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What’s really causing rising oil prices?

Workers World

What’s really causing rising oil prices?

Published Jun 26, 2008 7:43 AM

As the skyrocketing cost of energy continues to rapidly erode the standard of living of billions of workers around the globe, a handful of transnational oil companies are being given hundreds of billions of dollars in no-bid oil contracts in Iraq.

Exxon Mobil, Royal Dutch Shell, Total, BP and Chevron are reportedly in the last stages of finalizing a deal to take over production in Iraq’s oil fields. The deal is expected to be officially announced on June 30.

The awarding of the no-bid contracts comes at a time when President George W. Bush is lobbying Congress to grant some of these same oil corporations the exclusive rights to oil exploration off the Atlantic and Pacific coasts of the United States.

The no-bid contracts in Iraq, and the attempt to hand to the oil giants exclusive drilling rights on the U.S. coasts, highlight the increasing monopolization of the world’s most coveted resource.

Recently, there has been no shortage of explanations for the meteoric and record-breaking ascent of the price of oil. But lost amidst all the talk of growing demand in China and speculation in the futures market is the fundamental contradiction of a natural resource that is essential to the daily lives of billions of people being owned and distributed by a small handful of private corporations.

Increasing monopolization of the oil industry has enabled oil giants like Exxon Mobil and Royal Dutch Shell to become price setters. The average cost per barrel of producing oil for a company like Exxon Mobil or Shell has remained around $30, if not lower, since 2003. In the same time frame, the price of oil has gone from $30 a barrel in 2003 to over $140 a barrel today. That is the very definition of windfall profits.

The claim by the oil corporations that the price increase reflects the increased cost of oil exploration and drilling is an outright lie. Exxon Mobil spends more money per year on buybacks of its own shares than on oilfield exploration and investment.

Exxon Mobil raked in $40.6 billion in profit last year. That figure ranks as the biggest profit margin in the history of capitalism. Royal Dutch Shell raked in more than $30 billion. In the same year, ballooning energy and food costs pushed billions of workers deeper into poverty, while 800 million people went hungry. Accumulation of great wealth at the top of the socio-economic ladder has directly caused misery and starvation at the bottom.

In bouts of demagogy, U.S. ruling class politicians often blame foreign governments in OPEC for oil prices. But transnational oil corporations like Exxon Mobil produce more oil per year than almost all of the OPEC state enterprises, the only exceptions being Saudi Arabia and Iran.

And the state oil company in Saudi Arabia, Saudi Aramco, which owns the rights to the world’s largest proven reserves, has a board of directors that includes James Kinnear, former Texaco president and CEO; Mark Moody-Stuart, former chair of Royal Dutch Shell Group; and Peter Woicke, former vice president of the International Finance Corporation, a World Bank subsidiary.

Also, Western-based transnational oil corporations own and operate the vast majority of refineries needed to turn crude oil into fuel. This only heightens their monopolistic grip on production.

The fact is that the majority of the world’s oil is extracted, refined and sold by a small number of Western-based transnational oil corporations. These corporations are using their price-setting capabilities to gouge workers all over the globe. They want us busy pointing our fingers at Middle Eastern governments and unnamed speculators while they steal money from our pockets.

But while Exxon Mobil and Royal Dutch Shell may have raked in record-setting profits last year, their days of plenty are numbered. Across the globe, workers are joining together to fight back against the monopoly capitalists and their relentless price gouging. From striking truck drivers in the E.U. who have brought commerce to a halt, to street protesters in Southeast Asia who have shut down a number of cities, more and more workers are rising up in militant protest against sky-high fuel costs.

Increasing and intensifying these types of actions is the only hope of breaking the monopolists’ grip on oil. The shareholders of Exxon Mobil and Royal Dutch Shell should have no right to own this natural resource that millions of people need to heat their homes or drive to work. Private ownership of oil is as ridiculous as private ownership of the ocean.

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