On Tuesday the 12^th of November, we had the pleasure of Bas van Beurden joining us for an Expert Talk. Mr. van Beurden has a degree in history and now works as a business analyst at Shell. He has great expertise in renewables and energy solutions. During this Expert Talk, Mr. van Beurden has taken us through key historical turning points — the Napoleonic Wars, WWI, WWII, and more — to reveal the crucial role energy has played in each. At last, he drew parallels between the failure of the Keynesian system and the problems experienced by the current neoliberal system.

Introduction
After the Cold War, many scholars believed that liberal democracy would be the end stage of all nations, formulated most eloquently by Francis Fukyama in his piece ‘The End of History’. . The central thought behind this paradigm shift was the market fundamentalism: all sectors of society would eventually rely on market incentives, always leveling back to the equilibrium. The European nations certainly did think that they could control Russia by bringing them into their economic sphere: mutual economic dependence was seen as the solution to keep war at bay. The EU started to rely on Russian gas from Siberian fields, totaling to around 50% of their total energy consumption.

However, this supposed reliance has not deterred Putin from waging war in Ukraine, creating not only chaos on the battlefield but leaving most of Europe scrambling for energy resources. Market mechanisms have not prevented nations from certain decisions which would be regarded as irrational from an economic point of view. It is foolish to view market fundamentalism in a vacuum as it has always been tied to other dimensions like geopolitics.

Even Henry Kissinger, US Secretary of State and National Security Advisor in the 70s, changed his stance on the importance of energy. He famously said: “Don’t talk to me about barrels of oil. They might as well [be] bottles of Coca-Cola. I don’t understand!” But after the Oil Crisis, he saw the significance of oil within politics and believed that it could not be left alone to the Arabs.

First Energy Transition: Napoleonic Wars & Industrial Revolution
The French Revolution was the time where modern principles we know today were put into power. The Industrial Revolution created a higher standard of living and essentially our modern way of living.

During this period of time, there were multiple great powers on the stage. It was uncertain who would come out on top: Russia, The Dutch Republic, France, Great Britain, Prussia? Who was able to leverage most power?

When taking a realist outlook, a nation’s power can be calculated by multiplying the strength of one’s economy by its population. This can be combined into a simple formula:

Power = Economy x Demography

According to this formula, France should have been the victor. Napoleon had a decent economy and 40 million people at his disposal. This was much more than his opponents: Russia had 31 million, Austria 19 million, GB 9 million, Prussia 5 million, Netherlands 1.8 million). He also had great artillery, an invention at this time. However, what he did not possess was unlimited energy resources which he needed to power his war machine.

Though the British were outnumbered, they had a much more efficient energy resource in coal. Coal was the principal duel during that century as it was about 2 times more efficient than biomass (i.e., burning wood). With this coal, the British were able to outproduce Napoleon, powering their machines faster and more efficiently, while France reached their ecological limits. This superiority of fuel was key in Napoleon’s defeat and allowed Britain to acquire its vast colonial kingdom. Energy thus played a pivotal role; it was not only a battle of France vs. Great Britain, but also of wood vs. coal.

Second Energy Transition: Maritime Arms Race from 1898-1914 (Germany vs. GB)
Great Britain had two power principles during this time:

1. Have 2.5 times the amount of war ships around the British Isle to stave of threats
2. No great continental power in Europe

At the helm of the newly united Germany, Kaisar Wilhelm wanted colonies and thus started building a large navy. Great Britain was taken aback by this development: the German economy had grown exponentially, and they had a much larger demographic, meaning more power in realist terms.

In a bid to stave off a potential German threat, the British believed that they had to have a technological edge on their adversaries in order to be victorious on the battlefield. Therefore, Churchill asked the CEO of Royal Dutch Shell to meet with him.

One must realise that oil did not have the pivotal role within society it has today; it was really in its infancy. Oil as a commodity was only used for lamps, but they now wanted to change its usage revolutionary: they wanted to utilise it as fuel to power ships.

Though initial test results were disastrous, later tests were immensely successful: the ships became, faster, lighter, and more agile. They gained a significant advantage over the German coal ships, easily destroying them in naval battle. Germany had no oil, nor oil companies, so they simply could not compete with the British This naval dominance was key in the Allied victory during World War One.

Third Energy Transition: Second World War: A battle determined by oil
The German Blitzkrieg was enabled by oil: their entire war machine ran on the energy source as it allowed their tanks and other machinery to advance fast. And as we all know, speed was key in Hitler’s initial military successes.

Though Hitler still did not possess any oil fields, German engineers had figured out a way to convert coal into gas, known as methane, then compress it to get synthetic oil. Though this was an impressive feat, it had a drawback as it was inefficient. A unit of coal did not translate into a unit of synthetic oil, meaning that Hitler could only power 1/3 of his army.

To complete their Blitzkrieg, they had to acquire the Romanian oil fields. The Americans wanted to blow up these fields, but the Romanian army collaborated with the Germans to save certain fields. Still, more than half of them were blown up, leaving Hitler still scrambling for energy resources.

The Dutch refineries were also no option as Dutch intelligence alerted the Dutch oil companies of the incoming invasion. In turn, these firms unscrewed the main parts of their refineries and shipped it to Great Britain. Again, Hitler was left with bare hands

Oil demands were rising as the Blitzkrieg continued, especially within the Wehrmacht. A vicious cycle emerged:

• Germany needed oil to power its war machine but it doesn’t have oil
• They need to expand the war to acquire oil fields and reserves
• Expanding the war means it now needs even more oil in total

The rich oil fields in Azerbaijan were seen as the solution to Hitler’s energy problems. It would give him all the oil needed to last during the war, though it obviously required an invasion into the Soviet Union. Moreover, Rommel would seize the Suez Canal to halt oil transport into Europe, while the rest of the army captured Baku.

This did not go according to plan. The Russians used their scorched earth tactic to impede the German campaign into the Soviet Union. These delays were so significant that mud season had commenced, making it more difficult to march further and burn even more fuel.

Whereas Rommel eventually ran out of oil, the German push in Russia had halted during the winter as the leftover synthetic oil started the freeze. The Wehrmacht became stationary and essentially sitting ducks. Without working fuel, the army disintegrated completely, and Germany eventually lost the Second World War. Nazi Germany’s energy poverty and quest for oil paradoxically led it to its downfall

Parallels between the 1973 Oil Crisis and the present
After the Second World War, a new world order emerged. With the U.S. at its helm, the Keynesian system was implemented. They were convinced that unrestrained capitalism would lead to the fall of capitalism and democracy. Indeed, an unbridled market would lead to inevitable socio-economic dislocation, inequality, crises and eventually political revolt – which could manifest itself either in communism to the left or Fascism to the right. Therefore, the Allies were convinced that there had to be a domestic and foreign political-economic system that would manage capitalism to promote stability. Market forces served as a means to a better future, a healthier liberal democracy, but not as an end in itself. The main principle of the Keynesian consensus was balance. Government interference, checks, surveillance became the watchword.

Around the 1970s, the Keynesian model cracked domestically and internationally. In this, parallels can be drawn between our neoliberal model which is also nearing its end.

• Slowed economic growth & socio-economic disruption

The first 20 years after the war was a period of unprecedented prosperity growth, but this began to wane in the second half of the 1960s. This period saw a lot of structural shifts in the labour market, partly driven by the oil energy revolution. This initially negatively impacted some ~35% of the working population, who saw their jobs disappear and suddenly had to change professions. This socio-economic dislocation caused a decline in post-war self-confidence in the West; and people began to negatively compare the Western political-economic system with the authoritarian models of governance of the communist world, which were then thought to do better, especially when it came to safeguarding jobs. This led to a socio-economic tipping point around the 1970s.But a third, even more consequential development was the transition to oil.

The socio-economic experience of the 1970s compares with the 1920s of the 21st century. We have also seen a period of economic prosperity, namely in the late 1980s, the 1990s and the period up to the 2008 financial crisis, under the neo-liberal model, after which economic growth declined; and discontent in the West gradually began to emerge.

Both time periods have dramatic developments: automation and disappearing industries in the post-war period, and even more automation and globalisation in current times. Globalisation in particular has caused widespread deindustrialisation in western economies, especially in the United States and the United Kingdom, where huge ‘rest belts’ have been created. A conservative calculation by CSIS suggests that around 10 million direct jobs have been lost in the US due to deindustrialisation driven by globalisation, irrespective of indirect jobs

Added to this is the fact that our green energy transition has put additional pressure on heavy industry, putting energy-intensive sectors under increasing social pressure, to the point that they end up having to close their doors and relocate their production processes abroad, also losing bales.

All this has manifested itself in recent years in the rise of populist parties; and among the underside of society, a decreased trust in the traditional Western model of governance, especially in Europe – just as it did in the 1970s.

• Cultural backlash

Besides the socio-economic parallels, a socio-cultural link can also be drawn between the 1970s and the 2020s. For instance, the 1960s were marked by the rise of left-wing progressive movements in the form of the hippie movement, women’s emancipation, racial emancipation and many young people renouncing the church. Numerous cultural norms were broken through, with Western society going through a progressive transformation. However, by no means everyone uniformly agreed with the hippie movement; and a cultural divide emerged in Western society between progressives on the one hand and conservatives on the other. In the United States, this was further driven by racial emancipation and opposition to the Vietnam War, which caused massive polarisation and even social violence in the 1970s.

This development in the 60s and 70s is reminiscent of the progressive wave from the 2010s to the present. Wokism largely prevailed during this period, but like the hippie movement, experienced a cultural backlash from 2016 onwards. Today, this cultural struggle manifests itself in the toxic divide between Democrats and Republicans, much like the 1970s. Back then, the Vietnam War, decolonisation and women’s and racial emancipation were the main theme; today, it is the polarising war between Israel and Palestine, gender relations, Black Lives Matter, and immigration.

Back then, the left wing of society looked to the communist world as a beacon of moral superiority, while now the extreme right wing looks to the autocratic world as a leading example of normativity

• Division in the U.S. and Europe

All this led to divisions in the United States and Europe, paralysing ‘federal’ governance in the United States ‘and’ Europe in important ways. Well-known incidents to this end were the Watergate scandal and the Empty Chair Crisis of the European Economic Community, the latter of which saw a stalemate in Europe’s further economic integration in terms of creating a single market. This is very reminiscent of the internal divisions of the United States and the EU today.

Conclusion
While these parallels are very insightful and demonstrate the importance of historical analysis, it does not provide a concrete blueprint of what is to come nor what we should do as a society. Yet we can predict with some certainty what lies ahead. A geopolitical power shift will take place as those who possess energy sources and materials like cobalt, lithium, etc., will become even more powerful. They will gain leverage over other nations who need these resources for their society. Moreover, as Dutch minister Faber from the PVV put eloquently, ‘a new wind flows in Europe.’ The neoliberalist system has failed to keep a majority of people satisfied, allowing populist parties to surge. Trump has won the most recent American elections as he promises to overhaul American society. Therefore, it is not a question whether political reorientation will happen, but when it will take place and how the new system will look like.