USA: High Gas Prices Fuel Discontent

The rising cost of oil, and gasoline in particular, is having an effect on everything, further stretching the limits of our already strained wallets. From simply getting to and from work every day, to the cost of food which is also soaring due to increased transportation costs.

Oil prices are six times higher now than in 2002 and are up 40 percent since January. Gasoline prices are up almost $1 from a year ago. The average price at the pump, as tracked by the Energy Information Administration, has risen above $4 a gallon. Prices in California averaged $4.43 a gallon. And the trend is for price climbs to continue. Jet fuel has risen 66 percent in a year and several carriers have already gone bust. American Airlines is now passing on more costs to passengers while cutting jobs and routes.

Economists have indicated that the percentage of our income that goes to cover energy costs is also growing fast. Last December, that figure reached 6.1 percent, the highest level since 1985, amounting to $200 billion. At current rates, the average U.S. family will pay $400 more for gas in 2008 than in 2007,  a total of $3,000, a huge jump from 2002 when the average was $1,600. For many Americans, higher gas expenses will eat up all the money they receive in the form of “economic stimulus” checks being sent out by the federal government.

There are several factors involved in the substantial rise of fuel costs in the most recent period, from OPEC production levels to the increase in demand on the world market. It is true that “growing Asian economies” such as China and India are consuming much more oil and other commodities than in the past, but the main factor behind it all is the capitalist economic system and its irrational, unplanned and chaotic “free market.”

Speculation

The falling value of the U.S. dollar, down 11 percent since the beginning of 2007, has had the effect of raising the price of all products in international markets bought and sold with U.S. dollars. Speculators have played the market to their advantage. As they buy oil (not to use, but to hold and trade later), it reduces the overall supply on the market, thus forcing up prices. This leads to other speculators jumping on the band wagon to do the same, further driving up prices. Some economists estimate that they have added as much as $90 to the price of a barrel of crude oil.

According to congressional findings cited in a Wall Street Journal report, speculators now account for about 70 percent of all benchmark crude-oil trading on the New York stock market, up from 37 percent in 2000. Speculators make big profits simply by buying and selling oil which has already been extracted. They create nothing and add nothing to its value. In other words, they get rich at the expense of those of us who have to pay more at the pump.

Another major factor in the run away speculation is the imperialist occupation of Iraq. Economist Dr. Mamdouh Salameh, who advises both the World Bank and the U.N. Industrial Development Organization, has said that the price of oil would likely be no more than $40 a barrel, far less than the current price of $135, if it were not for the Iraq war. As Lenin once remarked, war is a terrible thing – terribly profitable!

Private gasoline production in the U.S.

The U.S. has roughly 150 refineries spread throughout 33 states, more than any other country in the world. This is more than most continents. For example, including six Russian refineries, the whole of the continent of Asia has just 133 refineries.

95 percent of the gasoline consumed in the U.S. is refined in-country, but less than 40 percent of the crude oil comes from the U.S. Although the U.S. is the 3rd largest producer of oil in the world, it imports nearly 60 percent of its total petroleum consumption, with effectively no exports of oil. In other words, maintaining a steady supply of oil is a key U.S. strategic interest. It is crucial to all economic activity in the country. Millions of Americans’ jobs rely directly and indirectly on oil, and yet supplies of vital resource remain in private hands, mega corporations that produce for profit, not society’s needs

Ten companies control 81 percent of U.S. oil refineries. The top five oil companies: ExxonMobil, British Petroleum, Royal Dutch Shell, Chevron and ConocoPhillips own more than 40 percent of U.S. refineries. As if we needed more proof that they are interested only in maximizing profits, they have responded to falling gasoline demand due to hits high cost by cutting production, thus keeping prices high. Refining utilization rates fell to a low of 81.4 percent in the second week of April, compared with 90.4 percent at the same time last year. In June of this year, refineries were running at just 85 percent of their capacity. The reason? “They are all cutting (gasoline production) because they say they are not in the business of losing money, they are not running a charity for the truckers and the motorists.” This, according to Fadel Gheit, an analyst with Oppenheimer & Co.

In the 1990s and early 2000s, a series of mergers reduced the total number of refineries and led to fewer companies having more control in a sector that was also being deregulated. In other words, the big oil companies are able to manipulate the market in order to make greater profits, with minimal government regulation. According to Mark Cooper, director of research at the Consumer Federation of America, “We let them accumulate market power through the wave of mergers, and we’ve been paying the price in the last five years. If there is a small number of players in the market, they learn from each other’s behavior.”

Democrats and Republicans: oil men and women alike

Just like the Republicans, the Democrats have done their part to help big oil companies make mega profits at the expense of working people. It is well known that Bush and co. are oil men and women, but this is not unique. Oil money has seeped into many hands in Washington, those in power have returned the favor.

Al Gore

Even the “environmentalist” Al Gore has played his part. During the Clinton/Gore years the largest act of privatization by the federal government took place when the Department of Energy sold 47,000 acres of the Elk Hill oil reserve to the energy company Occidental. The sale of the publicly owned oil reserve to a private company came after five years of lobbying, with Clinton and Gore pushing for Elk Hills to be sold as part of their 1995 “Reinventing Government” initiative, despite a recommendation against privatization by the National Academy of Public Administration. Gore served on the board of directors of the private company hired to assess the sale’s environmental impact and at the time controlled $500,000 of Occidental stock. After the sale, Occidental’s stock shot up by 10 percent, netting hefty gains for Mr. Gore.

In addition, oil companies have not made payments of at least $10 billion in royalties for the right to drill on public land. This began under Clinton and has continued and been compounded under Bush. Whistleblowers in the Department of the Interior have reported intimidation at attempts to rectify this situation from within the department.

So can we expect anything to change now that Bush is on the way out and the Democrats seem poised to take the reins of power? Obama opportunistically and demagogically poses as an opponent of big business. For example, earlier this year he appeared in a TV ad stating: “I’m Barack Obama. I don’t take money from oil companies or Washington lobbyists, and I won’t let them block change anymore…”

As it happens, ever since 1907, federal law has prohibitted corporations from contributing directly to federal candidates – making his statement technically true of all the candidates. Nevertheless, they receive millions from big oil on the campaign trail and then serve corporate interests once in office. What Obama fails to mention is that, while he has received no money directly from corporations, he has received hundreds of thousands of dollars in contributions from top executives of oil companies in the form of individual contributions. George Kaiser, the chairman of Oklahoma-based Kaiser-Francis Oil Co., ranks 68th on the Forbes list of world billionaires, and is listed on Obama’s web site as having raised between $50,000 and $100,000 for the candidate. He has also received contributions from “individuals” at ExxonMobil, Shell, Chevron and BP. All in all, he has taken in more than $213,000 from “individuals” in the oil and gas industry alone.

Obama, seen by many as a candidate of “diversity,” also equally respects the funding he has received from those in the nuclear power industry. For example, the executives and employees of Illinois-based Exelon have contributed at least $227,000 to Obama’s campaigns for the United States Senate and now for President. Two top Exelon officials, Frank M. Clark, executive vice president, and John W. Rogers Jr., a director, are among his largest fund raisers.

Of course, working people can expect no more from McCain. Although he has said: “I am very angry, frankly, at the oil companies,” he takes their money just the same, to the tune of $720,613. Big oil is clearly hedging their bets in order to ensure their interests are represented no matter which party wins the Presidency.

Nationalized oil cost less for workers

While nationalization alone doesn’t directly lead to socialism, one can see the benefits of nationalizations from the perspective of the working class. In nearly every country with a nationalized or even partially nationalized oil industry, workers pay far less for gas than their class brothers and sisters in countries with privately owned oil industries.

Venezuela is a clear example, where despite the efforts of the oligarchy and bureaucracy to disrupt and skim off the wealth of the oil industry, the lifeblood of the Venezuelan economy, gas is subsidized and costs just $0.19 a gallon! Some other countries with nationalized oil and the cost of a gallon of gasoline: Kuwait $0.79; Nigeria $0.38; Saudi Arabia $0.45; Qatar $0.83; Egypt $1.21; United Arab Emirates $1.40; Trinidad and Tobago $1.82; Mexico $2.64.

One may argue, of course, and they would be correct, that these are also countries with large reserves of oil and with plenty of other economic and social disparities. However, if one looks at the difference between Saudi Arabian oil at 45 cents a gallon, which comes from the world’s largest knows oil fields, and the country with the next largest known oil fields, Canada, where a gallon of regular costs an average of $5.49 a gallon, one has to ask why is the difference so great? Part of the answer is because in Canada oil is not nationalized. Just as in the U.S. it is run solely in the interest of profits.

Nationalize the oil industry!

According to the U.S. Department of Energy: “Oil is the lifeblood of America’s economy. Currently, it supplies more than 40 percent of our total energy demands and more than 99 percent of the fuel we use in our cars and trucks.”  Perhaps in no other country is oil and gasoline as important to the functioning of society and to workers’ livelihoods as in the U.S. And yet, the whole of the industry is operated in the interests of a small section of the ruling class, which is itself a tiny fraction of humanity.

Fossil fuels are not a sustainable source that can indefinitely provide for the world’s growing energy demands. Continued dependence on oil can only further adversely affect the environment and the quality of life of literally billions of people. And while it is hard to say whether or not we have reached “peak oil,” the point after which the planet’s oil reserves and extraction levels go into terminal decline, it is clear that the Earth’s oil resources are finite. Whether we like it or not, nearly everyone on the planet depends on oil in one way or another. This is why we need a rational, democratic plan of production and new regulations or taxes on “windfall profits” that seek merely to moderate the excesses of big oil are not enough. Society needs to control our energy resources and put them to use in the interests of all.  But you cannot control what you do not own. As long as these vast resources are controlled by a handful of private interests, working people be at the mercy of the speculators, big oil companies and their representatives in government. 

The labor movement should boldly call for the nationalization of the oil industry, to be run under democratic workers’ control in the interest of the whole of society. Already, thousands of mostly non-union truckers have initiated strikes over the high costs of fuel. If the leadership of the AFL-CIO and Change to Win called for the nationalization of the oil industry, the echo would be enormous. If even just a handful of unions, for example, the Teamsters and the OCAW (Oil Chemical and Atomic Workers International Union), mobilized their ranks around such a demand, it could attract millions of working people whose quality of life is steadily declining due to rising fuel costs.

Ultimately, society needs to continue to develop and massively invest in renewable energy and reduce consumption by greatly expanding public transit. But in the meantime, while we are so dependent on oil, we must demand the nationalization of the oil industry under workers’ democratic control!

• Black Struggle and the Socialist Revolution by Workers International League (June 25, 2008)
• United States Perspectives - 2008 by Socialist Appeal - USA (June 2, 2008)
• USA: Successful 2008 Congress of the Workers International League by US Socialist Appeal (May 28, 2008)
• U.S. Food Prices Rising Fast by Socialist Appeal USA (April 28, 2008)
• USA: Recession Will Hit Workers & Poor Hardest by US Socialist Appeal Editorial Board (March 31, 2008)