| Review of: | Crude power: politics and the oil market by Oystein Noreng |
|---|---|
| Reviewed By: | Paul Stevens |
| Reviewed in: | International Affairs |
| Date accepted online: | 27/07/2004 |
| Published in print: | Volume 80, Issue 2, Pages 367-414 |
Energy and environment
This book examines the political economy of the international oil industry and markets. According to the blurb, it seeks to provide an analysis 'both of the world's dependency on Middle Eastern oil, and of the very dangerous way politics and economics play themselves out in the oil game - as producers and consumers tug at each other's interests'.
There are five chapters: the necessity of oil; foreign powers and Middle Eastern oil; oil supplies, OPEC, oligopoly and politics; the political economy of oil prices; and finally, the persistent political risks. The book is an interesting mixture of three distinct but interconnected strands. The first strand involves what is essentially a survey of the literature on various technical aspects of the industry. For example, to cite just one area, the discussion of views on the origins and nature of economic rent in the oil price is illuminating and clearly done.
The second strand involves aspects of the history of the industry. At times this reviewer found this a little superficial. However, to be fair it is a huge topic and is introduced in the book to provide a background context to the discussion of current issues and hence is not intended to be a comprehensive history of the industry. In any case, it is always dangerous to write a history of anything simply because everyone has different views and the history of anything of interest is inevitably controversial.
The third strand is a discussion of the underlying politics of the current and future state of the oil industry. This is even more controversial than Professor Noreng's take on history although, to misquote Arnold Toynbee's comment on historians, every energy economist worth his salt has a bee in his bonnet. The secret is to listen for the buzzing. Professor Noreng's 'buzzing' is his view that securing oil supplies is a (almost
Without wheeling out the detailed arguments for and against this view it does seem to this reviewer too simple a version of reality, with particular reference to the assumption that the basis of any US policy is clear-cut and well defined. The process of policy-making in Washington in terms of both formulation and implementation is so obscure and arcane as to be virtually impenetrable. There are so many interest groups, lobby groups and crusading champions that it is doubtful if anyone really understands why specific decisions were taken or particular policy stances pursued. For example, it is always difficult to square such views of the centrality of oil in US foreign policy with successive administrations' invariable and unshakeable support for Israel. This support shows little sign of wavering as Israel becomes ever more extreme and hard line. If oil were really the main building block of US policy as many suggest, surely more pressure would have been exerted to solve the Palestinian problem in a way acceptable to both sides, thereby removing the single most obvious source of regional instability in an area with two-thirds of proven global oil reserves? Nonetheless such 'oil-centric' views of US policy are widely held and Noreng argues them well and coherently.
An unfortunate weakness of the book is that it was completed before the US invasion of Iraq and the subsequent shambles which unfolds daily. Although this can hardly be blamed on the author, the result is, nevertheless, that much of the book's speculation about Iraq's future role in the politics of the region is effectively irrelevant. However, that said, the book's discussion of Iraq's future role in oil matters generally and OPEC in particular remains fairly robust in the post-Saddam era. Another weakness of the book is the tendency to use fairly selective evidence to argue a given point. This is done on many occasions. To give one minor example, Noreng argues for the central role of the US in the link between spot prices, physical trading volumes and inventory changes. And yet this is based on the one (and only) example when the Democratic Party, desperate in the run-up to the presidential election in autumn 2000, released oil from the strategic petroleum reserve to dampen prices. There are also gaps in the analysis. For example, some of the discussions on vertical integration in the industry miss many of the nuances as the majors switched from the use of operational vertical integration to the use of markets following the second oil shock. However, to be fair this book seeks to cover a very wide ground and an absence of gaps would require a very large tome indeed.
On the positive side, the book is written by someone who is very sympathetic to the problems of the oil exporters. Alas, this is increasingly rare as the media cheerfully seek to demonize Third World oil exporters, especially those with an Islamic orientation which have the temerity to challenge the interests of the industrial consumers. The book also gives a good overview of many of the current issues and challenges which face the industry and its participants. It is well-written, which should make it accessible to the intelligent layman. On balance it is a welcome addition to the literature if only because it further fuels the various controversies which make the industry so fascinating.