Commodity Online Like in India, several political parties across the world are up in arms against the rising food prices and soaring fuel costs.
In the US, Socialist Party has come down heavily on the wrong policies and capitalist mentality of the world nations for creating a difficult situation for common man.
On the website of the Socialist Party in the US, the party has come out with reasons and solutions to the present crisis.
The website said with prices at fuel stations averaging over $4 a gallon in the US and well on their way to $5 or even higher this summer, working families — already burdened by rising food, housing, medical and other costs — are experiencing a drastic cut in their living standards.
Due to the sprawling character of American metropolitan areas, the long distances from home to work and a general lack of investment in public transit alternatives, working people in the US are more dependent on their cars than many of their counterparts in developed countries. This has made the population even more vulnerable to the rise in gas prices, which have shot up 38 per cent since last July.
According to a poll conducted by some news agencies, nine out of ten respondents expect to be financially squeezed over the next six months due to rising fuel prices, with nearly half saying it could cause severe hardship.
The increases in the cost of natural gas-based fertilizers and transportation have contributed to the sharp rise in food prices. Diesel prices have driven independent truckers into near-bankruptcy, while the auto and airline industries have carried out mass layoffs due to rising fuel prices.
The conditions in the US are part of an international phenomenon. Protests by truckers, farmers and fisherman facing ruin from rising fuel costs are spreading across Spain, France, Italy, Britain and other European countries. Anger has also erupted in Asia, with strikes and demonstrations in Hong Kong, India, Nepal, Indonesia and South Korea.
There are several factors contributing to the current spike in oil prices, which have risen from $25 a barrel in 2003 to over $140 now— more than doubling in the last year alone. One major factor is the declining value of the US dollar, which has led oil-producing nations to raise prices to compensate for the falling value of the dollar-denominated payments they receive.
The wars and occupations in Iraq and Afghanistan, growing US threats against Iran and geo-political tensions in the Middle East, Africa, Russia and other oil producing regions have also generated fears of sudden supply disruptions. On top of this there is a growing consensus that world petroleum resources are dwindling and cannot keep up with global demand, particularly from the fast-rising economies in China and India.
At the heart of the crisis is the breakdown of the global economic system. For decades, politicians, corporate leaders and the media have subjected the world’s people to the self-serving claim that the capitalist market is the most rational means of allocating society’s resources. What is now being revealed is the basic conflict between the needs of a modern mass society and anarchy of the profit system.
It is impossible to ascertain any truthful estimates of remaining global supplies, because the oil producing countries and energy conglomerates have vested interests in concealing their “business secrets” from the people.
Entrenched corporate and political opposition has also largely squelched large-scale development of environmentally safe and sustainable alternatives, although the technology has existed, in some cases, for decades.
Supposed solutions produced within the framework of the capitalist system have only worsened the crisis. The development of bio-fuels is a case in point. Even if one were to accept the widely disputed claims that bio-fuels are a means of reducing carbon emissions, their production has only led to a massive increase in the price of corn and other crops, wreaking havoc throughout the world. The entire project has been tied to the interests of agri-business monopolies, such as ADM and Cargill, which have an overriding concern, not in ending global warming, but boosting their bottom lines.
The rational use of remaining petroleum resources and the development of genuine alternatives require an unprecedented level of international cooperation and the marshalling of the world’s technological, material and human resources. This is not possible as long as capitalism divides the globe into competing nation states, each vying for advantage over the other.
The mad scramble to control the world’s remaining oil supplies has led to a violent struggle, in which the bloody US invasion and occupation of Iraq is but one episode. All of the major powers—from the US, to China, Europe, and Japan—are vying for control of the Middle East, the Caspian region, the Artic and Antarctica and even the sea-beds of the world’s oceans. The struggle for resources is once again threatening the world with the eruption of a new round of imperialist wars, which could threaten the very survival of humanity.
FINANCIAL SPECULATION
Another major aspect in the rise of global oil prices is the speculative frenzy that has erupted on the New York Mercantile Exchange and other commodity markets. The growing global financial instability of the last five years—the plunging dollar, the bursting of the dot-com stock market boom, the collapse of the sub-prime mortgage and housing bubble, etc—has led wealthy investors to shift their money into commodity market, where they have engaged in the buying and selling of futures in oil, corn and gold, essentially betting on the continuing rise of prices.
With little regulation from the US government’s Commodity Futures Trading Commission (CFTC), investors increased their purchases of commodity futures twenty-fold over the last five years, from $13 billion in 2003 to $290 billion in 2008. This speculative flow has now created yet another bubble, with the prices of the top 25 commodities rising nearly 200 percent during the same period.
In most cases the speculators never take delivery of the oil they purchased. Instead, they are engaged in an elaborate scheme of trading contracts—with very little money down—whose cumulative impact is to drive up prices and guarantee huge returns for hedge funds, institutional investors and others. By some estimates, speculation has added as much as $50 to the current price of a barrel of oil.
Signaling the Bush administration’s support for such profiteering, US Treasury Secretary Henry Paulson told CNN June 10, “I don’t believe financial investors are responsible to any significant degree to this price movement. This is supply and demand.”
Such comments only underscore the subservience of the American political system to the financial aristocracy. The capitalist market is not an impartial arbiter of economic relations. It can and has been manipulated by the most powerful corporate and financial interests in order to serve their profit interests.
Last year British Petroleum agreed to pay $373 million to end a US Justice Department investigation into price-fixing by BP in the heating oil market, while Enron’s manipulation of the electricity supplies, including the deliberate provoking of rolling blackouts in California, is infamous.
In the case of the oil bubble, hedge funds and major finance houses, such as Goldman Sachs, Morgan Stanley and JP Morgan, have reaped up to 200 percent returns on their investments. Kenneth Griffin, head of energy trader Citadel Investment Group, made $1.5 billion in 2007. Steven Cohen of SAC Capital Advisors made $900 million.
In addition the rise in prices has produced a windfall for Big Oil, with ExxonMobil, Chevron and the other top five corporations raking in $36 billion in profits during the first quarter of this year and rewarding their corporate CEOs with multi-million-dollar pay packages.
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