Oil hit $65 a barrel on speculative markets last week, an all-time high. Gasoline and heating fuel prices quickly followed. Natural gas is not far behind.
Prices are not established by immutable economic laws — as capitalists would have us believe — but by struggle. The struggle is between and amongst classes, which are economic players. History has demonstrated many times that struggle can bring prices down. Increases in the price of bread, beans, rents, fuel, mass transit and other necessities have been reversed again and again by mass struggle.
Right now, the world oil industry is effectively monopolized by a few Wall Street families, who also own the most important U.S. banks. Even British Petroleum today is a Wall Street subsidiary, incorporating the old Standard Oil of Indiana, with Citigroup its primary banker.
In capitalism’s competitive days, when crises hit, companies cut prices. Monopolies raise them. Oil prices are almost a barometer of capitalism’s sickness — the more severe the system’s contradictions, the more expensive the oil.
The monopolies’ average cost of producing oil today is around $2 a barrel (42 gallons), according to figures published in Business Week and Fortune. In recent years this cost has been falling around 4 percent per year, thanks to advances in exploration and production.
How then to explain $65-a-barrel oil? Sickness. The largest monopolies are trying to make up losses from their system’s contradictions. Productive capacity is outrunning the income and demand of producers and consumers. One-third of U.S. manufacturing capacity remains idle, four years after the official end of the 2001 recession, according to the Department of Commerce comprehensive Survey of Plant Capacity. Significant losses result when capacity sits idle.
The U.S. war in Iraq drives up the price of oil by destabilizing a region where oil can be produced inexpensively. Expensive oil benefits Wall Street in multiple ways. This includes plundering weaker capitalists and effectively cutting wages through the higher costs of necessities, from heating and cooking fuel to transport.
Expensive oil also plunders China, a significant oil importer. Imperialist control of oil supplies threatens China’s still largely planned economy.
Expensive oil was probably a factor in China’s recent decision to revalue its currency against the dollar. But oil prices immediately jumped, negating the revaluation’s impact on China’s oil costs. On the other hand, the prices of capitalist agricultural exports to China could quickly decline, potentially destabilizing China’s vast countryside.
Despite capitalist inroads, China is the product of a great socialist revolution. Imperialism is doing all it can to destabilize China. Wall Street, with the endorsement of the IMF and other agents, is pressing China to open its currency to speculation.
The July-August issue of Foreign Affairs, the Rockefellers’ house voice on international matters, approvingly reports, “The IMF has chided China for having its priorities backward,” saying that China’s top priority must be “exchange-rate flexibility,” a code word for opening its currency to speculation. This is the money equivalent of “labor flexibility,” Wal-Mart’s demand for workers who are ready to work until 4 in the morning, “as necessary,” then take a week or month off, “as necessary” — without pay, always with a smile.
China’s continued development requires a stable currency, with prices that accurately reflect changes in production costs. World capitalism constantly undermines both stable currencies and pricing accuracy, through rampant speculation and monopoly pricing practices — consider oil prices. In addition, the dollar and other capitalist currencies are no longer backed by gold, and no currency in this epoch can truly be stable without such backing.
Impelled by its deepening contradictions, capitalism is targeting China, as it is attacking all workers’ organizations and living standards. The situation today is reminiscent of the 1980s, when Wall Street was targeting the Soviet Union and allied states, as well as trade unions in capitalist countries. The interests of workers in the U.S. and worldwide converge in struggling to end the U.S. aggression in Iraq, bringing down the extortionate price of oil — and defending China against imperialist threats.