[Marxism] Tomgram: Michael T. Klare, The Problem with Cheap Oil

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Tomgram: Michael T. Klare, The Problem with Cheap Oil
 
 
clip -- 
With the plunge in oil prices and a growing sense (however temporary) of oil  
plenty, this dog-eat-dog competition is likely to abate. The current absence 
of  intense competition does not, however, mean that oil prices will cease to 
have  an impact on global politics. Far from it. In fact, low prices are just  
as likely to roil the international landscape, only in new ways. While  
competition among consuming states may lessen, negative political conditions  
within producing nations are sure to be magnified.  
Many of these nations, including Angola, Iran, Iraq, Mexico, Nigeria, Russia, 
 Saudi Arabia, and Venezuela, among others, rely on income from oil exports 
for a  large part of their government expenditures, using this money to finance 
health  and education, infrastructure improvements, food and energy 
subsidies, and  social welfare programs. Soaring energy prices, for instance, 
allowed 
many  producer countries to reduce high youth unemployment -- and so potential 
unrest.  As prices come crashing down, governments are already being forced to 
cut back  on programs that aid the poor, the middle class, and the 
unemployed, which is  already producing waves of instability in many parts of 
the world. 
 
Russia's state budget, for example, remains balanced only when oil prices  
stay at or above $70 per barrel. With government income dwindling, the Kremlin  
has been forced to dig into accumulated reserves in order to meet its  
obligations and prop up sinking companies as well as the sinking ruble. The  
nation 
hailed as an energy giant is running out of money quickly. Unemployment  is on 
the rise, and many firms are reducing work hours to save cash. Although  Prime 
Minister Vladimir Putin remains popular, the _first signs_ 
(http://online.wsj.com/article/SB122963701381519641.html)   of public 
discontent have begun to 
appear, including scattered protests against  increased tariffs on imported 
goods, rising public transit fees, and other such  measures.  
The decline in oil prices has been particularly damaging to natural gas  
behemoth _Gazprom_ (http://www.gazprom.com/) , Russia's biggest company  and 
the 
source (in good times) of approximately one quarter of government tax  income. 
Because the price of natural gas is usually pegged to that of oil,  declining 
oil prices have _hit_ 
(http://online.wsj.com/article/SB123007069519831241.html)  the  company hard: 
last summer, CEO Alexei Miller estimated its market 
value at $360  billion; today, it's $85 billion.  
In the past, the Russians have used gas shut-offs to neighboring states to  
extend their political clout. Given the steep drop in gas prices, however,  
Gazprom's January 1st decision to sever gas supplies to Ukraine (for failure to 
 
pay for $1.5 billion in past deliveries) is, at least in part, finance-based.  
Though the decision has triggered energy shortages in Europe -- 25% of its  
natural gas arrives via Gazprom-fueled pipelines that traverse Ukraine -- 
Moscow  shows no sign of backing down in the price dispute. "They do need the 
money," _observed_ 
(http://www.nytimes.com/2009/01/02/world/europe/02gazprom.html)  
 Chris Weafer of UralSib Bank in Moscow. "That is the bottom line."  
full --     
<_http://www.tomdispatch.com/post/175018/michael_t_klare_the_problem_with_cheap_oil_
 
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