The pandemic caused unprecedented disruption to the global shipping of oil, but the industry survived with the help of massive state intervention. Control over the oil trade is a vital tool of economic power that the US is determined to retain.
This is an excerpt from Extractive Capitalism: How Commodities and Cronyism Drive the Global Economy, now available from Verso Books.
Fly over ocean anchorages near the world’s largest oil ports, and you’ll see a tangle of cargo ships waiting to refuel and tankers of all sizes radiating out from the loading buoys, queuing to unload or load their cargo.
Oil ports often boast proximity to both tank farms and refineries. These oil facilities are usually visible in their totality only from the air or from the sea, with loading buoys sometimes a mile or more away from the shore itself and the ships anchoring still farther out to sea.
Tank farms tend to be hidden behind layers of barbed wire, and strips of wasteland often separate them from nearby roads, villages, and towns. These interconnected coastal infrastructures reveal the extent to which the extraction, storage, pricing, and sale of petroleum and petrochemical products is not just dependent on how these products are transported across oceans but is fundamentally defined by it.
The politics of maritime circulation are bound up with the asymmetries of power typical in extractive industries: the unbalanced relationship between producing nations and the consumers; between producers of crude and those who refine the oil; between those who work on the ships, tank farms, and infrastructures and those who profit from them; among hegemonic leviathans, rising global powers, and those struggling against imperial economic arrangements.
These asymmetries are hidden behind the security fences and complex jargon of energy and logistics, deliberately made invisible. But a series of recent events have made the internal mechanics of this clockwork apparatus much more legible, even to those who do not speak the language of capitalist logistics: the Houthi blockade of the Red Sea and the Malaysian boycott of Israeli ships in support of Palestinians, and the stoppages through the Suez and Panama canals. Most decisive were the logistical glitches wrought by the COVID-19 pandemic, starting in December 2019.
World in Stasis
In late April 2020, an image circulated on social media that looked like a screen capture from a ship-tracking application. These types of apps are commercial products that draw on GPS data and the automatic identification systems (AISs) of ships to track the movement of vessels across the oceans. They also provide information about what kind of ships the small markers on the map represent (container vessels, bulk carriers, roll-on/roll-off vehicle carriers, pleasure yachts, and the like), what cargo they carry, a history of each ship, and a map of their current routes.
The image, which quickly went viral, was a map focused on the Western Hemisphere that showed clusters of stationary tankers along the coasts of Africa, the Americas, and Europe. Because so much transportation and factory production had ceased due to the pandemic, the demand for oil dramatically dropped. Simultaneously a price war triggered by Saudi Arabia against Russia flooded the market with oil.
With oil production rising and demand plummeting, landside tank farms and storage spaces began to run at or near capacity. Oil producers and buyers were soon chartering tankers to store oil at sea. By mid-April, the cost of chartering an Ultra Large Crude Carrier was up to $350,000 per day, double what it had been a scant few weeks before. Instead of oil being delivered to new buyers and markets, vast quantities of it were in stasis, in tankers at anchor in oil ports around the world.
Under the map’s ostensibly static image of ships waiting for a move in the market was another story: that of a historically unprecedented moment when the price of oil plummeted below zero. While the computer screens of the financial systems strobed with the plunging prices of most petroleum products on April 20, maritime tracking screens traced the paths of tankers gathering in ever-denser clusters near oil and bunkering ports, waiting to load and unload.
Ships were anchored along the coasts of Venezuela, the Gulf of Mexico, southern California, Mexico, the west coast of Africa, near the straits of Malacca and Hormuz, and all along the shores of East Asia. Although we cannot know whether these ships were simply acting as storage or were in fact in transit, we do know that many shipping companies changed their routes between Europe and Asia as a direct result of the oil glut.
Slow Steaming
During the pandemic, this logic was writ large, as more than five hundred shipping journeys were canceled between Asia and Europe or the Americas throughout March and April 2020. Those that did traverse their planned routes had reduced numbers of containers and traveled along their routes at extremely slow speeds (sometimes at a quarter of the usual speed). Even ships steaming from the Eastern Mediterranean chose to pass through the Strait of Gibraltar and go around the southern tip of Africa rather than pay the fees for the much more proximate Suez Canal.
The Cape route also allowed for economies of scale in the transportation of goods. The canal’s depth and width places certain limits on the size of ships passing through it. Suezmax ships are about 275 meters long and have a draught of 12.2 meters — a ship’s “draught” being the maximum depth of the hull and propellers that can safely be below the waterline. The ships now loading crude from the Ceyhan oil terminal in Turkey are Very Large Crude Carriers (VLCCs) or Ultra Large Crude Carriers (ULCCs), some with a draught of more than 20 meters and most with lengths exceeding 350 meters.
On the April 21 map, some ships are pointed away from Nigeria or Venezuela and seem to be steaming toward the Cape of Good Hope, presumably on their way to Asia. China imports the vast majority of its oil — 90 percent of it — by sea, but the country is nowhere near the largest global consumer of oil. The United States consumes 20 percent of all the oil produced worldwide, whereas China only takes 13.5 percent.
The April 21 map cannot, therefore, be taken as a snapshot of the global oil trade, because so much of it happens within borders or without maritime circulation. The US is both an exporter and importer of petroleum. Much of what the United States imports arrives through pipelines from Canada or Mexico and is intended for refineries that are configured to process particular kinds of oil produced north and south of its borders.
The large number of refineries in the Gulf of Mexico also distinguishes US consumption of oil from Chinese. US refining capacity outstrips that of all other countries — Texas alone has greater refining capacity than all of China — but more important, its refineries produce products like jet fuel or gasoline that are sold at higher market prices than unprocessed crude. As such, US refineries’ ability to convert raw commodities to value-added products far outstrips all other countries. Why does this matter for maritime transport?
Traders Over Producers
Those enormous VLCCs and ULCCs that often only carry crude oil depend on extractive economies and trade in raw materials, a hallmark of colonial economic relations. Smaller tankers, by contrast, often carry refined products. So chartering a broader range of ship sizes indicates how much of a producer’s products are sold as cheaper crude and how much as value-added product. And if you build an oil port that only exports crude via the largest of ships, then you may not sell more profitable value-added products.
Indeed, in the aftermath of the nationalization of oil in the Gulf in the 1970s, many of the Gulf countries turned to increasing their refining capacity as a means of keeping more profits from value-added products, and through acquiring petrochemical manufacturing technology and know-how.
The 1970s nationalizers were not fiery revolutionaries expropriating US or European oil companies, as the more radical nationalizers had been in decades past in places like Iran or Mexico, where they had seized the oil companies outright. They were technocrats from producing nations of the Gulf politely negotiating the buyout of their national oil from North American and European oil majors.
These technocrats understood the benefits of downstream value-added production and control over the circulation of their own products. In a fascinating 1975 New York Times account of a failing shipyard in Belfast, a sales representative of the shipyard, “back from a sales tour of Saudi Arabia, Kuwait, Abu Dhabi and Iraq,” laments that, instead of large tankers, the Arabs were ordering smaller vessels to carry refined petroleum products such as kerosene and gasoline.
“They won’t need them until four or five years from now,” he said, “when they will have the refining capacity to make the products.” As Walter Rodney has noted, the emphasis on trade of raw materials, rather than on production of more expensive manufactured goods, privileged traders over producers, delayed technological innovation, and led to economic stagnation and intensified exploitation of both humans and natural resources.
Contradictions of Development
Whether producer countries can profit from the full value of their exports or not, economic development is a double-edged sword. Both the production and the circulation of petrochemicals have dramatic ecological effects.
The same shale oil that has, since the deregulation of fracking, boosted the position of the United States as an exporter of oil also leads to the devastation of groundwaters and soil in spaces inhabited by indigenous peoples. The indigenous and First Nations people of the US and Canada have been struggling against devastating extractive industries defacing and destroying their lands for centuries.
Most recently, the Water Protectors of Standing Rock in the Dakotas and their Wetʼsuwetʼen counterparts farther north have campaigned against the construction of pipelines across their lands. The struggle of the Water Protectors of Standing Rock was crushed by militarized police forces, while the Wetʼsuwetʼen campaign — which included a widely supported blockade of logistical lines — was deferred because of the pandemic, though the blockade has picked up again thereafter.
The liberationist indigenous environmental movements of Western Canada were countered in the east by a right-wing truckers’ blockade of Ottawa against both vaccine mandates and demands for indigenous sovereignty. The right to burn fossil fuels unfettered by regulations was eventually appended to the truckers’ initial demands. The environmental degradation wrought by fossil fuels has become — and has already been — a significant point of contention between the Left and the Right.
Maritime transportation of oil devastates the environment. Tanker transport is responsible for at least a quarter of all oil spills at sea. And aside from catastrophic large-scale oil spills, ship collisions or groundings can lead to the leakage of oil and petroleum products during loading and unloading.
On oil-rich coasts around the world, beaches are often strewn with lumps of tar that have formed at sea and washed ashore. Ships can release ballast water in illegal ways, and although ballast tanks and oil or fuel tanks are supposed to be separate, dirty ballast water, released in unregulated or lightly regulated ports, can introduce dangerous pollutants into the marine environment.
Ships also produce enormous air pollution. If they are at anchor for days, even weeks, on end, the chance of their illicit discharge of all sorts of waste will also increase, and their engines will inevitably produce oxides of carbon and nitrogen, sulphur compounds, and particulate matters.
A Changing Map
The tumbling of global trade, the closure of borders, the historically high unemployment, and therefore plummeting demand for oil wrought by the pandemic all sketched the contours of a changing map for the maritime movement of oil and extractive capitalism, a shifting context that now, five years on from the first lockdowns, is still unsettled. But the real levers of transformation were and are political.
In response to the pandemic, businesses consolidated their positions, and policymakers rallied around capital to ensure that pandemic-era reforms did not permanently handicap the ability of businesses to accumulate profits. As trade was hobbled, various states such as France and South Korea bailed out their oil and shipping companies.
The United States maintained its hegemonic role as the greatest consumer and the greatest producer of oil (and, inevitably, the greatest polluter) throughout and after the pandemic. China and India slowly took up the oceans of oil stored at sea as their factories reopened.
The pandemic has midwifed a new era of catastrophe: capital has proven remarkably resilient in the face of crisis, even successive ones. Any real transformation — in how we produce and circulate and consume energy, in who benefits and who suffers from the effects of producing and circulating petroleum and its products — has come and will only come through concerted political action: one that binds the struggle against the uneven planetary distribution of wealth and power to movements to save the environment.