehicles. But after Jiang Zemin’s State Planning Commission announced that car production was to become a ‘pillar’ of national economic development, with foreign companies invited to provide capital and knowhow, China soon became the developing world’s leading recipient of foreign direct investment. By 1998, it was making 500,000 cars a year; in 2002, it was making a million; a year later it was making two million.

There have been tangible economic benefits. As Kelly Sims Gallagher reported in China Shifts Gears (2006), by 2003 China’s automobile industry – including cars, motorcycles, engines and parts – employed 1.6 million workers and accounted for 6 per cent of the total added value of manufacturing. The growing availability of relatively affordable cars to China’s burgeoning middle class has also satisfied a long-suppressed desire. According to a recent US government estimate, the number of privately owned cars in China is expected to rise from 27 million in 2004 to 400 million in 2030.

This huge growth is the main cause of the rise in China’s oil consumption. Until 1993, it consumed less oil than any other major power and satisfied its needs from domestic production. In that year, according to BP, China produced and consumed 2.9 million barrels a day, compared to 17.2 million barrels in the United States and 5.5 million in Japan. By the end of 2003 it had overtaken Japan to become the world’s second biggest consumer and now consumes 9.2 per cent of the world’s oil. But it has failed to boost domestic production much above its 1990s level. In spite of efforts to develop new fields in offshore areas and the far western Xinjiang region, China is producing only 3.7 million barrels a day, an increase of a mere 800,000 barrels over its 1993 output. This means that imports have had to rise from zero to their current level of about 3.7 million barrels a day; and it is this rise, the largest in any country over the past ten years, that has made such a contribution to the growth in global demand.

It’s difficult not to feel that the Chinese leaders made a strategic error in choosing to push car manufacture. Why not develop subway systems, suburban and high-speed intercity railways? With its crowded cities and continental expanse, China would be far better served by an integrated rail network. Beijing is now finally taking steps to improve the country’s rail system, but it is also committed to a huge road-building programme, and continues to hold gasoline and diesel prices at below market rates, further spurring sales of both oil and cars. With domestic output unable to satisfy rising demand, China’s devotion to the automobile will make it a sinkhole for imported oil, depleting its economy and distorting international markets.

One of George W. Bush’s first major acts as president was to set up a National Energy Policy Development Group (NEPDG), headed by Dick Cheney. Many observers assumed that the NEPDG would take account of the evidence then beginning to accumulate that oil production was about to peak: one of the first key studies, Kenneth Deffeyes’s Hubbert’s Peak: The Impending World Oil Shortage, was published in 2001 and widely circulated. (M. King Hubbert was the oil geologist who first developed the equations that predicted a peak.) Many environmentalists also argued that a new energy policy should stress the importance of developing alternatives to fossil fuels, given the mounting signs of global warming. But Cheney, a former executive at Halliburton and a close ally of many oil company executives, had other plans; though he met senior executives of major US energy firms, he failed to consult with representatives of any environmental organisations.

The Cheney panel’s final report, National Energy Policy, published on 16 May 2001, contained 105 recommendations, but almost all US news coverage was devoted to just one of them: the call for drilling in the Arctic National Wildlife Refuge. Environmentalists raised a howl of protest, and Congress has yet to give its consent. But this focus on Arctic drilling has had the unfortunate effect of distracting attention from the more profound implication of the report: its commitment to the perpetuation of the Petroleum Age by any means and at any cost.

Cheney came close to revealing his objective when he told reporters on 30 April 2001, two weeks before the NEP’s release: ‘Conservation may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy.’ Oil and other fossil fuels, he said, would remain America’s principal sources of energy for ‘years down the road’. To ensure this, the NEP called for increased drilling not only in the Arctic but in other protected wilderness areas, on public land in the American West, and in the outer continental shelf. Even more significant, the report openly assumed that the United States would become more rather than less dependent on imported oil, and urged the president to take a more active role in securing American access to foreign energy reserves. Of the report’s recommendations, around a third are aimed at bolstering US participation in global oil markets.

Bush claims that the NEP provides strong backing for the development of wind power, solar power and other energy alternatives. And it is true that the administration has approved modest research grants into such technologies. But these are insignificant compared with the support given to increased domestic drilling and the pursuit of foreign oil, a pursuit that can be measured by the repeated visits by Bush, Cheney, Condoleezza Rice and other senior figures to the capitals of major oil-producing states, including Angola, Azerbaijan, Kazakhstan, Nigeria and Saudi Arabia.

There is also the question of how far the administration’s decision to go to war in Iraq was prompted by a desire to control Iraqi oil (or indeed to ensure US dominance of the Persian Gulf). Until recently, the view that Iraq was a war for oil was held largely by critics of the war, but last year Alan Greenspan broke ranks with other members of the Washington establishment when he declared: ‘I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.’ Whatever its original aim, the conspicuous presence of US forces in the Arab world and the continuing instability in Iraq have significantly contributed towards the proliferation of terrorist groups in the region, many of which have mounted attacks on pipelines, refineries and loading platforms – causing yet more disruptions to oil supplies.

Throughout their administration Bush and Cheney have worked to impede the adoption of conservation measures (such as tough fuel-efficiency standards for domestic vehicles), to hold back the development of alternative sources of energy and transport, and to sustain high levels of oil consumption. As a result, according to BP, US consumption rose by one million barrels a day over the course of Bush’s presidency while the output of domestic fields declined by roughly the same amount, pushing net imports up by two million barrels. Although not as large a rise as that recorded by China, it still contributed to the pressure on oil exporters and helped to push prices up. Until American and Chinese consumers of oil are put on a diet, and alternatives to petroleum are developed, the world’s energy crisis will only get worse.

Send Letters To:

The Editor
London Review of Books,
28 Little Russell Street
London, WC1A 2HN

letters@lrb.co.uk

Please include name, address, and a telephone number.

Letters

Vol. 30 No. 18 · 25 September 2008

Michael Klare’s plan to ward off the impending oil crisis is to put ‘American and Chinese consumers of oil … on a diet’ (LRB, 14 August). The problem, as he sees it, is a combination of the geological finiteness of oil reserves, economic growth in developing countries, and the Bush-Cheney energy policy. He absolves oil companies and commodity and stock traders from blame. But if there is an oil crisis, it has taken the form of a crisis in the value of the US dollar, or of a sudden drop in the price of oil and of the commodities tied to it, which has reduced the profitability of the oil industry and global capital as a whole. This is why oil producers – state and multinational oil companies alike – have resisted calls to invest in expanding production capacity as oil prices have climbed in recent years. Such investments would have reduced profitability by cutting directly into profits and by increasing the risk of market gluts that would bring prices down and reduce profits further.

Oil companies decide against investing in expanding production because they don’t want to erode the conditions that generate surplus profits, not because there isn’t enough oil. Oil majors are never ‘eager to bring new projects online (and thereby increase their take from the current surge in prices)’, as Klare maintains, because this would produce the opposite effect. Indeed, major companies have always endeavoured to keep oilfields unexplored and unexploited for long periods of time, and to prevent smaller producers, the so-called independents, from gaining access to them. They have managed this primarily through monopolies, cartels and gentlemen’s agreements: the concentration of power has remained an essential characteristic of the oil industry since the turn of the 20th century.

The surge, or more precisely the fluctuation, in oil prices has more to do with speculation on ‘paper oil’ in commodity markets. Financialisation has also penetrated the oil industry at a more fundamental level. Oil ‘investments’, when they do occur, do not necessarily find their way to the wellhead or the exploration rig: they go mostly into buying shares, stocks and assets, resulting in the further monopolisation of the oil industry through large-scale mergers and acquisitions. When profits are not available to finance such mergers and acquisitions, oil companies (including state oil companies) borrow from large investment banks or offer company stock on the market. Hardly any oil major today is not publicly traded, and only a handful of state oil companies are completely owned by their respective states. Consequently, profits have increasingly derived from trade in stock rather than from investment in extraction. Indeed, ‘investment’ in the oil industry, in the form of mergers and acquisitions, has increased the ability of oil majors to control and prevent investment in production. The share of investment to profit has significantly declined over the past decade, as more has been invested in buying back stock and distributing higher dividends to shareholders. According to Floyd Norris of the New York Times, in 1997 Exxon was investing twice as much as it paid its shareholders; in 2005, with the first surge in oil prices, it invested 70 cents for every dollar it distributed to shareholders.

The financialisation of the oil industry has turned political instability into an asset, especially if it can be managed in such a way that it does not completely prevent access to oil reserves. The deterioration of the political situation in the Middle East after the invasion of Iraq, and the consequent interruptions in supply, has expanded the profits of oil majors (and military contractors: wells and pipelines must be protected). The tightening of sanctions against Iran and the threat of a military strike there have had the same effect. There is a more intimate connection between war and oil than peak oil analysts suggest. As oil reserves dry up elsewhere, the cheap and easily accessible reserves of the Middle East will become ever more crucial. Military expansion to gain access to oil, according to Klare, has made ‘price spikes’ more frequent because of the disruption to oil supplies caused by attacks on oil infrastructure by terrorist groups. But what if the war on Iraq was itself intended to create a longer-lasting disruption of oil supplies and a spike in the price of oil? What if the war was intended to keep Iraqi oil off the market by preventing, and in the long run controlling, investment in its production? In this respect the war has had a similar effect to the sanctions maintained against Iran since 1996, which have prevented it from expanding its productive capacity. Today, Iran’s share of world oil reserves is around 10 per cent, while its share of world oil production is around 5 per cent (and dropping). Iraq has a similar (possibly greater) share in world oil reserves and an even smaller share in world oil production. Both countries could significantly increase the supply of oil on the world market, which would result in a drop in its price.

Actual and potential political instability in oil-producing regions not only takes a significant amount of oil off the market, but boosts speculation on oil futures. Every time Bush or Cheney reminds the world that the military option against Iran is still on the table, and Iran counters by threatening to close the strait of Hormuz, a signal is sent to investors to buy oil futures lest a sudden interruption in supply results in an immediate and disproportionate increase in its price. In this respect, peak oil predictions of oil crises have the same effect as wars or threats of military crises, and for obvious reasons energy analysts in big investment outfits, as well as corporate raiders, delight in projecting high oil prices (they never explain their miscalculations when the price eventually drops). But the real crisis would result from an inability to maintain high oil prices at a time of general decline in the profitability of capital, and the eventual burst of the speculative oil bubble.

Mazen Labban
University of Miami

send letters to

The Editor
London Review of Books
28 Little Russell Street
London, WC1A 2HN

letters@lrb.co.uk

Please include name, address and a telephone number

Read anywhere with the London Review of Books app, available now from the App Store for Apple devices, Google Play for Android devices and Amazon for your Kindle Fire.

Sign up to our newsletter

For highlights from the latest issue, our archive and the blog, as well as news, events and exclusive promotions.