Petro-Capitalism

Petro-capitalism is a capitalism that hinges on the production, exchange, and consumption of petroleum. Petro-capitalism is central to the development of today's society. Geopolitical analysts describe the dynamics of petro-capitalism in terms of competition over access and rights to petroleum-producing areas around the world, a competition linked to issues of resource scarcity and energy security. Political economists, in contrast, argue that the interactions between local histories, larger processes of material transformation, and unequal power relations have shaped petroleum's role as a “strategic commodity” in the current capitalist world order. Yet more traditional political economists argue that attention must be paid to how and under what conditions competing petroleum producers (capitalists) and petroleum-producing countries control overproduction and oversupply of petroleum.

Petroleum is the basic unit (commodity) of petro-capitalism. The logic of capitalism is to produce surplus value—to expand or create new capital from already-existing capital. This occurs through the process of capital circulation: new capital (e.g., profit) is formed when raw materials and labor are combined, exchanged in the market, and reinvested in more production. In the case of petro-capitalism, petroleum is natural capital, the raw material that is transformed through an arrangement of labor, scientific knowledge, and technologies to become an exchangeable commodity that will generate the production of further commodities.

The exchange value of petroleum is determined by the “law of value,” the terms of trade that dictate the quantity of any other commodity for which petroleum will be exchanged. The law of value, in turn, is shaped by perceptions of value, social dynamics (e.g., competition, collaboration), and the cost of commodity production. Petroleum is a commodity of extremely high use value because of its wide range of uses and very high energy fuel properties. It is a raw material fundamental to the motion of global capital today—a necessary object without which the production of a multitude of other commodities cannot proceed. Yet it is petroleum's exchange value (not its use value) that makes it matter to capitalism—a value that is recognized through money, the universal means of exchange in today's capitalist society.

The monetary value of petroleum is shaped by its demand, its scarcity, and the conditions of production (e.g., access to the resource). The high demand for petroleum indicates that it is a desirable commodity. Petroleum provides 90 percent of the energy consumed in motorized transportation—one of the fundamental characteristics of capitalist society—and its derivatives are found in most objects consumed in daily life, from fertilizers to plastic to lipstick. Petroleum's abundance, in contrast, is difficult to ascertain. Some analysts argue that petroleum reserves around the world are limited and in decline, whereas others argue that there is no petroleum scarcity problem. This uncertainty contributes to instability in petroleum prices and, at times, has increased the exchange price of petroleum. Petro-capitalists—firms that profit from the extraction and trade of petroleum—play a fundamental role in setting the price of petroleum. For the most part, they are able to control rates of extraction and the quantities and qualities of petroleum available in the market, thus shaping public perceptions about its abundance or scarcity.

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