Girish Kuber – The Geopolitics of Oil
On the 5th of March 2018, students and faculty members of Meghnad Desai Academy of Economics, along with several enthusiastic and eager guests, participated in a discussion on ‘The Geopolitics of Oil’, led by Mr. Girish Kuber. Kuber is an expert in the field of energy, and specifically oil economics, having authored a trilogy of books based around the topic. He is currently the chief editor of Loksatta, a leading daily in the Marathi language and has also formerly served as political editor for the Economic Times.
Kuber’s talk began with a recount of the history of the oil market, right from its beginning in Europe, up until more recent events. He is of the opinion that every major historical event that has occurred in the last 200 years across the world is a by-product of oil and energy politics. He set out to prove his statement correct by connecting major developments in history to the growth of the oil market.
The discovery of ‘rock oil’ in 1855 in Pennsylvania, sparked off a chain of events that culminated in the rise of John D. Rockefeller and the foundation of the company ‘Standard Oil’. Rockefeller began by supplying oil to the local Municipal Corporation, before realising the need to become self-sufficient as a business, and investing in tankers, warehouses and striking secretive deals with the railroads industry, in order to become a monopoly in the market. Inadvertently, by 1890, Rockefeller controlled 95 % of the oil refineries in the United States and had amassed more wealth that that of Bill Gates today, making him one of the wealthiest men in history. Concerned about Rockefeller’s ever-growing oil empire and the resistance they would start facing from it, the United States government decided to, for the first time, create anti-trust laws in the country. Rockefeller’s monopoly was broken down into 30-odd different companies.
Around the same time, in Germany, Rudolph Diesel began his work on combustible diesel engines, that would later go on to change the oil market. In 1913, he began a process of striking a deal with the United Kingdom navy. However, while on his way to London, Diesel mysteriously disappeared while on the ship. Yet, despite the collapse of the deal, some of the naval chiefs from United Kingdom had begun to realize the need to use diesel in place of the existing coal used, that had become the cause of several accidents in London at the time. They proposed a change in fuel used in ships to the then UK government, who agreed to do so in time for the first World War in 1914. UK’s realization, and consequent implementation of this new resource partially enabled them to become and maintain the status of a superpower in the world, as they further began extracting oil on a commercial basis.
As the two World Wars were unfolding, Kuber related, another kingdom was on the rise. Saud, the monarch and founder of Saudi Arabia, was in the process of consolidating his empire, one that would come into being fully in 1932. The discovery of oil in the region in the late 1930s, further invited the US and the UK, the biggest changemakers in the oil industry to the desert land, to strike deals with the oil-rich empire, that continues to control more than 33 % of oil reserves in the world today. Kuber described some very interesting anecdotes, based on real conversations that transpired during the deals, including the UK gifting a gold-plated Rolls Royce to Ibn Saud, and the US handing over then President Roosevelt’s motorized wheelchair, evidence of the desperate fight for control of the oil industry.
But, the end of the World War 2 changed situations. There was a new world defined, based on connections to oil, with two new superpowers – the US and the USSR. Surprisingly, while the US, had struck a deal with Saudi Arabia, that allowed it fair control over its allies, the USSR, while appearing at the top in all world production, did not have a say in oil politics, and was not included as a member in the OPEC.
Energy related trade wars, Kuber described, began in the 1970s, that were led by US companies, especially Enron. Terrorism, Kuber said, was a ‘direct by product’ of these trade wars. The 2001 attack on the World Trade Center in New York culminated in the US taking a decision to become self-sufficient when it came to oil. It decided to invest significantly in energy and oil excavation, so as to detach itself from the oil controlling nations and has already managed to achieve this goal well within its target of two decades.
Turning to India, Kuber explained how, in complete contrast to other nations, despite being dependent on oil for daily tasks, the country has neglected to invest in developing its oil stock. He expounded how, if US were to be cut off from its oil sources, it would still have up to 6 months’ worth of oil stock to provide for its citizens. India, on the other hand, has the capacity of only 9 days. On the 10th day without access to oil, there will be mayhem. Unlike in China, whose current economic and political relations are all based around oil, India is yet to learn the full impact of how oil rules the world. Despite having thorium reserves along its southern coastline, India is yet to act on its available resources. Kuber stressed on how oil has become and will continue to be for at least the next 200 years, the world currency. A one dollar rise in oil price, he said, can damage India to the cost of 8500 crore rupees. It is necessary, Kuber highlighted, for India to realise its oil potential in order to be able to become self-sufficient.
Bookings are closed for this event.
Date(s) - 05/03/2018
3:15 pm - 5:15 pm