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Profits and Power: Navigating the Politics and Geopolitics of Oil

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David A. Detomasi discusses how the oil system works, its key players, and the political and geopolitical issues related to its use.

Image courtesy of interviewee. May 29, 2024

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This video is a transcribed discussion where the speaker reflects on their background, views, and reasons for writing a book about the oil industry. They describe growing up in Cochrane, Alberta, near Calgary—the epicenter of the Canadian oil industry—before moving to Eastern Canada for graduate training. The speaker notes a significant trend among young people who are averse to the oil and gas sector. They emphasize the importance of understanding the global energy system and the widespread dependency on oil, especially concerning food production, plastics, and various everyday products.

The speaker presents their motivation to provide a comprehensive overview of the geopolitics and economics surrounding oil, based on years of study and industry engagement. They argue that while there is a growing movement to reduce oil consumption due to environmental concerns, many existing uses—like transportation and industrial applications—remain heavily reliant on oil.

The discussion touches on global oil dynamics, including dependency factors for oil-producing countries and the strategic relationships tied to energy security. The speaker believes that predictions about a rapid end to the oil era are overly optimistic, citing entrenched systems and the rapid industrialization needs of emerging markets as reasons for continued oil dependency. They advocate for a balanced and reasonable conversation about the role of oil in society, addressing both its benefits and drawbacks without tribalism or hostility. The overall goal is to encourage a constructive dialogue about moving away from fossil fuels while acknowledging their current significance.

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X-TIMESTAMP-MAP:LOCAL=00:00:00.000,MPEGTS=900000

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I grew up in a small town called Cochrane, Alberta,

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which is east about, no, excuse me,

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about 30 kilometers west of Calgary.

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Now for your viewers, Calgary is Houston North

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or herd of Canada.

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It is the, it is the epicenter of the oil industry.

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And so it was always in, my life that I saw

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and knew people who worked in it.

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And I saw what the, the industry was like,

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and it just was sort of part of it.

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Then I moved to Eastern Canada to do my graduate training,

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and then eventually I worked at a university there.

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And over the past four or five years, in particularly

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what I've seen is a very large number of young people who

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absolutely despise the oil industry.

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Um, or the idea of using carbon based energy just generally.

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And, okay.

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And so I would be incorporating some

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of my knowledge about it.

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'cause I thought it was important. They learned

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how the global energy system worked

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and they, they didn't really wanna do it

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because they felt that somehow this was a dirty

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or difficult thing that they don't want to be involved in.

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But then I pressed a little further, a lot

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of them knew nothing about it.

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They didn't know how it worked.

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They didn't know where it came from.

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They didn't know how utterly dependent we all are

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on it, at least at the moment.

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And, I thought, okay, you can certainly oppose oil

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and gas all day long if that's your, your feelings,

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but you have to know why.

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And you have to know how, why it is the way it is.

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So I wrote the book primarily

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to give people a really clear overview of what's going on,

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what, and what the politics and geopolitics are around it.

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So that's the motivation. I've been interested.

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Been doing bits and pieces of it for 20 years.

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It was a big part of my master's degree.

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I did a master's degree in

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what was called war studies at the,

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Royal Military College of Canada,

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where you study the geopolitical impact of economic activity

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as part of broader strategic goals.

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And everyone was always talking about, you know,

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the US dependency on oil and the US dependency on imports.

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So I've been looking at it in, in terms of its details,

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in terms of its flows for at least a decade, probably more,

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before I even began seriously writing the book.

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And, the research was pri primarily documentary,

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tracking statistics, speaking

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with people in the industry of a of a length.

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There's a fair number of that in, in the book as as well.

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And trying to figure out how

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to locate Canada into this great big

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thing we call the global oil industry.

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So that's sort of how I did it.

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It is currently responsible for 95% of the world's,

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light duty vehicles in terms of their combustion engines.

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I mean, electric vehicles are starting to gain traction,

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but it's gonna be a while before they go.

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Um, oil and natural gas are responsible

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for something on the neighborhood of six to 70%

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of the world's fertilizer.

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So without it, we wouldn't have the massive amounts

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of food we need to feed 8 billion people.

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Uh, plastics are all derived from oil in various places.

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Asphalt teams for roads, golf balls,

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all the plastics in a modern emergency room,

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that we hopefully don't see, but

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Eventually, we probably will all depend,

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are manufactured based on that.

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I mean, there's literally hundreds

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and hundreds of things we use in our daily lives in addition

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to the burning of oil

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and refined products in engines,

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which is what most people think about.

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Um, that we don't have ready substitutes for plastics

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and glasses play, you know, golf knives, kayaks.

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So, it's going to reduce oil use substantially.

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Most people are focusing on its use

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and being burned in an internal combustion engine.

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But there's all these sorts of other things that go into it.

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And, and finally, what would people, I'm going

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beyond the scope of your question,

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but they, many, many countries in the world

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who produce oil are utterly dependent on

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it for their income.

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And so they're not gonna give it up easily, quickly.

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I think they had a little bit more, than they,

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than than they they do now.

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Um, and I think a lot of it's illusory in the sense

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that the, the power that oil gives you,

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particularly when you can sell it at a high price

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and extract it at a low price,

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which is what's going on in most

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of the Middle East suppliers.

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Most people, when I think of oil, think of opec,

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the organization patrolling exporting countries who work

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as a quasi cartel to try

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to keep the supply into the system enough

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to keep the price at a certain level that they target.

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Um, they can, when prices are enormous, take in

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enormous amounts of money.

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Uh, it's the basic license to print money,

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I call it in the book, what you see is being used

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and deployed in Saudi Arabia, both in terms

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of its own domestic development,

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but also can be deployed overseas in terms of investments.

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So one of the big ones is financial.

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You, you get a lot of power from having finance.

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Um, historically you also get freedom from

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if a country is dependent on another country

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for energy imports, that first country is very unlikely

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to significantly criticize that other country

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for things it doesn't want it to do.

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Because you know, you're afraid that if you do that, you,

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so one of the things we've seen in the history of oil is

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western countries sometimes tolerate things on oil

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by oil producers that they otherwise would not

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or would be at least critical of because of this dependency.

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Um, a third area where, you know,

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the west apparently has become very de dependent on oil

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and gas is many of the countries that have oil

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and gas spend a lot of money on their militaries.

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And they buy a lot of stuff from North America.

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And, and we end Europe, you know,

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very advanced weaponry systems

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that keeps those businesses going

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when we decide not to spend much.

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So there's lots of different ways.

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Oil money is always part of the geopolitics of the system.

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Initially, one of the best books on this was called the,

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the House of Bush and the House of Saudi,

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which basically argued

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that while the US Saudi relationship had been built often on

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the export of crude oil

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and the supply of the United States,

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it went far beyond that, right?

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I mean, Saudi Arabia, at least in theoretically

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historically, was supposed to be some kind of bridge

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between North America

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and the wider Arab world, could support moderation

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that wider Arab world

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and such a toleration of the existence of the state

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of Israel and a

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and a variety of other things

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that the Americans also kind of cared about.

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When the Americans became much stronger oil producers about

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what the advent of fracking, a lot of people worried about

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whether or not the US would remain interested at all in

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what was going on in the Middle East.

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It turns out it, it certainly is,

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but, you know, would this give them more freedom to act

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as a neutral arbiter in the region rather than a supplicant

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to people who gave it oil?

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Secondarily, Saudi, you know,

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we talk about sometimes there's two issues with oil.

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There is supply security,

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but for people who produce a lot of oil,

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there's also demand security.

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You have to sell the stuff.

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And what we've seen in Saudi Arabia recently is if they're

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not sure the Americans are gonna buy their surplus crude,

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well they're gonna look for other consumers who will.

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And that's code word for China and,

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and increasingly India who are powering their own economies

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with oil and carbon based fuels.

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So as they sell more to them,

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you might think their diplomatic and military

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and strategic reorientation might go

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to their bigger customers and less from North America.

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It, it's, the patterns are so cyclic.

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A couple of things that I saw is, one is the pattern towards

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increasing centralization and domination by a cartel.

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Um, the history of the energy industry has been one

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of boom and bust.

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And of course the biggest figure in oil's history was,

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you know, John d Rockefeller who ran Standard Oil

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and he wanted to standardize American production in the late

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18 hundreds, early 19 hundreds and states,

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because he hated this, you know, rise in demand, a lot

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of wildcatters come in, bring too much out to on the, and

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and tried to to, to monopolize it

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and control it through its refinery.

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That happened then it happened in the course at the end

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of the second World War with II sisters who tried

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to really monopolize and control oil production.

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It's happening again today with really big companies.

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It's interesting. One

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of the things I've noticed in the past couple

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of years is I would've thought a persistently long period

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of high price, which we have had,

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would bring more producers into the market

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and drive the price lower because the attractiveness.

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But that actually hasn't happened.

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We've had a sweet spot for two, three years now of

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by oil price dynamics where they've remained fairly high

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and fairly elevated and no huge amounts come on.

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So I, I think it's, we are in a different era now

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because of the pressures on

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carbon emissions and reducing them.

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But this, this, this moving back

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and forth, this, this tendency for people

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to over attribute the importance of oil

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or under attribute it, they like, it's not nothing,

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but it's not everything it to get its proper place

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that's historically powerful.

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So there's just a lot of patterns in it that just seem

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to come up against same damn thing after another.

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Well, a classic, classic example I talked about a few

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minutes ago, people had historically thought the only thing

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the Americans in the Europeans cared about in the Middle

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East was its ability to export a consistent supply of energy

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and full stop and the rest of it, you know,

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and I, I think oil mattered,

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but that's, that's not all that mattered.

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Uh, oil oil mattered in terms of the US aggression

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or war in Iraq at the, at the end of the know

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during the war on terror.

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Sure. But I don't believe

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that was the only thing that mattered.

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There was, there's other things that,

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that play into the mix.

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War oil and natural gas prices matter in the economy

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in terms of feedstock and cost for everything else,

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but they aren't the only things that matter.

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So, it's a very simplistic thing

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and an easy thing to say that says oil causes wars, or,

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but it actually, the data doesn't support that entirely.

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It's very, it matters,

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but it's not as big a deal as people often think it is.

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Yes. Well, and again, you have the devil's in the details.

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Our energy future, you know, are we talking a hundred years?

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Are we talking 50 years?

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Um, you know, people make predictions about, you know,

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some organizations,

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the International Energy Agency is predicting an end

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to the oil era much faster than I do.

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I I think we've got several decades left.

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I mean, I just look at the entrenched, systems we use

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to motor ourselves and power ourselves.

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How, you know, we've got 30,000 commercial aircraft in the

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world, all of whom still use oil-based fuels.

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So, you know, it's gonna be a while

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before they replace their fleets

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and, you know, 18 wheeler trucks and cars.

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So yeah, oil has a future, it will level out, in use,

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but, whatever reductions, for example,

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we might achieve in developed markets in terms

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of our overall carbon use is gonna be more than made up for

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by emerging markets who want to industrialize as fast

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as they can and they're gonna use carbon to do it.

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Anyone who wants to understand how the industry works

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and why it is the way it is, which I, you know,

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when you write a book as an academic, you have

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to really think about your audience.

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Some books are deeply, deeply scholarly and are interest

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and are used in, you know, senior graduate seminars

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and, you know, 30 people in the world really care.

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And some are what I call, you know, airport books,

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which are very quick and easy and, and fairly.

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I, I had, I believe there was a market for an intelligent,

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widely researched, scholarly book

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that regular folks can, could read and get something from,

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and, and then just people who are interested.

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And that's who I targeted. So that's who it's for.

11:44.545 --> 11:47.675
What I worry about the environmental aspect is it's become

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a war, it's become a, an ident.

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It's, it's almost like a holy war.

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It's an identity crusade that, I want people

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to, to calm down.

11:58.225 --> 12:01.085
Oil is a commodity. It's an economic product

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that we currently use a lot of.

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So let's talk reasonably about the good things that

12:05.765 --> 12:07.765
that gives us and the bad things that that gives us.

12:07.765 --> 12:09.445
And then let's go have a beer at the end of the day.

12:09.445 --> 12:14.005
But what's happening now, now is it's almost,

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it's very tribal that

12:16.065 --> 12:19.565
to admit somehow the carbon is good in some ways is

12:19.565 --> 12:20.925
somehow awful.

12:21.895 --> 12:23.475
And of course when you do that, the people

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who depend on carbon, you know, won't listen, you know,

12:26.095 --> 12:27.155
to the environmental side.

12:27.155 --> 12:30.315
So I wanna build a bridge. I want people to calm down.

12:31.575 --> 12:36.075
Um, and I want people to have confidence in the future

12:36.265 --> 12:39.835
that if this, we want to move away from carbon based fuels,

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we can, without having all this rankor and rhetoric

12:43.155 --> 12:46.555
and political polarization, which is increasingly associated

12:47.065 --> 12:48.235
with the environmental movement.

00:00 - I grew up in a small town called Cochrane, Alberta, which is east about, no, excuse me, about 30 kilometers west of Calgary. Now for your viewers, Calgary is Houston North or herd of Canada. It is the, it is the epicenter of the oil industry.

00:12 - And so it was always in, my life that I saw and knew people who worked in it. And I saw what the, the industry was like, and it just was sort of part of it. Then I moved to Eastern Canada to do my graduate training, and then eventually I worked at a university there. And over the past four or five years, in particularly what I've seen is a very large number of young people who absolutely despise the oil industry. or the idea of using carbon based energy just generally.

00:43 - And, okay. And so I would be incorporating some of my knowledge about it. 'cause I thought it was important. They learned how the global energy system worked and they, they didn't really wanna do it because they felt that somehow this was a dirty or difficult thing that they don't want to be involved in. But then I pressed a little further, a lot of them knew nothing about it.

01:03 - They didn't know how it worked. They didn't know where it came from. They didn't know how utterly dependent we all are on it, at least at the moment. And, I thought, okay, you can certainly oppose oil and gas all day long if that's your, your feelings, but you have to know why. And you have to know how, why it is the way it is. So I wrote the book primarily to give people a really clear overview of what's going on,

01:24 - what, and what the politics and geopolitics are around it. So that's the motivation. I've been interested. Been doing bits and pieces of it for 20 years. It was a big part of my master's degree. I did a master's degree in what was called war studies at the, Royal Military College of Canada, where you study the geopolitical impact of economic activity as part of broader strategic goals. And everyone was always talking about, you know,

01:48 - the US dependency on oil and the US dependency on imports. So I've been looking at it in, in terms of its details, in terms of its flows for at least a decade, probably more, before I even began seriously writing the book. And, the research was pri primarily documentary, tracking statistics, speaking with people in the industry of a of a length. There's a fair number of that in, in the book as as well. And trying to figure out how to locate Canada into this great big

02:19 - thing we call the global oil industry. So that's sort of how I did it. It is currently responsible for 95% of the world's, light duty vehicles in terms of their combustion engines. I mean, electric vehicles are starting to gain traction, but it's gonna be a while before they go. oil and natural gas are responsible for something on the neighborhood of six to 70% of the world's fertilizer. So without it, we wouldn't have the massive amounts

02:43 - of food we need to feed 8 billion people. plastics are all derived from oil in various places. Asphalt teams for roads, golf balls, all the plastics in a modern emergency room, that we hopefully don't see, but Eventually, we probably will all depend, are manufactured based on that. I mean, there's literally hundreds and hundreds of things we use in our daily lives in addition to the burning of oil

03:10 - and refined products in engines, which is what most people think about. that we don't have ready substitutes for plastics and glasses play, you know, golf knives, kayaks. So, it's going to reduce oil use substantially. Most people are focusing on its use and being burned in an internal combustion engine. But there's all these sorts of other things that go into it. And, and finally, what would people, I'm going beyond the scope of your question,

03:38 - but they, many, many countries in the world who produce oil are utterly dependent on it for their income. And so they're not gonna give it up easily, quickly. I think they had a little bit more, than they, than than they they do now. and I think a lot of it's illusory in the sense that the, the power that oil gives you, particularly when you can sell it at a high price and extract it at a low price,

04:01 - which is what's going on in most of the Middle East suppliers. Most people, when I think of oil, think of opec, the organization patrolling exporting countries who work as a quasi cartel to try to keep the supply into the system enough to keep the price at a certain level that they target. they can, when prices are enormous, take in enormous amounts of money. it's the basic license to print money,

04:25 - I call it in the book, what you see is being used and deployed in Saudi Arabia, both in terms of its own domestic development, but also can be deployed overseas in terms of investments. So one of the big ones is financial. You, you get a lot of power from having finance. historically you also get freedom from if a country is dependent on another country for energy imports, that first country is very unlikely to significantly criticize that other country

04:54 - for things it doesn't want it to do. Because you know, you're afraid that if you do that, you, so one of the things we've seen in the history of oil is western countries sometimes tolerate things on oil by oil producers that they otherwise would not or would be at least critical of because of this dependency. a third area where, you know, the west apparently has become very de dependent on oil and gas is many of the countries that have oil and gas spend a lot of money on their militaries.

05:27 - And they buy a lot of stuff from North America. And, and we end Europe, you know, very advanced weaponry systems that keeps those businesses going when we decide not to spend much. So there's lots of different ways. Oil money is always part of the geopolitics of the system. Initially, one of the best books on this was called the, the House of Bush and the House of Saudi, which basically argued

05:50 - that while the US Saudi relationship had been built often on the export of crude oil and the supply of the United States, it went far beyond that, right? I mean, Saudi Arabia, at least in theoretically historically, was supposed to be some kind of bridge between North America and the wider Arab world, could support moderation that wider Arab world and such a toleration of the existence of the state

06:12 - of Israel and a and a variety of other things that the Americans also kind of cared about. When the Americans became much stronger oil producers about what the advent of fracking, a lot of people worried about whether or not the US would remain interested at all in what was going on in the Middle East. It turns out it, it certainly is, but, you know, would this give them more freedom to act as a neutral arbiter in the region rather than a supplicant

06:40 - to people who gave it oil? Secondarily, Saudi, you know, we talk about sometimes there's two issues with oil. There is supply security, but for people who produce a lot of oil, there's also demand security. You have to sell the stuff. And what we've seen in Saudi Arabia recently is if they're not sure the Americans are gonna buy their surplus crude, well they're gonna look for other consumers who will.

07:05 - And that's code word for China and, and increasingly India who are powering their own economies with oil and carbon based fuels. So as they sell more to them, you might think their diplomatic and military and strategic reorientation might go to their bigger customers and less from North America. It, it's, the patterns are so cyclic. A couple of things that I saw is, one is the pattern towards increasing centralization and domination by a cartel.

07:31 - the history of the energy industry has been one of boom and bust. And of course the biggest figure in oil's history was, you know, John d Rockefeller who ran Standard Oil and he wanted to standardize American production in the late 18 hundreds, early 19 hundreds and states, because he hated this, you know, rise in demand, a lot of wildcatters come in, bring too much out to on the, and and tried to to, to monopolize it and control it through its refinery.

07:59 - That happened then it happened in the course at the end of the second World War with II sisters who tried to really monopolize and control oil production. It's happening again today with really big companies. It's interesting. One of the things I've noticed in the past couple of years is I would've thought a persistently long period of high price, which we have had, would bring more producers into the market and drive the price lower because the attractiveness.

08:23 - But that actually hasn't happened. We've had a sweet spot for two, three years now of by oil price dynamics where they've remained fairly high and fairly elevated and no huge amounts come on. So I, I think it's, we are in a different era now because of the pressures on carbon emissions and reducing them. But this, this, this moving back and forth, this, this tendency for people to over attribute the importance of oil

08:51 - or under attribute it, they like, it's not nothing, but it's not everything it to get its proper place that's historically powerful. So there's just a lot of patterns in it that just seem to come up against same damn thing after another. Well, a classic, classic example I talked about a few minutes ago, people had historically thought the only thing the Americans in the Europeans cared about in the Middle East was its ability to export a consistent supply of energy and full stop and the rest of it, you know,

09:17 - and I, I think oil mattered, but that's, that's not all that mattered. oil oil mattered in terms of the US aggression or war in Iraq at the, at the end of the know during the war on terror. Sure. But I don't believe that was the only thing that mattered. There was, there's other things that, that play into the mix. War oil and natural gas prices matter in the economy

09:43 - in terms of feedstock and cost for everything else, but they aren't the only things that matter. So, it's a very simplistic thing and an easy thing to say that says oil causes wars, or, but it actually, the data doesn't support that entirely. It's very, it matters, but it's not as big a deal as people often think it is. Yes. Well, and again, you have the devil's in the details. Our energy future, you know, are we talking a hundred years? Are we talking 50 years?

10:11 - you know, people make predictions about, you know, some organizations, the International Energy Agency is predicting an end to the oil era much faster than I do. I I think we've got several decades left. I mean, I just look at the entrenched, systems we use to motor ourselves and power ourselves. How, you know, we've got 30,000 commercial aircraft in the world, all of whom still use oil-based fuels. So, you know, it's gonna be a while

10:39 - before they replace their fleets and, you know, 18 wheeler trucks and cars. So yeah, oil has a future, it will level out, in use, but, whatever reductions, for example, we might achieve in developed markets in terms of our overall carbon use is gonna be more than made up for by emerging markets who want to industrialize as fast as they can and they're gonna use carbon to do it. Anyone who wants to understand how the industry works and why it is the way it is, which I, you know,

11:12 - when you write a book as an academic, you have to really think about your audience. Some books are deeply, deeply scholarly and are interest and are used in, you know, senior graduate seminars and, you know, 30 people in the world really care. And some are what I call, you know, airport books, which are very quick and easy and, and fairly. I, I had, I believe there was a market for an intelligent, widely researched, scholarly book that regular folks can, could read and get something from,

11:40 - and, and then just people who are interested. And that's who I targeted. So that's who it's for. What I worry about the environmental aspect is it's become a war, it's become a, an ident. It's, it's almost like a holy war. It's an identity crusade that, I want people to, to calm down. Oil is a commodity. It's an economic product that we currently use a lot of. So let's talk reasonably about the good things that

12:05 - that gives us and the bad things that that gives us. And then let's go have a beer at the end of the day. But what's happening now, now is it's almost, it's very tribal that to admit somehow the carbon is good in some ways is somehow awful. And of course when you do that, the people who depend on carbon, you know, won't listen, you know, to the environmental side. So I wanna build a bridge. I want people to calm down.

12:31 - and I want people to have confidence in the future that if this, we want to move away from carbon based fuels, we can, without having all this rankor and rhetoric and political polarization, which is increasingly associated with the environmental movement.

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