Tuesday, January 10, 2012

111 years of global oil-blessing or curse?

Oil and oil fields were around since the 19th century. But it is was 111 years ago on this day that the modern oil industry as we recognize it today was born. An oil field in Texas started gushing 100,000 barrels of oil per day. History and humanity changed decisively after that-both for good and bad. Till that day in 1901, oil had limited uses. After that, it is the Black Gold that literally runs the world. Oil was the first industry in history to record revenues in excess of a trillion dollars, that is 1000 dollars. If all the oil and gas companies in the world were listed on stock exchanges, they would account for more than 80% of the top companies in the world. Even now, oil and gas companies dominate the Fortune listing of the largest companies in the world. Royal Dutch Shell, with revenues of more than $ 450 billion is the largest oil company in the world and vies with Wal Mart for the top slot. Even Indian Oil reports a revenue of more than $ 75 billion a year. The largest private sector behemoth in India, Reliance Industries became so big primarily because it focused on oil, gas and petrochemicals. Oil exporting nations earn more than $ 1 trillion a year in revenue.

Of course, we cannot now imagine a world without oil and gas. Along with coal, it is the cornerstone of the energy industry. We cannot comprehend of modern transportation, road, rail, ships and air, without oil. Fact is, modern societies and economies simply cannot run without oil. There is no doubt whatsoever that the oil industry is responsible for the vast improvements in the economic prosperity of nations and the quality of life of people. Schools, hospitals, homes, offices, shopping centers, malls, cinema halls, stadiums....nothing in the modern world can run without oil, and gas.

And yet, while oil has been a boon when it comes to living standards and quality of life of people, it has also been a curse, resulting in millions of deaths in what can termed as collateral damage. West Asia is so volatile and so violent primarily because it has been blessed-and cursed- with oil. The largest oil and gas producing nations of the world have had an uncanny tendency to adopt autocratic forms of government. Without oil, born again Christians from Texas would not have the money to spend hundreds of millions of dollars a year trying to convert 'heathens' into Christianity and without oil, it is difficult to visualize Osama Bin Laden and his unique brand of Jihad.

Till the early 20th century, Saudi Arabia was a country nobody really gave a damn about, except the fact that it hosted the Muslim Holy sites of Mecca and Medina. But the discovery of massive reserves of oil in that desert changed everything. A local warlord, or prince Ibn Saud defeated all his rivals and emerged as the ruler of the land, also named Saudi Arabia aft him. The House of Saud continues to rule that nation. It is easily the most conservative Muslim nation on earth and makes a mockery of women as well as human rights. But for more than 8 decades, it has been a steadfast ally of Britain and America. You will often hear of American presidents preaching democracy and human rights to other countries of the world. But they never dare do that to Saudi Arabia. It is Saudi petro dollars that have largely financed the expansion of the militant and intolerant Wahabi version of Islam throughout the world. You can see the disastrous effects of that in our neighboring country Pakistan. Iraq was invaded and virtually destroyed in 2003 by the then American President not to spread democracy but secure oil and gas supplies for his country. Iran was emerging as a true democracy after the Second World War and was not amenable to America and its allies having a monopoly over its oil industry. The CIA organized a coup to install a friendly dictator. That eventually resulted in a Revolution in 1979 when hard line Shia clerics took over the nation. Now that Iraq has been subdued, it is Iran which is the target number for America and its allies.

And oh yes, just in case you did not know this. In the late 1930s, America imposed and oil embargo and blockade on Japan. The rapidly growing military industrial complex of Japan would have collapsed without oil supplies. We got Pearl Harbour.


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