The Real Oil Shock

ISBN-13: 9783031071331 / Angielski / Miękka / 2023

Ryan C. Smith

Opis

The rise of the global financial industry is treated by many economists as a critical component of the rise of neoliberalism. What few address is the role of the 1973 OPEC Oil Embargo and the 1979 Oil Shock in making modern financialization possible. Here, it will be demonstrated that the dramatic transfer of wealth from the industrialized, capitalist world to OPEC’s members triggered by the Oil Embargo and the Oil Shock created a vast pool of liquid capital. Oil prices inflation, as a result of Embargo and Shock, also triggered a balance of payments crisis that created unprecedented global demand for credit. Processing this capital and mitigating the inflationary pressures which followed the 1973 Shock encouraged the development of more liquid, internationally mobile instruments that made financialization possible and ushered in the effective privatization of money creation. This transformation of the creation of money, the rise of a new global debt cycle, and petrocapital-fuelled changes to financial practices laid the foundations of modern finance and the neoliberal world order as we know them.

Spis treści

 

Introduction

Would provide a brief introduction of the topic, the limitations of existing scholarship, and the links this work intends to make that will fill in these blank spots.  It will lay out the specific argument that the Oil Shocks were necessary for creating the modern, financialized world order by effectively privatizing the creation of currency and providing the necessary liquid capital to transform finance in a similar fashion to how the resources provided by Columbian Conquest made European imperialism possible and the cotton trade was utilized as the launchpad for the Industrial Revolution.

Chapter One: The World Before the Shocks

Discusses the state of international finance and the oil industry before the oil shocks from the 1933 Saudi concession which initiated oil drilling in that country by the Arab-American Oil Company to the founding of OPEC.  It will include discussion of Bretton Woods, the impact of reliably cheap oil on global economics, the growing Eurocurrency market, and other related factors.

Chapter Two: When Oil Shocked the World

Covers the rise of OPEC, the 1973 Oil Shock, the attempted 1967 oil embargo, the tensions which led to the first Oil Shock, and the consequences it had for the global economy and OPEC’s members.  This chapter’s emphasis will be on dissecting the broader economic and social impacts of the Shock with particular focus on how it challenged finance.

Chapter Three: Beggar Thy Neighbor

Investigates the divergent, often conflicting policies of the US and their allies in responding to the Oil Shocks, the different approaches taken to cope with the new petrocapital cycle, and how these clashing objectives opened up space for the private sector to operate more or less unhindered.  Three areas of specific discussion will be how this transformed the Eurocurrency market, led to the creation of the petrodollar monetary system, and fueled a new arms race in the Middle East.

Chapter Four: Dancing to the New Beat

Analyses how financial institutions and markets adapted to the new normal of the post-1973 world, with particular emphasis on the explosion of international loan syndications, the rise of swap instruments, and the diversification of financial futures.  Particular emphasis in this chapter will be on how this fundamentally transformed global finance in ways that laid the foundation for the financialized economic order which followed.

Chapter Five: The Day the Music Died

Closes out the book with examination of the 1979 Oil Shock, how it was caused by escalating geopolitical tensions in the Middle East, and its role in thoroughly destabilizing global markets leading up to the Volker Shock.  Particular areas of emphasis will be on the collapse of OPEC’s supply of capital for global markets, the new wave of inflation triggered by the second shocks, and how these new pressures culminated in the 1982 Global Debt Crisis.

Conclusion

Provides a recap of the book, discusses the main points of how the Oil Shocks created a world where currency creation was effectively privatized, finance become the most valuable industry in the world, and the direct links between the neo-liberal/neo-classical economic order and these tumultuous times. 

O autorze

Ryan C. Smith is an independent scholar specializing in modern finance, the oil industry, energy and geopolitics, and the Middle East. He received his Ph.D. in Economic and Social History from the University of Glasgow in 2022.

 

Blurb

"Understanding the role of oil in our past, as this absorbing volume undertakes to do, informs a good deal about our present plight. And it should make us resolve to kick fossil fuel once and for all, for the far more democratic forms of energy now available to us." 

Bill McKibben, author of The Flag, the Cross, and the Station Wagon: A Graying American Looks Back at his Suburban Boyhood and Wonders What the Hell Happened

“Ryan Smith offers a new and challenging perspective on the OPEC oil crisis and its aftermath drawing on contemporary theories that rethink the nature of money, debt and finance.”

Mary Mellor, Professor Emeritus at Northumbria University (UK) and founding Chair of the University's Sustainable Cities Research Institute

The rise of the global financial industry is treated by many economists as a critical component of the rise of neoliberalism. What few address is the role of the 1973 OPEC Oil Embargo and the 1979 Oil Shock in making modern financialization possible. Here, it will be demonstrated that the dramatic transfer of wealth from the industrialized, capitalist world to OPEC’s members triggered by the Oil Embargo and the Oil Shock created a vast pool of liquid capital. Oil prices inflation, as a result of Embargo and Shock, also triggered a balance of payments crisis that created unprecedented global demand for credit. Processing this capital and mitigating the inflationary pressures which followed the 1973 Shock encouraged the development of more liquid, internationally mobile instruments that made financialization possible and ushered in the effective privatization of money creation. This transformation of the creation of money, the rise of a new global debt cycle, and petrocapital-fuelled changes to financial practices laid the foundations of modern finance and the neoliberal world order as we know them.

Ryan C. Smith is an independent scholar specializing in modern finance, the oil industry, energy and geopolitics, and the Middle East. He received his Ph.D. in Economic and Social History from the University of Glasgow in 2022.