Nov 19, 2007
Gasoline prices are now more than $3.11 per gallon on average nationally, and approaching $3.50 in California and other big states. Since crude oil prices have increased to almost $100 per barrel on world markets, price increases are expected to continue for gas at the pump.
Don't believe all the myths and scare- mongering used to justify these outrageous prices.
No, there are no oil shortages anywhere. As the Wall Street Journal pointed out on November 8, supply above the ground is "abundant." The amount of oil in storage tanks is near all-time record highs: 4.2 billion barrels at the end of June, according to the U.S. Energy Information Administration.
No, we are not running out of oil below ground.
The world's proven oil reserves are 12% higher than they were a decade ago, according to BP (British Petroleum). And that's not even counting the more than trillion barrels of oil locked in Venezuela's Orinoco tar sands. "Combined," writes the Wall Street Journal, "that comes to a century of production at the current rate." Oil reserves may not be eternal. But there are still plenty of new major oil finds, and we continue to discover new oil reserves at a faster rate than the world consumes them. Just this month, for example, the Brazilian government announced that oil fields discovered off the coast of Brazil will almost double that country's reserves.
No, there is no big increase in worldwide demand for oil.
According to BP, oil consumption in the U.S. actually fell by 1.3% in 2006. As for worldwide demand, it increased by a measly 0.6%. In other words, all those scare stories about how supposedly "incredible" economic growth in China and India has driven big increases in worldwide oil consumption are complete nonsense and garbage.
No, there is no big increase in the cost of crude oil production.
The cost of extracting oil ranges from $4 per barrel in Saudi Arabia up to $30 per gallon in Canada's oil sands. In 2006, the average lifting cost per barrel of oil was about $9 per barrel at oil giant Royal Dutch Shell. This means that crude oil is being sold for up to 10 or even 20 times its cost of production.
To sum up: oil prices are not going through the roof because we are running out of oil, or because India and China are burning it all up.
No, oil prices are being driven up through the insatiable greed of the big oil companies. These companies dominate the world oil market. And they use that power and control to produce enormous profits. In 2006, the top six oil companies, known as the "super majors," had combined profits of over 136 billion dollars. Just one company, Exxon-Mobil, had profits of 40 billion dollars. And this year, their profits are on track to be even higher!
Of course, those oil companies don't just keep the money for themselves. They recycle it through stock buybacks engineered to boost the stock price and provide big dividend increases to further enrich their major stockholders, that is, big parts of the world bourgeoisie. They pay their top executives tens and hundreds of millions of dollars per year.
And in the process, the oil companies drain the wealth and resources of the world. They snap up big chunks from the wallets of billions of consumers, while impoverishing and destroying entire regions in the Middle East and other underdeveloped countries in Africa, Asia and South America through war and pollution. The people in those regions call it the "oil curse."
In fact, it is not the oil that is the problem, but the quest of the capitalist class to enrich itself at the expense of the rest of the world.