More than 90,000 truck drivers throughout Spain are on strike over rocketing fuel costs, triggering panic buying amid fears of empty supermarket shelves. The strike follows similar protests in Britain where drivers blocked arterial motorways into England, Wales and Scotland demanding fuel tax reductions to avert closure of haulage businesses. Fishermen across Europe are similarly angered and threaten to paralyze ports.
In the US, motorists are reeling from unprecedented prices at the pump spiraling upward from $4 a gallon, with many unable to afford to fill their tanks. Palestinians struggling to cope with rising food costs are fuelling their vehicles with olive oil. Last week, Malaysian and Indian governments decided they could no longer afford to maintain fuel subsidies at current levels eliciting massive rises in petrol prices accompanied by inevitable street protests.
On Friday, crude fetched $139 a barrel beating all previous highs, prompting serious warnings of a global recession. Stock markets across Asia tumbled, 3.1 percent was knocked off the Dow and the dollar took a battering against other currencies. But the bad news isn’t over. According to Morgan Stanley, the cost of oil may hit as much as $150 a barrel within the next four weeks, while other industry experts predict oil will never be cheap and plentiful again.
What’s happening? Who or what can we blame for this turmoil sweeping the planet, which some say is a recipe for internal conflicts and even major wars?
Many nations point the finger at OPEC for resisting an increase in production as it did last Sunday. Australian Prime Minister Kevin Rudd, for instance, warned that petroleum prices are causing the world a “huge problem”, which could only be rectified by OPEC agreeing to pump more.
But OPEC believes increased production would be like putting a sticking plaster on the wound maintaining that the fault lies partly with the weak dollar and partly with get-rich-quick speculators/commodity dealers who are driving up the market.
OPEC also blames political tension in the Middle East caused by a statement from an Israeli Cabinet Minister Shaul Mofaz to the effect an Israel strike on Iran was “unavoidable” to curtail Tehran’s nuclear ambitions. The threat has been criticized by the Israeli Ministry of Defense officials, who say the remark will make it more difficult to persuade the international community to intensify diplomatic efforts. But too late! The damage to oil markets has already been done.
Vice Chairman of Oil and Gas Consulting at Deloitte & Touche Gary Adams seems to agree with OPEC that a floundering dollar and speculators are the main price drivers. Oil is “being used as a hedge by speculative buyers for the weakened dollar” he said, anticipating that the “price will continue to go up as investors look for alternatives”.
There are also those who lay the blame at the feet of India and China, both rapidly developing nations with ever increasing fuel demands (and food requirements). But this is such an elitist argument that it doesn’t merit being taken seriously. Countries that work hard to better the standards of living of their peoples do not deserve criticism because their wealthier populations can afford to drive cars, live in climate-controlled homes and regularly eat meat. The haves will just have to get used to the idea that there are less have-nots than there used to be and, thus, resources need to be shared.
Demand for oil maybe outstripping supply and certainly will do in the long run but rather than seek scapegoats — whether oil producers, consumers, governments of importing nations or middlemen — the international community under the auspices of the United Nations or World Bank, perhaps, needs to set its brightest and best the task of finding solutions.
They should, of course, study the feasibility of renewable energies, biofuels made from crops that do not erode food supplies and the excavation of as yet untapped fields among other possibilities.
Still, there may be more that some countries and organizations can do in the short term to alleviate consumer pain.
For instance, oil companies are recording record profits. Exxon Mobil Corp’s has surged from $11.5 billion to $40.6 billion — or twice the entire GDP of Albania — within the past five years, while five major companies together — Exxon, Chevron, Shell, BP and ConocoPhillips — racked up $36 billion in the first quarter of this year alone. Such profits were so off the scale that their top executive were asked to explain them before a Senate Judiciary Committee in an attempt to stave off new profit windfall taxes on the industry.
Democratic Sen. Dianne Feinstein was not impressed. You have “a litany of complaints that you’re all just hapless victims of a system yet you all rack up record profits...quarter after quarter after quarter”, she told the oil execs.
So, oil companies could certainly make a difference by cutting profits, and some governments, in particular the UK’s, could drastically reduce taxes on petrol. The current duty on petrol in Britain is more than 70 percent and possibly even 80 percent when VAT is added — the highest in Europe and possibly the highest in the world. This makes even less sense when one considers that the UK is an oil-producer itself.
The issue is complex and there are no easy fixes. Everyone — producers, importers, distributors, retailers and consumers — need to come together to set long-term strategies to ensure the global economy is kept on track and ordinary people aren’t ultimately left holding the baby. If the situation is left to slide as each sector plays the blame game, saying, “it’s not our fault” we could be looking at decades of chaos, conflict, chronically ailing economies and widespread hunger. That’s no legacy to leave to our children and grandchildren!
