5-29-08, 9:52 am

Original source: The Guardian (Australia)

The price of crude oil more than doubled in 12 months and more than quadrupled in five yeas since May 2003. The big oil corporations empty people’s pockets and pump out record profits, while the government sits by and says there is little else it can do. Debates about reducing the GST or excise on petrol avoid the real issues and genuine solutions. So too does the blame game which points the finger at China and India for using more oil and creating demand beyond capacity as they develop their economies.

The record profits being raked in by the five largest global oil corporations show where most of the price rises went. ExxonMobil turned out the largest net profit ever made by a publicly listed US company of US$40.7 billion in 2007. Shell also had a record-breaking year of riches.

Wallowing in profits

The top five feasted on a total of more than US$123 billion in net profits last year, and continue their price gouging in 2008. BP last month reported a whopping 63 percent surge in net profit for the first quarter of 2008, a record US$7.6 billion. Shell reported a 25 percent rise to US$4.1 billion.

Every price rise is another windfall for the oil sharks and another rise in the cost of living for the people. The cost of extracting and shipping a barrel of oil is less than US$10 and the cost of research and exploration ranges from US$5 a barrel upwards in the Middle East to over US$50 off the US cost. The price of oil affects flows throughout the economy, whether it is an input in production, keeps the machinery running or is a fuel for heating or transportation.

Capitalist economists and other apologists for the oil corporations say it is not the fault of these companies. They claim it is a matter of supply and demand. At present there is excess demand.

In reality, it is the oil companies that raise the price, as they realise they can get more for their product because of high demand and their monopoly control of markets. They manipulate the markets, they put the prices up. They are not innocent victims of some anonymous or mystical market forces.

Left to 'market forces', oil sales are not made according to need or some rational plan of usage. Allocation and purchase become a question of ability to pay, and the higher prices are passed on to consumers.

Oil guzzlers

These same apologists even go further and say the short supply is the fault of developing countries, China and India in particular, as consumption of oil rises.

The US uses 25 percent of the world’s oil supplies. Car and truck usage have been deliberately encouraged to the detriment of public transport and rail freight. Successive Australian governments, in receipt of generous political donations from the oil and auto industries, have also pursued similar policies, building freeways, closing rail lines and failing to provide comprehensive and efficient public transport.

The US military’s tanks, planes and ships guzzle 340,000 barrels of oil a day, National Public Radio told listeners in the US (14-11-2007). They are the largest single purchaser and consumer of oil in the world. The C-130 Hercules transport plane does three gallons to the mile (1.28 km to the litre). The Abrams battle tank, which the Howard government decided to order, does two gallons to the mile.

One of the few positive outcomes of the higher prices in Australia is that more people are turning to public transport and more fuel efficient means of transport. Public transport systems are showing signs of strain and many suburbs and towns are just not serviced with public transport. It will take years to overcome these shortcomings, and the sooner governments get on with it the better.

The pursuit of alternative energy sources could be of environmental benefit if it is in the direction of low-greenhouse emitting, renewable energy.

The oil corporations are very aware that they are fast approaching a situation where they cannot sustain current levels of production as the planet’s resources become depleted.

Inflationary pressures

In the recent federal budget pensioners, carers, the unemployed and other welfare recipients were denied increases in their benefits, not because they did not need them, but because it would be inflationary. Workers are always being told that wage rises are inflationary. These claims are now exposed for what they are — myths.

Oil prices and higher interest rates are the main factors, creating inflationary pressures, along with the monopoly pricing practices of the two major supermarket chains.

Political pressure has seen Prime Minister Kevin Rudd acknowledge there is a problem. But the government’s solution, FuelWatch, a system of monitoring and giving advance notice of price changes, lacks teeth and will not solve anything. The operations of the oil corporations will not be curbed without stronger measures that control oil prices.

The government is also considering the possibility of a reduction in GST for petrol. This will only create another GST bookkeeping nightmare for small business and bring claims for compensation from the states. Neither a reduction in the GST nor a reduction in fuel excise would address the causes of rocketing petrol prices — at best they might reduce the weekly petrol bill by a few dollars until the oil companies raised the price again.

The practices of oil dependency and excessive consumption by western nations, monopoly pricing by oil giants, and allocation based on who can afford to pay the most, need to be addressed along with the crucial climate change factor. The needs of third world countries pursuing development must be recognised, and not cast off as the cause of the crisis or oil prices put beyond their reach.

The pricing and distribution of oil cannot be left to the markets to determine. Long-term measures to reduce reliance on oil products and develop economically and environmentally sustainable transport systems, and alternatives to oil are required. This will take planning and resources. There is plenty of money to invest, billions of dollars in the Future and Building Australia Funds.

Crude oil prices are running profits so far this year

From The Guardian (Australia)