Behind the oil “glut”, the chaos of the capitalist market

Workers' Fight workplace bulletin editorials
17 December 2014

We are told one thing and then we are told the exact opposite, as regards the fall in the price of oil! Either the relative world "glut" of oil at present will make Britain's economic recovery slower, or it will somehow boost investment!

Of course, the effect of a low oil price on North Sea oil and gas is obvious - and Osborne's Autumn Statement already gave bosses in this sector a helping hand with a generous corporate tax cut.

So, is this a new kind of oil "crisis"? In the past, when petrol prices went through the roof, the media blamed the oil-producing countries for "taking consumers hostage" - even though the main beneficiaries, by far, were the western oil majors!

By contrast, this time round, the world price of oil has slumped by over 40% since last June while the world price of gas has been falling even more.


We're always told that the "beauty" of the capitalist market is that there's a "trickle down" to consumers. And, indeed, a fall in the world price of oil and gas should result in cheaper petrol and energy bills. But does it?

So far, not one of the big energy suppliers has cut its rates - despite the fact that they all benefit from the fall in world prices. Expect a big increase in their profits this year!

True, the price of petrol is down at the pump. But in December 2006, the last time the world price of oil reached such a low level, unleaded was down to just over 88p, 25% less than today! It's not hard to imagine where the difference goes - in taxes and in a bigger profit margin for the oil companies!

The fact is that consumers are "taken hostage" by the big oil and energy companies. Regardless of the hot air about "competition", their monopoly over the distribution of petrol and energy means they can play the market as they please. They are accountable to no-one, neither to official business-friendly "watchdogs", let alone to the rest of us, working class consumers. So much for the "beauty" of the capitalist market!


For nearly a decade, in the rich countries, a host of financial speculators have been betting on an on-going rise in world oil prices - and they've made many billions out of this. Today, these speculators, especially big banks, are crying misery because the oil milch cow has dried up, for the time being.

But those who are really suffering from this "crisis" are not in the boardrooms of western financial institutions. They are the populations of the third world oil-producing countries, whose national income has been cut by 40% over the past six months!

These populations never benefited from the alleged "trickle down" of the capitalist market. What the western oil majors left to these countries out of their oil wealth only went to a tiny capitalist minority - just as it does here. This is why in Nigeria, for instance, oil workers started an indefinite national strike this Monday, to protest, among other things, against the high level of petrol prices - in Africa's biggest oil producing country!

The truth is that for the populations of Nigeria, Gabon, Venezuela, etc., and even for the population of Russia, the present collapse in the oil price is a catastrophe. For them, it means large-scale job slashing together with massive cuts in public expenditure and vital government subsidies.


Regardless of what politicians or economic commentators may claim, the economic crisis is not over - neither worldwide, nor in Britain.

If petrol prices have gone down, it is because both industrial demand for fuel and consumers' demand for petrol are down - meaning companies cutting down on investment while consumers cut down on driving costs. If anything, these are symptoms of an economy which is in deep trouble.

But in a system where the means of production are privately owned by capitalists whose only concern is to make more profits, no rational solution can be found to sort out this mess.

Take electricity, for instance. Because the energy companies have failed to invest, a blackout has become a possibility - this, in one of the world's richest countries. And what "solution" has been found? To force consumers to pay the energy companies several billion pounds each over the next 3 years, to get them to commit themselves to avoiding such a blackout. Who knows whether they'll deliver? But they'll take the money, for sure!

In the meantime, this latest "oil glut/crisis" is causing turmoil on financial markets, as speculators are looking for other ways to make a quick buck. So, we can expect more instability in an already unstable system. Hasn't it already gone on far too long?