The capitalist economic crisis is sharpening global competition for Persian Gulf oil and driving fuel prices sky-high. The working class is being dealt a triple body blow. In some parts of the U.S. workers are shelling out up to one-fifth of their pay for gasoline. Soaring energy costs contribute to a job-destroying economic slowdown and are driving up food prices worldwide.
While many politicians and pundits rail at greedy speculators, who are indeed cashing in on, and boosting, the price spike, its root causes are geopolitical (and rose immediately from Federal Reserve efforts to protect U.S. banks — see box below). China’s and India’s burgeoning economies now thirst for Mid-East crude supplies that U.S. rulers once claimed as private property. The wars in Iraq and Afghanistan were supposed to counter U.S. economic weakness by strengthening its control over the oil all rivals needed. But despite murdering millions, the U.S. war machine has failed to secure oil-rich Iraq or tame al Qaeda and Taliban fighters in Afghanistan and Pakistan bent on seizing Mid-East oil sources. Oil’s grand prize, U.S. puppet Saudi Arabia, faces internal attacks. Meanwhile, Washington and its proxy Israel are trading escalating war threats with Iran’s holy-roller oil barons, who kicked out Exxon Mobil three decades ago. And beyond the Gulf, an upsurge in political violence has slashed Nigeria’s oil output.
BOTCHED BY BUSH, U.S. IRAQ GENOCIDE YIELDS RULERS LITTLE OIL
Unlike growth in China and India, the U.S. fiasco in Iraq — which is also central to the oil price-crunch — receives little blame from the rulers’ media. U.S. bosses invaded Iraq in 2003 hoping to create a new “swing producer,” in addition to its old one, Saudi Arabia, increasingly bedeviled by al Qaeda. A “swing producer” is one with sufficient spare capacity to steer world markets by raising or lowering output, according to its U.S. patron’s wishes. (One reason U.S. rulers toppled Saddam Hussein was his constant jerking around of oil production, making for an unstable price market which Big Oil couldn’t control.)
In the 1980s, Saudi Arabia helped the U.S. bring down the oil-exporting Soviet Union by pumping so much crude that its price fell to $5 a barrel, depriving the Kremlin of needed foreign income. Months after the Iraq war began, the liberal Brookings Institution gushed, “Many analysts believe that Iraq might be able to pump up its production to as much as 6 mbd [million barrels per day] by 2010 and 7-8 mbd by 2020.” (Brookings, May 2003)
But Bush didn’t put enough boots on the ground to secure Iraq’s oilfields, which now produce 2.5 mbd, even less than before the war. And with their own infrastructure in peril, Saudi princes can’t take up the slack. “Saudi Arabia has arrested 701 Islamists in the past six months on suspicion of plotting attacks on oil industry installations.” (AFP, 6/26/08 ) The Saudis just promised to hike output a meaningless 200,000 barrels a day.
The U.S.-Israeli standoff with Iran is another major factor in oil prices. “Speculators and others may be acting on the assumption that Washington and its Israeli ally will proceed to ‘take out’ Iranian nuclear facilities, because that is exactly what Bush and his allies are implying will happen if the Ahmadinejad regime does not comply with U.N. resolutions.” (Newsweek, 7/7/08 ) In turn, Gen. Mohammad Ali Jafari, commander of Iran’s elite Revolutionary Guard, promised, “Iran will definitely act to impose control on the Persian Gulf and Strait of Hormuz” (Los Angeles Times, 6/29/2008 ) the world’s most important chokepoint. Through it 17 million barrels of oil pass every day. In such a case, $10-a-gallon gas would be cheap.
WITH CRUCIAL FUEL SOURCES AT RISK, RULERS FEEL A DRAFT
To ease their oil woes, U.S. rulers are planning a solution involving far more than reducing fuel consumption or regulating speculators. Harvard University’s Kennedy School and a group called Securing America’s Future Energy, headed by former Marine commandant P.X. Kelly, are staging a war-game program,“Oil ShockWave,” on campuses across the U.S. The New York Times (11/2/07) reported on one imminent scenario presented last year:
“Iran had drastically cut its oil production in response to Western economic sanctions imposed because of its nuclear weapons program. The Venezuelan leadership of Hugo Chavez followed suit, driving prices beyond $150 a barrel. The Iranian nuclear program touched off talk of war. The military advisers urged redeployment of the bulk of America’s naval and air power to the Persian Gulf in anticipation of war, and urged reinstatement of the draft for young men and women.”
Hang onto your hats. At press time oil hit the $143-per-barrel mark and talk of war with Iran has begun. “Oil ShockWave” deliberately targets college students, who, ever since Vietnam, have been reluctant to support the Pentagon’s murder machine. The program springs from the highest levels of the liberal Establishment. In addition to its Harvard pedigree, “Oil ShockWave” boasts Robert Rubin, Citigroup chief and
Clinton Treasury-Secretary, as a leading participant.
Like openly militaristic McCain, “Barracks” Obama favors the mobilization a broader Gulf war requires. He vows to add 92,000 troops immediately upon inauguration. But his threat to invade Pakistan “searching for Osama bin Laden” and the Taliban would require hundreds of thousands of troops and could kick off a war in a country possessing the A-Bomb. Some “anti-war” candidate!
Voting for either candidate would prove a serious political error. War is a result of capitalist crisis and inter-imperialist rivalry. A new president can change the appearance of the crisis, but not its essence. The solution is to work towards the ultimate elimination of the profit system that causes these endless oil wars. Our revolutionary communist Party has this goal.
U.S. BANK BAILOUT SPIKED OIL PRICES
While many politicians and pundits blame greedy speculators for skyrocketing oil prices, the immediate problem arose from the Federal Reserve’s efforts to protect U.S. banks. Under capitalism, money serves two functions: (1) it has a “use value,” enabling the buying and selling of commodities, from raw materials and labor power to finished goods; (2) its accumulation is a means of storing value for future investments and future payment. Capitalist hoards are claims on the future labor of workers and the surplus value they can create. (Workers are paid only part of the value they create. The rest is “surplus value” from which bosses’ profits are reaped.)
Since last August the Federal Reserve has lowered interest rates and supplied billions of dollars to the banking system in an effort to limit the bank failures that began with the subprime mortgage crisis. This increase of money in circulation cheapened the value of the dollar. It now buys less in international markets.
As the value of the dollar fell 20% during the last year, so did the value of foreign investments in U.S. treasury bills and corporate debt. The decision to let the value of the dollar fall so quickly sharply reduced the value of hundreds of billions of treasury bills belonging to China and other rivals.
Looking for protection from such losses, investors (U.S. banks, pension funds, foreign governments) began buying gold and oil, commodities whose value could not be manipulated by the Federal Reserve. This increased buying forced up the price of both oil and gold, fueling new internal conflicts in the Middle East. In Saudi Arabia and other Persian Gulf nations, immigrant workers, whose earnings are tied to the dollar, have staged strikes because the reduction in the value of their pay meant they can no longer feed their families back in India and Pakistan.
Faced with internal conflict, many Persian Gulf nations are again pressing to price oil in euros or yen, both worth far more than the dollar. (Iran already requires Japan to pay for oil in yen not dollars). This move has been limited only by the efforts of the Saudi royal family, the world’s largest oil producer and a major holder of U.S. investments (including in Citibank). If oil was not priced in dollars, the value of the dollar and these investments would fall even further as countries dumped the dollar for other currencies.
This falling dollar stoked the already heated inter-imperialist rivalries for oil, further exposing the U.S. failures in Iraq and Afghanistan.