Oil: bad both ways

March 12, 2016

From the March-April 2016 issue of News & Letters

The price of oil has fallen over 70% in less than two years. Previously high oil prices were blamed for recessions, as in the global economic crisis of the mid-1970s, in which the 1973 “oil shock” was one factor. Now low oil prices are proving economically disastrous in oil-producing states like Texas and North Dakota, and numerous countries from Russia to Nigeria. Worldwide, an estimated 250,000 oil industry workers have lost jobs, and many other people are being hit by economic weakness.

Picture thanks to the Sierria Club.

Picture thanks to the Sierria Club.

Pundits who crow about the way this undercuts governments like Vladimir Putin’s in Russia callously disregard the real suffering by working people there. At the same time, that suffering stokes discontent and even labor unrest, which so far Putin has kept in check. In Venezuela, the fall in oil prices highlighted how much “building socialism” had meant an oil-funded welfare state, and how dependent it remained on the capitalist world market—which the right wing was quick to exploit. (See “Venezuela’s election,” Jan.-Feb. N&L.)

The world economy continues to show tendencies to crisis. That includes oil-importing China, whose decreased demand has hit exporters from Europe to Africa to Latin America. That is one reason the price of oil has been falling, along with the tremendous increase in oil production brought about in the U.S. and other places when oil prices were high. Much of that increased production uses especially expensive sources and technologies, such as shale oil fracking in North Dakota and tar sands mining in Canada—and they are more polluting, with more greenhouse gas emissions.


The same is true for some projects that have, for now, been abandoned, like drilling in the Arctic Ocean and Utah’s tar sands. Industry plans to revisit these when prices rise again.

The decimation of jobs in some regions shows starkly how, whether the price of oil is high or low, either way is a catastrophe for the common person.

In addition to the serious economic effects, it shows how capitalism is locked into climate change. Low oil prices stimulate more consumption of oil. High prices stimulate investment in production of the most environmentally damaging sources of fossil fuels.

This perversity inherent in capitalism’s law of motion reinforces what some scientists have been saying in response to the pathetic emptiness of the Paris climate change summit agreement: we need a different foundation to the economy. That is the kind of thing that Karl Marx referred to in the work of a scientist of his day as “another unconscious socialist tendency!”

Franklin Dmitryev

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