Socialist Worker

Insanity of the market

Issue No. 1714

Behind oil price rises lies the

Insanity of the market

IN THE space of less than 12 months the price of oil on the world market has more than tripled, from $10 to almost $35 a barrel. This comes after a long period of low and falling oil prices. With the exception of a brief surge during the 1990 Gulf War, oil prices have been low since 1980.

The low price of oil was part of a more general fall in world commodity prices driven by the interests of the global corporations which want cheaper raw materials. The impact of the low oil prices on some countries was severe. Latin American countries like Ecuador, Colombia and Venezuela, for instance, depend on oil exports.

Low world oil prices pushed these countries deeper into debt. At the same time the governments of these countries slashed back public spending and welfare, encouraged by the International Monetary Fund and World Bank. Western leaders who complain about high oil prices said nothing at all while low oil prices brought misery to the developing world.

Meanwhile they insisted that oil-producing countries like Saudi Arabia, Indonesia and Nigeria used money from oil exports to buy arms. The British government under Margaret Thatcher pushed through a �22 billion arms deal with Saudi Arabia. The Tories and now New Labour pushed Indonesia to buy Hawk jets and other weapons.

The price of oil, unlike that of most other commodities, has leapt up in the last year for a number of reasons. The oil companies themselves are partly to blame. The Financial Times says, "The industry has been so focused on cost-cutting and consolidation in recent years that it has left itself with inflexible refineries and permanent vulnerability to shortage of specific oil products."

In an echo of the "just in time" methods of manufacturing industry the oil companies have slashed back to the point where slight disruptions in particular areas can affect the whole system. "There is a refinery capacity problem, especially in the US," says the Financial Times.


System is killing globe

BURNING fossil fuels like oil is destabilising the world's climate and causing global warming. But Western governments and big business refuse to take any serious action. Instead they have pushed society towards an even greater dependence on car and lorry use, and resisted measures to cut oil and petrol use.

A rational society would CURB car and lorry use, because the greenhouse gases emitted by exhausts are a major factor in global warming. But the US, the world's biggest contributor to global warming, works hand in glove with giant oil and car companies to block action on greenhouse gas emissions.

Companies like Shell and Ford have funded the misnamed Global Climate Coalition to lobby against action on global warming. All the car giants are aggressively expanding into new markets like India and China.

And all the oil companies are pushing to produce and sell ever more oil and petrol. BP claims to have gone Green but is massively expanding its oil exploration. These companies, and the governments which back them, have attacked public transport in a bid to increase society's dependence on the car and road transport.

In Britain the Tories pursued policies designed to drive freight from rail to lorries. In part this was done to undermine the power of rail workers to offer solidarity to groups like the miners.

During the 1984-5 miners' strike, Margaret Thatcher relied on small and medium sized lorry owners to shift coal and undermine the strike. The Tories also systematically attacked public transport, privatising the railways and causing chaos with privatisation and deregulation on the buses.

The result has been a far worse service and much higher prices-pushing more and more people to depend on cars.

Out of control

TONY BLAIR says people should blame the rising price of oil on OPEC, the organisation of oil-producing countries. This is far too simplistic.

The US is the world's biggest oil producer, but it is not a member of OPEC. Britain is also a major oil producer, thanks to North Sea oil, and is not part of OPEC. It is true that OPEC countries have tried to push up prices.

They agreed to limit production in order to make oil more scarce, in the hope that this would push up the price. Venezuela, for example, wanted to raise money to help overcome the effects of the devastating floods which swept the country last year. Such countries had no intention of pushing prices up to today's levels.

But the madness of the market system means that once oil looked like it would be in shorter supply its price surged uncontrollably. OPEC agreed last week to boost production to try and bring prices down. But it will be months before this has any impact.


Multinationals gain from vicious spiral

OIL IS not the only commodity which has been low in price in recent years. The World Bank estimates that between 1980 and 1997 the world price of tin fell by 78 percent, sugar by 73 percent, oil by 65 percent, coffee by 64 percent, cocoa by 58 percent and rubber by 52 percent.

This fall has been deliberately driven by bodies like the IMF and World Bank to ensure cheaper raw materials. Most of these commodities are produced by Third World countries.

The debt burden these countries suffer pushes them into the arms of IMF-imposed Structural Adjustment Programmes. Poor countries are told they must earn foreign currency to service their debts before anything else.

This means slashing public spending. But it also means exporting as much as possible of the products they can sell on the world market-raw materials. The result is a surplus in many of these commodities which drives prices down. A vicious spiral follows.

Exporting countries try and pump out even more of the commodity in order just to earn the same amount of foreign revenues, and so keep the bankers happy. But that in turn drives prices down even more, making more profits for the global corporations which benefit from cheap raw materials.

Workers in the industrialised countries gain nothing. The corporations do not pass on their reduced costs-they just bolster their profits. But when prices rise, companies quickly jack prices up and make us pay.


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Sat 16 Sep 2000, 00:00 BST
Issue No. 1714
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