Big Oil gets rich, blames OPEC
By Rubin
Kanowitz
Recent developments in the petroleum industry are taking
on worldwide significance. Higher prices for crude oil,
refined oil products and natural gas are said to be causing a
crisis in capitalist business activity.
If past experience is a guide to how the
corporate-dominated news media will handle this problem, they
can be counted on to further demonize the foreign oil
producing countries, especially the Organization of Petroleum
Exporting Countries, in a racist way. All 11 OPEC members are
located in the Middle East, Africa, Latin America and
Asia.
The OPEC countries are already subject to intense
economic, political and diplomatic pressure in the campaign
to bring crude oil prices down. But a closer look at the
state of the oil industry shows that any blame for the
economic pain that has descended on workers and oppressed
people in the United States, Europe and other countries rests
squarely on the major international oil companies, the banks
and the workings of the capitalist system.
Blame Big Oil, not OPEC
As of late September, world crude oil production was
estimated to be 77 million barrels per day. At prices of
$30-$40 per barrel, this represents annual revenues of $850
billion to $1.1 trillion.
Of the 77 million barrels produced each day, about 40
million enter into world trade--that is, they are produced in
one country and consumed in another. Of these 40 million
barrels, OPEC production accounts for close to 29
million.
When crude oil prices dipped from $30 per barrel in 1997
to $10 in 1998, the major international oil companies sharply
reduced their exploration and production investments.
Expenditures for oil wells, for example, dropped from $3.8
billion in 1997 to $3.0 billion in 1998 in the United States.
Gas well expenditures dropped from $7.2 billion in 1997 to
$6.8 billion in 1998, while total drilling expenditures
dropped from $13.9 billion to $12.4 billion in the same
period.
U.S. crude oil production declined from 6.3 million
barrels per day in 1998 to 6.0 million in 1999 while
worldwide production rose about 1 percent.
These figures reflect Big Oil's reaction to that drop in
crude oil prices. Development of new crude oil sources, like
the Caspian Sea region, were put on hold until prices might
rebound to generate sufficient profits to justify the
investment.
It is those sharp cutbacks in production investments that
have caused today's tight crude oil market and higher
prices.
Today there is little unused production capacity. OPEC has
increased production three times so far this year, by a total
of 3.2 million barrels per day. Unused oil producing capacity
worldwide is now just 2 to 3 million barrels per day--almost
all of it in a few countries, including non-OPEC Mexico.
The natural gas example
The dynamic of capitalist overproduction followed by
underproduction is apparent in natural gas as well. The
United States produces nearly all of its natural gas from
within its own borders. No blame can be placed on other
countries for sharply higher prces, limited supplies and
other injustices of the market place. It is all the doing of
the U.S. petroleum industry.
The price of natural gas at the point of production is now
$3.40 per thousand cubic feet--double what it was last year,
the U.S. Energy Department reports. The wholesale price is
about $5 per thousand cubic feet--up from $2 last year. Some
experts say the price could reach $7 per thousand cubic
feet.
The American Gas Association says that natural gas
inventories are down 15 percent from a year ago.
The U.S. government announced Sept. 22 that it would
release 30 million barrels of crude oil from the country's
Strategic Petroleum Reserve. This involves a transfer, not a
sale, to the oil industry. This oil is to be returned after
the winter heating season, when prices will presumably be
lower.
Supposedly, the oil transfer is to help force prices down,
especially for heating oil. But who will benefit from this
arrangement?
Heating oil demand is seasonal. Will a cold winter trigger
big heating oil and natural gas price increases? Since both
fuels are cost items to big corporations, landlords and
utilities, the possibility exists for a general inflation to
result.
Of tremendous importance is whether higher prices will
mean inadequate heating for tenants, especially those who are
most vulnerable--seniors and other people living on fixed
incomes.
This article is copyright under a Creative
Commons License.
Workers World, 55 W. 17 St., NY, NY 10011
Email: ww@workers.org
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