------------------------- Via Workers World News Service Reprinted from the Oct. 5, 2000 issue of Workers World newspaper ------------------------- 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. - END - (Copyleft Workers World Service: Everyone is permitted to copy and distribute verbatim copies of this document, but changing it is not allowed. For more information contact Workers World, 55 W. 17 St., NY, NY 10011; via e-mail: [EMAIL PROTECTED] For subscription info send message to: [EMAIL PROTECTED] Web: http://www.workers.org) ------------------ This message is sent to you because you are subscribed to <[EMAIL PROTECTED]>. To unsubscribe, E-mail to: <[EMAIL PROTECTED]> To switch to the DIGEST mode, E-mail to <[EMAIL PROTECTED]> Send administrative queries to <[EMAIL PROTECTED]>
