• Book review: Disorder – Hard Times in the 21st Century by Professor Helen Thompson

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      Patrick Lavery

      Combustion Industry News Editor

To publish a book that weaves together the stories of energy geopolitics, international finance and democratic politics on 24 February of 2022 was an inadvertently risky thing for Helen Thompson, a professor of political economy at the University of Cambridge, to do, given it was the day that Russia invaded Ukraine. I think it is fair to say that Disorder – Hard Times in the 21st Century, published by Oxford University Press, has so far passed this difficult test reasonably well, through its meticulous but interdisciplinary approach and Thompson’s admirable ability not only to hold expertise in the three major themes but to examine events with analytical detachment. It is a book worth reading if one wishes to achieve a better understanding of the last century up to and including the COVID-19 pandemic. Through its identification of a range of the forces at play, it also allows Professor Thompson to make some broad, deeply reasoned and unideological predictions about the ramifications of the current attempt to transition to clean energy sectors worldwide. That is valuable in itself.

Professor Thompson was a fixture on the popular but now ‘retired’ Talking Politics podcast hosted by fellow Cambridge academic David Runciman, a professor of politics.  The book is probably aimed at its audience, seeking to bring explanatory power to political events by linking them to the quest of governments to secure energy supplies and the financial arrangements around energy. Energy, as Disorder makes clear, is the “foundation of all economic activity”, as well as being essential to militaries. Because of this, “twentieth and early twenty-first century economic and political history is impenetrable without understanding what has followed from the production, consumption and transportation of oil and gas”. This was well understood already by German foreign minister Gustav Stresemann in 1929, when he said that Germany “had no foreign policy without the German chemical company and coal” – that being IG Farben’s coal hydrogenation plant at Leuna in Eastern Germany, today still the site of one of Germany’s largest chemicals plants.

Reading the history of competition for oil and gas around the world since the late 1800s is a rather sorry experience, as it is not only a key part of economic and political history, but it is integral to the history of state-level violence. Oil, in the words of energy scientist and historian Vaclav Smil, transformed the USA from “an overwhelmingly rural, wood-fuelled society of marginal global import” into an industrial power that by the turn of the 20th century economically and technologically mesmerised Europeans. Russia was the other major producer of oil apart from the USA at that time (being the largest for a short period between 1898 and 1902, and again later in the 20th century). European countries were largely deficient in resources, except for Austria-Hungary in what is now southern Poland, Britain’s Burmese colony, and the Netherlands’ East Indies colony, creating structural weaknesses in their economies and geopolitical ambitions. Political instabilities in Russia crippled oil production in the early 20th century, as it had annexed Batumi (now part of Georgia) to be able to export oil from the Black Sea from the oilfields of Baku (now the capital of Azerbaijan), and both became revolutionary centres. In 1905, “Tartar groups intent of killing Armenians set fire to two-thirds of the Baku oilwells, wrecking the Russian export industry for much of the next decade. Consequently, by the time the First World War began, the preponderance of oil production lay in the Western Hemisphere.”

The thirst for oil spurred colonialism, and when direct colonialism became physically or politically impossible, military measures still supported the oil business. Middle Eastern oil was an important source of tension between Britain and Germany before the First World War, even though firms from the two countries cooperated to form the Turkish Petroleum Company in 1912. Britain’s presence in the southern Persian Gulf and control of India, and its de-facto control of part of Persia, where oil was discovered in 1908, gave it an advantage in exploiting Middle Eastern oil, the British state buying a controlling stake in the Anglo-Persian Company in 1914. But Germany for its part cultivated a relationship with the Ottoman Empire, which before the First World War controlled territory encompassing today’s Turkey, and much of what is today Syria, Iraq, Jordan, Lebanon, Kuwait, and parts of what are today Saudi Arabia and Yemen. Deutsche Bank secured a concession at that time to build a railway from Basra to Baghdad and then Konya in Anatolia (which meant a connection to Berlin by rail), as well as the right to explore for oil along the stretch of the track. Naval considerations were important to this jostling – Britain had become the first country to acquire oil-only ships, which were more capable than their coal-powered predecessors, and the government saw the need to secure a diversity of sea routes for the supply of oil to Britain with naval power, a kind of chicken-and-egg situation. But in the First World War, when oil became the most important global resource, Germany and the Central Powers persuaded the Ottomans to close the Dardanelles to shipping of Russian oil to Britain and France, making them dependent on supply from the USA (financed by Wall Street), thus encouraging German submarines to attack those supply lines. After the end of the war, the British Foreign Secretary declared that “the Allied cause had floated to victory upon a wave of oil”. During this time, however, Britain lost its position as the world’s dominant creditor, the crown passing to the USA, and the dollar started to become the world’s underpinning currency, especially as oil was one of the key commodities of trade and the USA was the world’s major producer.

Following the First World War, the European powers again jostled for oil resources in the Middle East, as American president Woodrow Wilson “could think of nothing the people of the United States would be less inclined to accept than military responsibility in Asia” – something still highly resonant a century later. During the war, Britain, France and Russia had secretly agreed to divide up the Ottoman Empire in the event of victory, giving Russia Constantinople, but Russia’s treaty with Germany following the Russian Revolution in 1917 put an end to those plans. Instead, Britain gained control of the Dardanelles and pushed the Ottomans out of the Caucasus, but was unable to hold these territories, losing the latter to the Soviet Union and the former to Turkey. Britain controlled Mesopotamia from the Persian Gulf to the Mediterranean, though only in practice rather than formally after the Iraqi revolt of 1920, meaning that though Britain only controlled 5% of the world’s oil supply by 1920, it controlled half of the world’s known reserves. France took Deutsche Bank’s 25% share of the Turkish Petroleum Company, and oil was discovered in Iraq in 1927. The USA became a net importer of oil between 1919 and 1922, and in the first half of the 1920s the government was alarmed by its lack of presence in the Middle East, until oil was discovered in Texas and Britain allowed Standard Oil of New Jersey to join a reconstructed Turkish Petroleum Company, renamed the Iraq Petroleum Company. Britain, however, through the Anglo-Persian Company, retained control of the extent to which American firms could operate within the old Ottoman Empire territories. Interestingly, Britain allowed Standard Oil of California to explore in the area which is now Bahrain after 1929, leading to a higher prospect of oil discovery in Saudi Arabia, and the Soviet agent Jack Philby (a British official) advised the Saudi King to grant an exclusive concession for exploration in the kingdom to Standard Oil of California (so as to weaken Britain). This began in earnest American oil involvement with Saudi Arabia, and lead to additional American leverage over European governments.

Financially, meanwhile, the story was also intriguing. Although the US Federal Reserve and various American presidents believed it would be better to partially or entirely write off the war debts of Britain and France, partly from the purchase and shipping of oil, and provide economic assistance to several European countries, Congress would not approve, partly because of what was then the norm for most countries – that the US government would borrow from its own citizens, rather than on international markets. To simplify the telling, financially enfeebled Britain and France therefore had no other option than to insist on German war reparations, which in turn led to German hyperinflation, which contributed to the Great Depression, which spread back across the Atlantic to negatively affect the USA and parts of the rest of the world. It also was a factor in the rise of the National Socialist Party in Germany and the beginning of the Second World War. In addition, the period of hyperinflation was such a profound influence on German economic history that it strongly shaped Eurozone economic policy during the formation of the single currency in the late 20th century, which, in Professor Thompson’s view, had considerable consequences for democratic politics within the EU.

Oil once again played a pivotal role in the Second World War, especially as air power also required oil. Japan’s imperial expansion was partly a quest for oil, as was Italy’s into Ethiopia. Germany had planned to become oil independent by 1940, but had not achieved that aim by the time it invaded Poland in September 1939. Britain imposed a naval blockade of German oil imports after the invasion, meaning that Germany was then dependent on imports from the Soviet Union, with which it had signed the secret Molotov-Ribbentrop Pact in August 1939, Romania with which it was allied after a domestic coup in September 1940, and from French reserves captured in June 1940. Professor Thompson suggests that while “Hitler’s motives [in invading the Soviet Union] have long aroused historical controversy … Germany simply could not win a war in which the United States was supplying the British Empire without securing control of Soviet oil, 90% of which came from the Caucasus. Whatever other motives, born of his apocalyptic obsession with Lebensraum and hatred of Bolshevism, Hitler brought to bear on Operation Barbarossa, and however far those preoccupations shaped the catastrophe that followed, oil weakness was a near sufficient motive for the invasion. The German failure at Stalingrad set Germany on an inevitable path to defeat. Shortly after, the Allies finally vanquished Rommel’s oil-starved forces in North Africa, allowing the Italian campaign to begin.”

Britain, too, had not solved its oil supply dilemmas by the outbreak of war. While before the outbreak of war only 10% came from the US, the Western Hemisphere accounted for more than half of supply, with Mexico and Venezuela being key suppliers. Though oil was also coming from British-controlled Iraq and Iran, its military was not sufficient to guarantee those supplies, especially with Italy’s alliance with Germany, and German air power preventing British oil shipping through the Suez Canal. The war forced Britain once again to buy more American oil using scarce dollars. During the interwar years, France had created the French Petroleum Company (today’s TotalEnergies), which also produced oil in Iraq, relying on British military power to secure it, thus also making France’s oil supplies highly vulnerable with the outbreak of war. Pre-war, France also imported oil from the Soviet Union rather than the US, the Soviet industry being revived in the 1920s with help from Standard Oil of New Jersey.

During the war, American involvement in Middle Eastern oil grew, partly because of the sheer volume of oil the war required. While at the beginning of the war the US believed that Britain should provide the military security for oil production in Saudi Arabia, and in 1941 President Roosevelt tuned down a request for financial assistance from the Saudi King, by 1943 a Lend-Lease arrangement had been agreed between Saudi Arabia and the United States. The Californian Arabian Standard Oil Company was renamed Aramco in 1944, and Standard Oil of New Jersey joined it. The continuing oil relationship with Saudi Arabia after the Second World War created a political headache for the US government, given the strong domestic support for a Jewish state and Saudi Arabia’s opposition to one. After a February 1945 meeting with King Ibn Saud, President Roosevelt accepted Arab opposition to a Jewish state, and his successor Harry Truman was advised by the State Department and the CIA against recognising Israel. Truman rebuffed them, but the tensions have been long lasting.

Oil geopolitics did not settle down after the Second World War, especially as car ownership and plastics production began to take off, creating additional demand. Egypt’s nationalisation of the Suez Canal in July 1956 led Britain, France and Israel to intervene militarily. However, the USA refused to finance this intervention, as President Dwight Eisenhower had already warned British Prime Minister Anthony Eden that unless it was absolutely demonstrated that all peaceful means had been exhausted, “there would be a reaction that could very seriously affect our people’s dealing towards our Western Allies”, with possible “far reaching consequences”. While Britain had been purchasing oil in sterling from British companies operating in the Middle East, with supply cut off, it was now forced to attempt to buy oil from the Western Hemisphere, in dollars, to which it did not have sufficient access. To avert this crisis and be able to access American financing for oil purchases (and in the face of Soviet threats of a nuclear attack), Britain pulled out of its military action without consulting its French and Israeli allies.

The fallout of the Suez crisis was profound. Although the US did not support Britain, France and Israel on it, in general it expected Western Europe to source oil from the Middle East, so that oil from the US and Venezuela could be consumed in the US, with security being provided by the British military. As this arrangement broke down, creating a supply problem, European countries instead turned to the Soviet Union for oil. Italy’s state-owned oil and gas company ENI had already spotted an opportunity to work to augment the Soviet oil industry before Suez, but began negotiating its first large-scale oil deal in 1958. West Germany and Austria joined Italy in importing Soviet oil, and in the 1970s West Germany began also to import Soviet gas. As has become well-known this year, Germany, Austria and Italy are still considerably reliant on supplies from Russia. This damaged the cohesion of NATO, which had been established in 1949, as parts of the alliance now had an energy dependence on the Soviet Union; Senator Hubert Humphrey said that Soviet oil exports were ‘one of the major threats that face us…perhaps even more dangerous than the military offensive threat’. In 1962, in an effort to derail the building of the Druzhba (Friendship) oil pipeline between the Soviet Union and Central Europe, US President Kennedy demanded that Western companies stop supplying wide-diameter steel pipe to the project (echoed in the 2010s in the US’s sanctioning of Western companies involved in the construction of Nord Stream 2), but this ultimately failed, and the pipeline was built.

The Suez crisis also led to the creation of the European Economic Community and the European Atomic Energy Community (Euratom), and helped propel France’s turn to nuclear power, after a period in which it had hoped to supply Europe with oil from its Algerian colony, after the discovery of oil there in 1956. This ended with France’s loss of control of Algeria in 1962, though France was able to retain control of its Saharan oil fields in the Évian Accords until they were nationalised in the early 1970s. Britain, for its part, encouraged British Petroleum (the former Anglo-Persian Company) to explore for oil in the Western Hemisphere, but retained oil operations in what was still the British protectorate of Kuwait, and, like the French, sought to develop a domestic nuclear industry – tied, of course, to military nuclear strategy.

American military involvement in the Middle East was still limited, constrained by a lack of domestic support, even as British power in the region dwindled. This meant that by the late 1960s, Saudi Arabia and Iran became the powers that secured supplies of oil from the Middle East, even if it was Western oil and gas companies doing the extracting. Western military weakness in the region allowed Colonel Gaddafi to seize power in Libya in 1969, and he immediately shut down US and British military bases, instead asking for Soviet military aid. Around the same time, the Ba’athist government in Iraq nationalised the Iraq Petroleum Company, and the Saudi Government took majority ownership of Aramco. These shifts enabled greater price and production setting power on the part of oil producing states, which had in 1960 formed Opec.

The American dollar increasingly became the currency of oil trade, and thus the US Federal Reserve’s monetary policy became more consequential internationally, particularly for oil producing countries. The devaluation of the dollar in 1971 was part of the reason that Saudi Arabia supported the oil embargo which led to the price shock of 1973, and high inflation throughout Western economies. This was coupled in 1974 by the Soviet Union overtaking the United States as the world’s largest oil producer. As the US was a net importer of oil by this stage, and the vulnerabilities in not having control over supply became more evident, the US became more involved militarily in the Middle East, sending warships to the Indian Ocean near the entrance to the Persian Gulf. But it also forced some cooperation with the Soviet Union on energy projects, including gas production projects in Siberia, which meant arms control treaties with the Soviets. As European countries generally sided with Arab states during the 1973 Yom Kippur War, division within NATO increased.

The International Energy Agency was formed out of a result of the first oil shock, the US government’s attempt to create more international cooperation on energy. But the US was also pursuing energy independence, with President Nixon telling Americans during a national address in November 1973 that the country needed to wean itself off Middle Eastern oil, partly through exploiting shale oil. President Carter took up this theme after his own election in 1976, adding the development of solar power to the quest for independence (something that would be taken up by the European Union decades later). However, the US did not return to being a net energy exporter until the second half of the 2010s, meaning that its dependence on Middle East oil and gas continued throughout the 1970s, 80s, 90s and 2000s. American and allied military involvement deepened, not only in the 1990-1991 Gulf War and the Iraq War of 2003-2011, but with a persistent naval presence in the Persian Gulf to ensure oil supplies (something that China came to rely on as its oil demand began to rise too). The threat of Soviet dominance in the Middle East also precipitated American military involvement in the region, with President Carter’s energy secretary, James Schlesinger, saying “Soviet control of the oil tap in the Middle East would mean the end of the world as we have known it since 1945’. But because democratic consent to Eurasian wars involving American ground forces had collapsed over conscription for the Vietnam War, the US instead fought through proxies, financing and arming the Islamic Mujahadeen in Afghanistan and providing covert support to Saddam Hussein’s government in the Iraq-Iran War of the 1980s. The threat of Soviet dominance in the Middle East had by this time put an end to the energy cooperation in Siberia of the 1970s.

In Europe in the early 1980s, a German consortium led by Deutsche Bank had agreed to provide finance to the Soviet project to build the new Trans-Siberian gas pipeline from the Urengoy gas field in West Siberia to Uzhhorod (now in Western Ukraine), but the US again imposed sanctions on companies involved in the project, though once more they ultimately proved ineffective. British trade secretary Lord Cockfield was outspoken against the sanctions, saying they were “an unacceptable extension of American extraterritorial jurisdiction in a way which is repugnant to international law.” A compromise was reached between the US and European governments after the latter agreed only 30% of their gas imports would come from the Soviet Union.

Oil could cut both ways, however, and was influential in the collapse of the Soviet Union (as was the Chernobyl disaster, discussed in my review of Serhii Plokhy’s book Chernobyl: History of a Tragedy.) The high oil prices of the 1970s incentivised production of oil and gas from the North Sea, as well as additional output in Alaska and Mexico, and this extra production capacity reduced the ability of Opec to control prices. So too did the creation of oil futures contracts on US exchanges, which gave the holders the right to buy oil at an agreed price in the future. Faced with this, Saudi Arabia led Opec in production cuts in an effort to retain control over prices, but as Saudi Arabia’s income began to fall, it reversed course, pumping up production to secure market share, leading to a price crash in 1986. This hugely diminished oil revenues for the Soviet Union, reducing its capacity to finance domestic spending, adding another destabilising factor that led to the dissolution of the Soviet project in 1991. Russia re-emerged to play the Soviet Union’s role in energy supply internationally, particularly to Europe, complicated by the fact that pipelines ran through former countries of the Soviet bloc, such as Ukraine and Poland. That story is of course very much active today.

This is a vastly abbreviated summary of the highly complicated history of oil and geopolitics presented in the book. Missing here are the Syrian civil war, NATO actions in Libya in the 2010s, China’s rising demand for energy and the effects on international finance, the US shale revolution, Turkey’s increasingly militaristic claiming of oil and gas resources in the Eastern Mediterranean, amongst other things, but being more recent these might be more familiar to the reader.

The intertwined roles of international finance and the effects on democratic politics which are central to the purpose of the book have only been touched on, but it is worth expanding on these briefly to do some justice to Professor Thompson’s work. The need for dollars by European countries following the Second World War, primarily in order to purchase oil, led to the creation of ‘Eurodollars’ – a somewhat mysterious financial invention that “began in the early post-war years as dollar deposits held in banks outside the United States that were not subject to American banking controls [such as the need to be backed by gold]. By the end of the 1950s, banks were trading and lending these offshore dollars in London. In these London markets, capital moved freely from post-war capital controls deployed by the European governments, or the controls on interest rates operated by the US Treasury. By the mid-1960s, a significant Eurodollar credit market had emerged. It was increasingly dominated by American banks that established London branches to participate, and it allowed European firms to borrow in offshore dollars. Quite how these Eurodollar credit markets worked to generate an accelerating quantity of dollars was far from transparent… what happened in the Eurodollar system was ultimately beyond any central bank’s control or authority.”

Ultimately, this messy system helped precipitate the 2007-8 sequence of economic crashes. Often misunderstood as a crash caused solely by American subprime borrowing and financial sector deregulation, there was much more at play, as Professor Thompson explains. First came the American housing market crash, with subprime lending a significant but not exclusive cause. Interest rates had been raised by the Federal Reserve in an effort to put downwards pressure on oil prices, which had been rising after a two-decade period of increased global production that had kept prices, and therefore inflation more generally, down. (The Iraq War beginning in 2003 had been intended to increase oil production from the country, but did the opposite, contributing to the rising price of oil.) Increasing interest rates made it more difficult for mortgage holders, who began to default, but the Fed continued to focus on keeping pressure on oil prices. Eventually, it did begin to lower interest rates to combat mortgage pressure, but by this time, especially with increased oil demand from China, oil prices were rising rapidly. “Quite simply, by 2007, the Fed could not set monetary policy to deal with two opposite problems.” Recessions in the EU and the US followed the oil shock, causing profound disagreements in the Eurozone, with Germany tending to value price stability, including for oil, and France and southern European countries favouring lower interest rates to ease the cost of borrowing. Following this was the banking crash, beginning in August 2007 with French bank BNP Paribas, which was unable to use mortgage-backed-securities as collateral for funding, spiking the cost of borrowing for Eurodollars, which, because they were not controlled by any central bank, deviated from the interest rate set by the US Federal Reserve for dollars that it could control. This divergence in rates between Eurodollars and US dollars sparked a borrowing crisis; the subprime crisis in the US was insufficiently large to be solely responsible for this financial crash. The European banks “had a singular difficulty: they needed funding in a foreign currency, and the Eurodollar markets on which they relied stopped functioning and could not be repaired.” This was eventually resolved, by the end of 2007, by the US Federal Reserve opening lines of ‘dollar swaps’ to the European Central Bank, the Bank of England, and the Swiss National Bank, so that they could pass dollar funds on to private European banks – in effect, the US Federal Reserve was bailing out European banks. Providing direct lines of dollar credit was something repeated in the financial crash induced by the pandemic in March 2020, this time to a wider variety of countries, including China.

To stem the mortgage crisis in the US, which was leading Japanese and Chinese banks to sell Freddie Mac and Fannie Mae bonds, driving the two mortgage corporations to insolvency, the Federal Reserve also stepped in to buy up bad loans related to those two corporations. Thus, oil and Eurodollars were major contributing factors to the 2007-2008 series of crashes. Quantitative easing – the creation of money to reduce interest rates and provide financial liquidity to economies – was key to being able to avert the Great Recession from being a second great depression, but its continued use throughout the 2010s and again during the pandemic has created its own economic and democratic threats, such as rising inequality due to inflated asset prices. The low interest rates following the crashes also made the North American shale oil revolution financially possible, increasing oil supply and thus reducing prices, keeping inflation low globally – until the last year. China’s huge fiscal stimulus, which brought growth back to many economies, poured money into domestic and international coal projects, causing greenhouse gas emissions to rise further.

In regard to democratic politics, Professor Thompson identifies two sources of potential instability – democratic excess, and aristocratic excess, this too tied to finance. The former is when the general population have a grievance against the wealth and excess of some members of the polity (encapsulated by the French Revolution), or when a government overspends to meet the short-term demands of the people. The latter is when those with more power within a democracy use it to further their own ends at the expense of the common people. The rise of international flows of capital, for instance, have allowed the wealthy to exploit tax havens, something not open to the everyday taxpayer, causing legitimate grievances on the part of common people. In the USA, the Supreme Court’s decision in 2010 (by 5-4) to allow corporations to spend freely on elections was another.  A further form of aristocratic excess has been the offshoring of manufacturing from Western countries, creating higher profits for corporations and their shareholders while reducing employment opportunities for less wealthy members of those nations. International finance has also threatened one means of creating a sense of nationhood, the creditor-debtor relationship. While during times of controls that keep capital within national borders, citizens lend to governments to provide services, creating an economic community of citizens sharing those services, and thus a sense of nationhood. With international finance that relationship is broken, meaning a different ‘story’ for nationhood is required to hold countries together and allow “losers’ consent” following elections – that is, the acceptance of defeat and tolerance of the results following an election in the knowledge that, in future elections with different outcomes, the other side will also accept defeat and live with those outcomes. This does not mean, of course, that international financing is wholly pernicious, as it can provide access to higher amounts of capital at an earlier time, and at lower interest rates, enabling faster economic growth. Still, as Professor Thompson details, countries have been struggling to find a stable alternative sense of nationhood, and without this shared and binding something, democracy becomes rocky, as anyone looking at the past decade can observe. Losers’ consent in the United States, for instance, was sorely tested in both the 2016 and 2020 presidential elections.

Within the European Union, Professor Thompson identifies a different strand of democratic instability brought about by aristocratic excess, in large part the result of the circumstances of the creation and development of the Eurozone. (Her assertions have been contested by others.) In her telling, as the role of the European Central Bank has grown, this has been coupled with the failure to achieve democratic endorsement of EU treaties at a national level, and the repackaging and renaming of these treaties without substantive change to pass them at an executive level has created a democratic deficit. With German influence on the Eurozone pushing the European Central Bank to value inflation control over government spending, and the German Constitutional Court having ruled that the European Union must act in accordance with German Basic Law, other members of the Eurozone have been and remain constrained in their economic policy setting. In Italy, for instance, technocratic prime ministers have been the norm since the early 2010s, as Germany would not support continued Italian access to ECB financial assistance (and low borrowing rates) without one. Faced with the choice of a sudden high spike in the cost of borrowing (if it left the Euro or was not supported by the ECB) or being fiscally restrained, Italian presidents have chosen the latter. In France, the traditional parties of the left and right – the Socialist Party and the Republicans – lost a great deal of their support after the introduction of the Euro because while large sections of their membership were opposed to membership of the single currency, their leaders could neither persuade the German government to reform the currency rules nor discover a stable currency alternative. With the traditional parties falling apart, the conditions were available for Emmanuel Macron’s La Republic En Marche! movement to claim the centre ground and electoral victory. (Mr Macron, promising Eurozone reform like his presidential predecessors, has also been unable to persuade the Germans.) In Britain, meanwhile, the fact that London became the trading centre for a currency it was not part of, to the chagrin of Eurozone countries, was part of what Professor Thompson argues were structural forces that, if they did not make Brexit inevitable, certainly pushed Britain towards exiting the EU. “David Cameron’s decision making, far from being an aberrant beginning, was the end of a story about weakening British consent to the EU.” This is of course a reasoning that stands in opposition to many explanations for Brexit, yet Professor Thompson is adamant. In her acknowledgement, she writes that she “realised that the long-standing monetary divergence between Britain and the Eurozone became particularly consequential from 2011 because of the very different responses of the Bank of England and the ECB to high oil prices.”

Germany has not had everything its own way, however. Borrowing on the part of Eurozone countries exceeded what Germany originally foresaw, meaning that German taxpayers have had the sense that it is they paying for spending in other EU countries. This has led to democratic problems for Germany, too, with the electorate being pushed to far right and left parties. “Between 1949 and 2004, a grand coalition had governed Germany for less than three years; but since the 2005 general election, a grand coalition has governed for all but four years.” The problems in modern democracies that have been much discussed in the last decade thus have long and deep roots, going back at least to the 1970s.

Her prognosis for the Eurozone is interesting. “Absent an actual collapse, the Eurozone states have gone too far monetarily to return to debt denominated in national currencies. Logically, this should propel the Eurozone towards fiscal union with accompanying taxes. Yet the conflicts around the Recovery Fund suggest that a politics that would drive such a chance is still absent. What politically remains of nationhood in European democracies may well be insufficient to support a tax state, and the national-citizen creditor cannot be recovered. But there is no evidence of a belief in, or acquiescence to, an idea of a people that could legitimate Eurozone-level taxes on citizens and no institutions representing a democratic people that could authorise them.” It is very much ‘wait and see’ for the Eurozone.

Taken together, all of this shows why Professor Thompson chose to call the book Disorder – the long century of oil has been full of it. It is tempting to believe that the energy transition which much of the world is today focussed on will relieve some of this disorder as economies become less dependent on oil. Professor Thompson is doubtful of this for a number of reasons.

The first is that energy supplies tend to be added to the world supply without others being taken away. My view is that while this continues to be broadly true at the global level, at the national level this is not true at least in some countries, which shows that transitions are indeed possible, and with enough being made at the national level, this will translate into a global transition. I agree with Professor Thompson, however, that shifting manufacturing to developing countries has helped Western countries with their energy transitions, and, clearly, considerable technological development is needed to decarbonise much of industry (and the broader use of energy, particularly in regards to storage of energy produced by renewables). I also agree with Professor Thompson that where the transition incurs higher costs of production, the allocation of those costs will be politically fraught. These challenges mean that the energy transition may be slower than many expect, prolonging the age of oil. That oil will continue to be demanded for some time not only for transport but also chemicals manufacturing, including plastics, is another reason to believe the age of oil disorder will, unfortunately, continue for years to come.

The second reason is more powerful still. While on the surface it may seem that lower oil demand will ease competition over resources, new energy technologies require their own specific metal and minerals resources. Though there are overlaps, these are generally distributed differently to oil resources, adding further dynamics to energy geopolitics – China, a large energy importer in recent decades, has many of the minerals of the clean energy transition. “Geopolitically, an energy change will necessarily result in upheaval. If Britain was the power that climbed to dominance during the age of coal and the United States the power that ascended during the age of oil and coal, the spectre haunting Washington is that without a decisive American strategic turn to renewables and electrification, the new energy age that depends on metals and minerals will belong to China. For the EU, there is the hope that green energy will prove an escape from the world of oil and gas that through the twentieth century did so much to weaken the European powers.”

Further threats to the energy transition are also identified. Large governmental spending has been and will be a feature of the transition, but rising interest rates will mean that these are more costly to finance, adding to their overall cost and the problem of distributing this burden. Because of aristocratic excess, cronyism in awarding large contracts is also a threat. Meanwhile, in the oil world, if investment in “the pursuit of higher-cost supply is not resurrected, the world economy will, for the next few decades, be dependent on expensive oil from the Middle East and Russia as it became in the 2000s. The return of high prices will in principle incentivise investment, but only if there is also a less critical attitude from investors to fossil fuels. Higher prices will, meanwhile, seriously constrain economic growth and once again destroy demand, causing instability in oil-producing countries, not least Iraq. The old problems that reliance on Opec Plus will reinvigorate will play out at the same time as the cartel’s members need to adjust to the huge medium-to-long-term changes that competition for oil from electricity in the transportation sector will bring.” Disorder, disorder, disorder – especially when coupled with the effects of climate change, which Professor Thompson acknowledges but does not discuss in any detail.

Although she does not predict the Russian invasion of Ukraine, she certainly sees the risks of it. I imagine she will have been somewhat surprised at the level of unity amongst Western countries that has so far been evident against Russia, and not at all surprised at the fault lines that are showing. She writes that “overall energy costs will rise and, once again, act as an inflationary pressure. Gas prices in Europe are particularly vulnerable to issues with Russian supply and transit, whether technical or generated by Putin’s willingness to use gas as a blunt strategic instrument.” Extending the analysis of economic effects of the energy transition, she goes on to state that “Without major breakthroughs on battery storage, there is no guarantee that electricity powered by renewables can escape an inflationary dynamic. Whatever the low unit costs of producing solar- or wind-powered electricity, at the system level – especially in those places, like Germany, where renewables are a significant proportion of the sector but the weather is unpropitious – the inefficiencies of intermittent renewables capacity have thus far often yielded higher electricity prices for consumers. It is likely that this energy-driven inflation will eventually unsettle the bond markets and make borrowing more expensive for governments.” Affordable energy storage is indeed crucial, but I think there is somewhat more room for optimism than Professor Thompson appears to show. Battery storage prices have been falling rapidly, for example, and hydrogen and synthetic fuels will also fall in price as government-supported deployment increases.

With the phasing out of internal the combustion engine, Professor Thompson foresees that “personal transportation … will become the site of political conflict. Electric vehicles are some distance away from being the equivalent of Henry Ford’s Model T. The future could well entail a return to the pre-Fordist world where car ownership was a luxury good and a source of class resentment.” This risk is certainly present, but I would expect voter pressure to overcome it, or for alternatives, such as car- and ride-sharing schemes and micro-mobility such as e-scooters, to ease this predicament, if electric vehicles do not achieve price-parity with their internal combustion engine cousins.

More widely, Professor Thompson argues that “how carbon neutrality should be achieved – not least how much carbon can be offset rather than eliminated – will move beyond governments announcing targets into the realm of electoral contest. In those Eurozone countries that struggle to structure much economic conflict in the electoral contests between parties [because of the fiscal constraints of the Euro], there will be pressures that pull in the opposite direction from the need to minimise macro-economic dissensus.”

The book does not offer solutions to these threats, focussing instead on defining the problems, in the hope that, seeing the problems clearly, others will be able to take up the challenge of finding ways that are acceptable to the public of muddling through energy transitions. “To mitigate against the possibly destructive nature of the politics to come, collective understanding needs to catch up with what the conjunction of physical realities about energy and the realities of climate change entails. Careening between the ideas of technologically driven salvation and an inescapable Götterdämmerung is a hopeless response … governments will have to decide on what concurrent risks must be taken in relation to different time scales. Those decisions will invite geopolitical conflict, including over the territory where critical resources are located. In Western democracies, politicians will need to make palatable the likely sacrifices demanded of citizens, without entrenching further aristocratic excess … How … democracies can be sustained as the likely contests over climate change and energy consumption destabilise them will become the central political question of the coming decade.” This will indeed be pivotal and difficult, but a worse possibility confronts us – that of putting the energy question to the side while we are forced to deal with war, food shortages, forced migration, cultural disputes, and cost of living pressures.  

Professor Thompson acknowledges from the outset that her triple focuses on energy geopolitics, finance and democratic politics are not wholly explanatory of world events – cultural and religious forces being two others she cites as influential. And perhaps more of a comparative examination of the politics of countries outside Britain, France, Italy, Germany and the USA would have aided her analysis. One also gets more of a feel of history as deterministic rather than contingent from reading the work. In addition, I feel her doubts around technological progress are a little too strong (progress on driving the cost of renewables down has been remarkable, for instance), even if her scepticism is reasonable. The International Energy Agency’s recent report on the need for demonstration projects for the energy transition suggests innovation this decade must be faster than for any previous energy technology, rather supporting Professor Thompson’s scepticism.

Disorder – Hard Times in the 21st Century is a fascinating and powerfully explanatory book. Although a relatively short book at 279 pages (with 68 pages of references and notes), it is heavily dense and, being dry in tone and rather complex, one that is not easy to read. No one will agree with all the arguments, but for those that do take the time to read it will find their time well spent.