From the series, “the beauties of our economic system”; today:
The modern world needs oil. The way it does business with it shows how progressively and rationally the world is set up.
This really starts with the global market economy having apparently successfully left behind the primitive standpoint that an abundant supply of a good that is essential for society’s technological functioning is definitely something welcome. Things work differently when the market regulates the provisioning of society: the current “oil glut” — mediated by the natural law of increased supply lowering the price that all products have for some reason or other — leads to the price of oil falling down a bottomless hole. And this, as is well known, only benefits those who pay the price — for their cooperating partners on the sellers’ side, precisely this benefit is a loss to precisely the same degree; at the moment, a rather gigantic one.
That such a glut can happen points to a further achievement of modernity: the hassle of socially planning social production is out of the question for the market economy, even with regard to the transporting and refining of oil, i.e., with an elemental, economic resource for the entire social life. Instead, what holds is the principle, as much ingenious as cross-rational, that what is produced and sold has to bring in a surplus of the selling price over the production cost to someone who commands enough capital to buy all the necessary factors for this type of production. And this someone doesn’t ask about the need, but rather looks to see that he sells as much as is profitably possible. Seen in this light, the glut doesn’t indicate a surplus, but a lack: selling oil pays too little profit, hence there’s too much of it. And so it comes about that, for example, in the US, fracking technology, still celebrated as the latest technological pride of the nation, as the spearhead of national reindustrialization, is now in numerous places being treated by its operators in effect as major industrial scrap with which nothing profitable can be done, i.e., nothing at all any more.
By the way, the free market idea that defines labor as one of the aforementioned factors of production proves its worth in this connection. Though this is theoretically a bit tricky, it is quite simple in practice: the livelihoods of the workers enter the cost-profit calculation of the producers as a cost. For those recently used according to this logic as cheapest-as-possible workers, the current decline of large parts of the oil industry certainly means, according to the same logic, the complete elimination of their livelihoods. From the standpoint of the freedom of private calculating, however, that is the most imaginably rational way of disposing of unused production factors — this, too, makes the market economy so unbeatably efficient. And for the millionfold oil workers in the world who are now laid off, this at least holds out the possibility that they might be re-employed in the next oil boom — should they live to see it; an opportunity they would get in no other economic system.
This economic system’s method of reducing overcapacity also distinguishes it from all non-existing alternatives. Only to hopelessly backward thinking would it make sense to coordinate cutbacks in extraction upon detecting an overabundance in the supply of a good that moreover tends to be regarded as ecologically problematic. In the global market economy, this result is achieved in a much cleverer form, as can be seen in the current situation, namely, as a kind of competitive game on the global oil market. The traditional oil producers in Arabia and elsewhere are now fighting within this framework against the American frackers. The fight is about each producer maintaining at least its own extraction, thus about driving the others off a market that is already drowning in oil anyway. The weapon is what you would expect: reducing the price and offsetting the lower price through more sales. The winner is the one who holds out the longest against the production of even more of what there is already too much of and against an oil price that keeps on falling due to this very fight between suppliers. A fascinating dialectic: the production of wealth in one place occurs with the express purpose of destroying it in another place.
But the real progressiveness of the free market only truly proves itself with the appearance on the scene of actors who have in the first place absolutely nothing at all to do with the production of oil, its transport, or its further processing, but instead intervene all the more in its pricing. In the market economy, it isn’t that nothing is planned. Developments in production and price that no single competitor can plan are in turn the object of the supremely rational economic activity called speculation. This is geared, as is fitting and proper, toward making money. Instead of dealing in oil (that’s already done by others), the representatives of this honorable profession deal in titles to oil, which they buy and sell because the price of oil rises or falls with the demand somewhere else — and the value of their titles along with it. So they try to predict how the price will evolve; not, of course, in order to invalidate the free market principle of the production and reproduction of society taking place as private competition. It’s the other way around: the basis of their business is that the whole society experiences the results of its own economic activity with as much bewilderment as the weather. Unlike meteorologists, the speculators investing in oil hope that nobody else shares their predictions. At least not at first, since speculators make profits on the oil market, too, by being the first to detect a trend that later also has to occur, which it then does if and to the extent that everybody else then speculates in the same direction. Only at first does this look a bit like a madhouse; at second glance, it can be seen that huge profits are thereby up for grabs, and that’s what ultimately matters. So again it only shows the higher rationality of the free market that there are many times more relevant future contracts for the purchase and sale of oil than there is oil. This has above all the singularly capitalistic consequence that, according to insider statements, the changes in the price of oil through speculation in it have for the first time reached an extent that now means a considerable disaster for entire nations.
Speaking of nations: modern peoples have decided, as is well known, to gather together under the rule of nation states. So arranged, they repeat the marvelous economic practice of cooperation that only exists as competition, just because it is so marvelous, on an inter-national level: especially in the fight over the free-market exploitation of oil, the national administrators of nations prove themselves as the ones really heating up the free-market conflict for all participants. The one promotes its domestic fracking industry with government loans, refutes capitalism-adverse concerns about environmental issues by legislation, and strongly encourages the rest of the world to buy the right oil and not the wrong stuff; and looks after the security of oil routes and pipelines across the world of states. The others use their state management of national oil production, their state credit, and their command over their people so that no oil spigot goes dry.
The sale of oil is for some of them an important source of government revenue, for a few the most important. And this is how the current upheaval in the oil markets makes for a decent amount of variety in the lives of peoples in quite another way. Because the budgets of entire states are currently going bust along with oil prices posted to the exact cent, these states make sure that the living conditions of the people they govern with these budgets get their fair share of the damage — some experts are now whispering of the possibility of social unrest, political instability, and the like.
Oil therefore has its part in ensuring that states do not exhaust the need for order, both internally and externally. All the more when the world is in recession. Not least therefore, in some of these countries, the need for means of violence grows with the very dwindling of the corresponding means of financing. According to reports by people who make it onto television with their expertise, the increasingly cutthroat competition over oil is lending the anyway already war-laden power struggle between the two oil giants Saudi Arabia and Iran a few, new exciting aspects. Though the expert-like rationales are not always clear in the particulars, there is apparently some consensus: the basic principle of the peaceful commercial dealings of states and their world order, the fact that even and especially the production of the use-value oil has its ultimate and highest purpose in the reproduction of state power over production, means that states, when lacking this source of their power, under no circumstances step back but rather remember that power is their ultimate means.
The modern world is democratic as well: even the common man is not detached from these colorful goings on. The modern media introduces him intellectually to all the sizzling interrelationships: in-depth, competent, multifaceted, with empathy for each of the conflicting standpoints and interests. And if he doesn’t want that, it also doesn’t matter, as we’ve said. Since after all, he is at the latest involved in practice at the gas station with every cent he has to pay.
© GegenStandpunkt 2016