The rising cost of oil is hitting people hard right across the world. By raising the price of all energy, it has a direct effect on people’s ability to heat their homes and on the cost of travelling to and from work.
Rising oil prices also have a devastating indirect effect by pushing food prices up even higher, since farmers depend on not only machinery and transport that uses oil, but also nitrogenous fertilisers whose manufacture is highly energy intensive.
It is also causing immense difficulties for governments and central banks as they endeavour to keep in check the recession that is currently developing in the US and Britain.
Their preferred method for doing this is by handing over huge sums of money to the banking sector and by reducing interest rates. But now they are terrified that this will stoke up inflation.
Capitalism worldwide grew relatively slowly through the 1980s and 1990s, as did the demand for oil. Its price fell in real terms from the very high level of the mid 1970s and early 1980s.
The big oil companies still made profits, but they held back from putting a lot of investment into looking for new oil reserves and put even less into refining capacity.
But then came the late 1990s and early 2000s. The US economy grew rapidly, fuelled by the large scale consumer borrowing and increased government arms expenditure. At the same time, rapid industrial growth in China began to have its impact on the world system as whole.
So demand for the consumption of oil shot up – and did so just as US imperialism’s war on Iraq was starting. Oil that had cost $10 a barrel in the late 1990s rose to $30, then to $70 and now to $130. Some analysts think it can rise another $100.
As this has happened, oil firms’ profits have shot up, and gas and coal producers have pushed their prices up. Financial speculators have gambled on trying to keep these commodity prices rising. Meanwhile, the world’s workers and poor farmers are told they must “tighten their belts”.
Running into disaster
It has been obvious for many decades that humanity cannot continue using up the earth’s oil without eventually running into disaster. Yet the drive for profit means that industry in the West and industrialisation in the rest of the world are based upon encouraging ever greater amounts of oil consumption, especially when it comes to transport.
Private cars have been prioritised over public transport, trucking over rail freight. And big cars with gas guzzling engines have been the prestige symbols of those who have got richer as the poor have got poorer. The old capitalists in Europe, North America and Japan have refused to abandon their destructive addition to oil – and the new capitalists in China and India have imitated them.
Now there is a deep fear that the point is being reached at which point the oil reserves will start to run out. Some commentators think “peak oil” has already been reached, others that it not due for another 40 years.
Nobody knows for sure, because those who control the oil reserves – the royal families of Saudi Arabia and the Gulf, the giant oil corporations and the Russian states – see their profitability as dependant on keeping the amount of their reserves secret.
There is, of course, another even more frightening absurdity to world capitalism being hooked on oil. Burning the world’s oil reserves involves turning them into greenhouse gases that are leading to catastrophic climate change.
The fear that the reserves are running out has led to a third of the US maize crop and half of the European Union vegetable oil crop being turned into oil substitutes – so called biofuels. This is one major factor behind the rising price of staple foods.
Yet capitalism knows only one way to overcome an addiction – cold turkey for the rest of us by forcing up the price of energy. The ruling class’s drive for profits has created a world where we are all dependent on oil in our everyday lives. Now they tell us we have to make sacrifices because it has gone wrong. Meanwhile, Shell, BP, Texaco, Centrica and the rest are making record profits.
Chris Harman is editor of the International Socialism journal. For more information go to » www.isj.org.uk