Magazine of Socialist Action in Australia

Nationalise the big oil companies!

Reading Time: 2 minutes

The living standards of workers in Australia are threatened by the ever rising cost of petrol. Rent, food and transport costs are also going up, without any sign of respite. As economic growth slows, workers will be hit the hardest as real wages struggle to keep up with inflation.
By Will Kaplan, Socialist Party

One factor, the skyrocketing price of petrol, is caused by the rising price of crude oil. The price of crude oil has almost doubled in the last year and gone up 400 percent since 2002. This is a result of growing demand in China and India, alongside the slower expansion of oil production. This in turn is due to a lack of investment in infrastructure and new oil fields by the big oil companies.

With tight supply and high demand this means that exporters have little to no room to expand production when it is needed. Consequently prices rise. And when demand outstrips supply, speculation in oil can become hugely profitable.

With the collapse of the US sub-prime sector and the US economy in recession, a lot of speculators have sought higher profits in other sectors, including oil. In light of their declining returns, buying oil – or even keeping it underground in wait for higher future prices – makes perfect sense to the capitalists.

As a result workers are now regularly paying in excess of $1.63 at the bowsers. The CSIRO has even predicted that retail prices could reach as high as $8 per litre within a decade!

Despite the ALP’s election promise of petrol price relief, the Rudd government has been powerless to stop prices hikes. The FuelWatch scheme can only hope to scratch the surface of retail end speculation, and according to advice from a handful of Rudd’s own ministries, FuelWatch may even increase prices! The Rudd government has similarly completely failed to ‘put the blow-torch’ to oil-producers in efforts to increase production.

The ALP has now adopted the Coalition’s populist policy of a five cent per litre cut to petrol excise. But this can also barely hope to make a dent in retail end prices, even in the short-term. The truth is that neither of the major parties have any real options within the narrow confines of their ‘market-knows-best’ ideology.

In the immediate term, real relief for workers from high petrol prices lies in reducing consumer demand and containing profiteering. Consumer demand can be reduced by immediately expanding public transport, while profiteering can only be eliminated by the nationalisation of the big oil companies. Under public ownership production and distribution of petrol could then be driven by need rather than profit. Only then could prices be set at a reasonable level.

Calls for the expansion of Australian oil production under the current free-market regime would utterly fail to reduce petrol prices, because oil prices are set at an international level. If an Australian company did opens a new oil field it would not be obliged to sell cheap to Australian consumers. To increase profit they would simply sell overseas where prices are higher.

Only democratic public ownership and control of the big oil companies would reduce petrol prices in the short term. This approach would need to be coupled with a plan to ensure that we move away from relying on cars and shift towards more eco-friendly public transport alternatives.


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