by BEN PECK
Tectonic shifts are taking place in the world economy. The price of oil has fallen dramatically in the past six months. The price of Brent Crude has now fallen to less than $60 a barrel. This marks a near fifty per cent drop in price from $115 a barrel in June. It heralds a new stage in the capitalist crisis, and its impact is being felt throughout the world.
The IMF’s Christine Lagarde has called this ‘good news for the global economy’. But is this really true? Cheaper oil prices should mean savings being passed on to the consumer, boosting demand and further stimulating the so-called “recovery”.
In truth the fall in oil is part of a more complicated picture. It has been caused primarily by the slowdown in the world economy, particularly China. This is the consequence of the worldwide crisis of overproduction, which in China’s case had been masked by historical levels of state intervention.
$586bn was pumped into the Chinese economy in 2009 as part of a huge stimulus package, in order to “keep the plates spinning”. Huge infrastructure projects were embarked upon that maintained employment and absorbed investment.
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However, this is not only an economic struggle, but a game of international power politics. The development of shale oil has increased the US’s share of oil production on the world market, leaving Washington more independent of Saudi Arabia concerning its energy needs. This is not to the House of Saud’s liking.
Iran and Venezuela, both members of OPEC, reportedly begged the Saudis to cut production below the agreed 30m barrels a day, as the two countries need a high price of oil in order to allow for a balanced budget.
But the Saudis want to hit out at Iran, its traditional rival in the area, whose influence has been growing. Iran has been recently courted by America and de facto brought into alliance with it against ISIS. Saudi Arabia wants to drive a wedge between the US and Iran by crippling the Iranian economy, which needs an oil price of $140 b/d to balance its budget. And by bringing American shale production to the point of ruin, the Saudis can bring the US back into its sphere of influence.
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