Oil Politics are Still the Order of the Day

Data shows that that the US is continuing to manipulate world oil prices in an effort to hinder oil producing countries, not in line with US foreign policy. As of Friday, the price of crude oil dropped 2 percent as the US has boosted domestic oil production by 1 percent. Meanwhile, Organization of the Petroleum Exporting Countries (OPEC) have reached a production output high for 2017.

The benchmark for crude oil was trading at 2.5 percent less, at $46.91 per barrel on Friday. US West Texas Intermediate (WTI) crude futures decreased 2.6 percent, to $44.33 per barrel.

“We’re seeing some head-scratching today. Following a sharp rally, which was mostly driven by short-covering, the failure of Brent to break back above $50 earlier in the week has once again given sellers appetite for sending it lower,” said Ole Hansen, head of commodity strategy at Saxo Bank, as quoted by Reuters.

Last week US oil production grew by 1 percent to 9.34 million barrels per day (bpd), according to government data. At the same time, OPEC exported 25.92 million bpd last month, which is 450,000 bpd more than in May and 1.9 million bpd more than a year earlier.

The primary victims of a drop in oil prices are export dependent countries like Russia and Venezuela. Both of these countries rely heavily on oil production and sales to stabilise and maintain their economies.

For Russia, 70 percent of their export income depends on the energy trade of oil and gas. It has been estimated that for every single dollar decrease in the oil price, Russia loses about $2 billion. A large enough of a trend in reduced oil prices could send Russia into an economic contraction if the price is not stabilised.

Currently, Russia refuses to cut back its own production in order to raise its price. they have a good reason for doing so. Energy Minister Alexander Novak once said, “If we cut, the importer countries will increase their production and this will mean a loss of our niche market.”

Venezuela is another special case. The initial gains of the Bolivarian revolution were achieved by the nationalisation of a portion of the oil industry. Much of it still remains in the hands of the capitalist class who wield it as a tool to destabilise the economy. The most immediate goal should be to seize the entire energy sector. This is the greatest economic tool that Venezuela could have. Allowing it to remain in the hands of the bourgeoisie will spell the end for the Bolivarian government, and a victory for US imperialism.

The cut in oil profits means a cut in the massive subsidies the government provides to the public in poverty alleviation programs. The country already has some of the world’s cheapest gas prices – fuel subsidies cost Caracas about $12.5bn a year. As the government seeks to keep these programs in the face of falling oil profits, inflation has already become a problem in this regard. President Maduro has ruled out subsidy cuts and higher petrol prices.

This manipulation of oil prices to harm the anti-imperialist block is being aided substantially by Saudi Arabia, who has the greatest ability to affect the price. They are currently the world’s largest exporter in the world and can wield tremendous influence. Unfortunately, the Saudis are great lackeys of US imperialism and will do their bidding on command.

Oil politics have long since ruled the world since the industrial revolution. As long as the US maintains such a dominant position, it will be able to wield it was a weapon. The rise of China, however, places a question as to who will be the energy leader in the future.