Straight to the point

Has Donald Trump been reading Don Quixote? Last week, the incoming President warned the UK that it was making “a very big mistake” by raising tax on North Sea oil. His solution? “Get rid of windmills.”

It was classic Trump, the Presidential candidate who fashioned himself as a friend of Big Oil, promising to free up the nation’s stores of liquid gold and secure America’s “energy dominance”. Thanks to Biden’s pause, which yesterday crescendoed into a ban, on new oil and gas leases, along with his restrictive environmentalist agenda, America’s stocks have been kept in reserve. And Trump wants to exploit them.

But does this mean the US can expect another oil boom? Not so fast.

In America, the oil business is identified in the public mind with individual Texas oil men and their families. Think Hollywood movies like Giant (1956), starring Rock Hudson and James Dean, and the Eighties TV soap opera Dallas, whose Machiavellian antihero, J.R. Ewing, was portrayed by the late Larry Hagman (who happens to be my cousin twice removed). Today, the hybridisation of pop culture and petroculture continues with Landman, starring Billy Bob Thornton as a jack-of-all-trades working for an oil company.

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The Texas connection is no myth. Only five American states produced 70% of US natural gas in 2023, with Texas producing 28% of the total, the same as the next two — Pennsylvania and Louisiana — combined. And from the Thirties to the Seventies, the Texas Railroad Commission helped to set world oil prices with its production quotas in the state.

However, this has never just been an American tale. From its origins in the 19th century, the oil industry in the US has been dominated by multinational corporations and subordinated to great power politics.

During the Fifties, when Giant played on movie screens, global oil prices were largely controlled by the cartel known as the “Seven Sisters”. And in the early Cold War, these companies — which included the predecessors of ExxonMobil, Texaco and British Petroleum — were partners with the US, UK and other Western governments. Indeed, during this period, petropolitics was geopolitics, leading to interventions such as the Western-backed coup that overthrew Iran’s democratic government and installed the autocratic Shah of Iran in 1953.

Over the following decade, Saudi Arabia and other oil-producing countries formed OPEC and demonstrated their collective power with the oil embargo of 1973 against the US and other allies of Israel during the Yom Kippur War. It was during this era, in Television Land, that J.R. Ewing hired a mercenary named B.D. Calhoun to blow up oil fields in the Middle East.

Back in the real world, however, foreign state capitalism won out over American-style private capitalism. Today, three-quarters of the world’s oil reserves are controlled by state-owned national oil companies. The largest, by revenue, are two Chinese companies, Saudi Arabia’s Saudi Aramco, Russia’s Rosneft, Brazil’s Petrobras, and India’s Indian Oil Corporation (IOCL). America, suffice it to say, does not compete.

Today’s Landman series, like the re-run of the Trump presidency, takes place in an era when high-tech hydraulic fracturing — the use of huge quantities of water to flush out “shale oil” and “shale gas” — has transformed the American fossil fuel industry and the global market. But geopolitics still rules the oil patch. More than 80% of the world’s oil reserves are controlled by the 13 members of OPEC, which produces 40% of all crude oil and 60% of global petroleum exports. And those members of OPEC — along with their expanded group OPEC+, which was created in 2016 — are not afraid to flex its muscles. After sanctions were placed on OPEC+ member Russia following its invasion of Ukraine, China helped Moscow by replacing Saudi Arabia with Russia as its largest foreign source of crude oil.

Meanwhile, pipeline politics also remain geopolitics. Shortly after President Biden vowed to “bring an end” to the Nord Stream 2 natural gas pipeline if Russia invaded Ukraine, explosions rendered the undersea pipeline useless in September 2022. Washington and allied Nato governments professed to be mystified; last August, however, The Wall Street Journal reported the sabotage was carried out by Ukrainian saboteurs. Around the same time, the Chinese government claimed that a Hong Kong-flagged ship in the Baltic had destroyed a critical pipeline in the Baltic between Estonia and Finland. It was, needless to say, “by accident”. The late J.R. Ewing no doubt is smiling somewhere. Trump, by contrast, is surely not.

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For in addition to having to deal with state-owned oil companies and the shifting alliances of our new Cold War, the incoming President can also expect resistance from inside the oil industry and investment world. The American Petroleum Institute, the main oil and gas lobby, opposes Trump’s threat to impose 25% tariffs on imports from Canada and Mexico, including energy imports. Elsewhere, the major oil companies, which rely on delicate international deals, are unlikely to approve of Trump’s cowboy diplomacy, including his threat to impose tariffs on the EU if it fails to buy more oil and gas from the US.

Yet Trump doesn’t seem to recognise this, declaring instead that, “if they drill themselves out of business, I don’t give a damn”. Strong words, indeed, but ones that overlook the fact that not even the President of the United States can force private oil companies to ramp up drilling.

Instead, Trump is left with an oily irony: if he wants to secure America’s energy dominance, he’ll have to imitate every other global competitor and create a state-owned oil and gas company. History teaches us that black gold will never be tamed by one man alone. Forget Texaco — and bring on the age of Americo.

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