Throughout the country and around the world, gas prices are rising at astronomical rates. In the month of April alone, gas prices went up 42 cents a gallon on average. Oil prices have risen 400 percent since 2001, when the average price per gallon of gas was $1.42. The average American driver now pays about $2,250 per year for gasoline—an increase of $1,400 over what consumers spent in 2001.
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The corporate media, oil corporations, capitalist economists and President Bush credit the invisible hand of the great capitalist market and the pressures of supply and demand. This capitalist myth absolves the government and the oil corporations—who are in collusion—of any responsibility.
While the world’s supply of oil is limited, the basis for the huge increase in gas prices is not the uncontrollable forces of supply and demand.
Giant oil monopolies are vertically integrated. This means that the oil giants are involved in the industry at every level— exploration, production, refining, and wholesale and retail marketing. ExxonMobil’s wholesale unit may have to pay ExxonMobil’s refinery more, and therefore ExxonMobil’s gas stations have to raise their prices. The increased profits all end up in ExxonMobil’s bank account. It is what used to be called a “shell game.”
A Federal Trade Commission report dated March 29, 2001, investigated price spikes in Midwest states during the summer of 2000. Predictably, the pro-industry FTC found the oil monopolies innocent of “collusion or any other antitrust violations.”
Despite the whitewash, the 2001 FTC report contained some highly revealing information about the companies’ manipulation of the market. Due to their takeover of so many U.S. refineries, the biggest corporations were easily able to manipulate supply.
The report states: “An executive of this company made clear that he would rather sell less gasoline and earn a higher margin on each gallon sold than sell more gasoline and earn a lower margin. Another employee of this firm raised concerns about oversupplying the market and thereby reducing the high market prices. A decision to limit supply does not violate antitrust laws, absent some agreement among firms. Firms that withheld or delayed shipping additional supplies in the face of a price spike did not violate antitrust laws.”
The biggest oil companies caused gas prices to soar by artificially creating a supply crisis. According to the FTC, this is perfectly legal. But without monopoly control of the market by a handful of corporations, such market manipulation would be much more difficult.
The ‘Big Five’
Five major corporations dominate the oil industry: ExxonMobil, BP, Royal Dutch Shell, ConocoPhillips and Chevron. There are a number of smaller, though still very rich, companies, but the Big Five dominate.
The big capitalists who own and run the Big Five oil corporations pocket huge sums of money. Average compensation for the CEOs of the five oil majors is over $23 million per year, 766 times greater than a worker earning $30,000 per year.
The pay of the top five executives at ExxonMobil, which received the largest profits for a single company ever last year, has gone from $28 million a year in 2001 to $76 million in 2007—a 170 percent increase. Not coincidentally, the increase happened as gas prices jumped 400 percent.
On top of their salaries, top executives receive a wide array of bonuses, benefits and other perks and are extensively invested in highly profitable corporate stock.
Meanwhile, monopoly domination continues to grow. In 1993, the five largest U.S. companies controlled 34.5 percent of refining capacity. They now control 50 percent. In 2004, the top ten companies controlled 78.5 percent of all domestic refining capacity, up from 55.6 percent in 1993.
According to Judy Dugan, research director at Consumer Watch: “They are not sitting in a boardroom and colluding, but they can see easily enough where their benefit lies, and it doesn’t lie in a price war. In a truly competitive market, you might see some of these providers try to improve their market share by reducing prices. But this is not happening. They are all better off by restricting production to keep prices up.”
The oil industry wields great economic, and political power from within the ruling capitalist class. As a result, the subsidies and tax breaks offered to the industry are truly amazing. Working people pay for these subsidies and tax breaks given to Big Oil in the form of an increased tax burden or decreased government services.
There is another huge and largely hidden way in which the working class subsidizes the oil industry—the military budget. A central objective of the war in Iraq and the U.S. military occupation of the Persian-Arabian Gulf region is control of the area’s petroleum resources, an estimated 70 percent of the world’s total. U.S. oil monopolies are the prime beneficiaries of this strategy, with their British and Dutch junior partners getting a cut—the same Big Five.
The cost of these enormous military operations in money is now at least $200 billion per year. The cost in human lives is incalculable.
Bipartisan inertia calls for independent workers’ movement
The Democrats and Republicans in Congress now feel great pressure—facing the anger of the masses at the result of their own policies of corporate givebacks—to address the rising gas prices. However, they take little action to address the crisis, instead blaming those invisible and uncontrollable forces of supply and demand.
There are, in fact, many tried and tested short-term steps that could be taken. During World War II, for example, there were price controls on gasoline and other goods. There could be a genuine investigation of the crimes of the oil industry, conducted publicly and broadcast live with full transparency. A special tax could be passed on the windfall profits that the oil companies have wrung out of the people by manipulating the market. The executives could be tried and imprisoned.
But for even those short-term solutions to be realized, there must be no illusions about the capitalist politicians who call themselves “representatives of the people.” The reality is that the White House, Congress and the state legislatures are all completely beholden to the capitalist class, of which the oil corporations are a powerful part. In that context, even short-term reforms to alleviate the crisis must be fought for.
Only a powerful workers’ movement, independent of the interests of the tiny billionaire elite, can win a real solution to the deepening energy crisis. In Europe and Asia, widespread strikes and protests have broken out in response to rising fuel prices.
Short-term measures—price controls, investigations and taxes and fines on the Big Five oil monopolies—can soften the impact of the present crisis. A broader solution—the expropriation of the oil and gas industries and their reorganization on a centrally planned, not-for-profit socialist basis—must eventually follow. Only then will it be possible to assure that the global energy resources are used in a sustainable way to meet the needs of the world’s people.
