In a previous post I outlined the debate over whether speculation is playing a role in the oil market. While I didn’t really make a case there as to which side of the fence I fall on — although it should have been pretty obvious — I’ll admit right off the bat here that I think speculation is playing an enormous role in the oil markets. Again though, both sides of the debate already have their arguments laid out, not to mention the fact that financial news outlets regularly cover what is going on in the oil markets (and if you want to pretend that these reports don’t matter do come to the debate wearing your tin foil hat, please…). So, let’s take a different tack.
A lot of people on the left don’t seem to respond to the speculation argument and at the same time the stench of Peak Oil is almost always hanging in the air. Paint me a conspiracy nut, but I don’t think these two things are not connected. I’m not saying that every person on the left who denies that speculation is playing a role in the oil market is a Peak Oiler — although nor am I saying that there are not a substantial number of closet-case Peak Oilers on the left, as I know this to be true — but what I am saying is that the two narratives appeal to the same underlying desire. Which is why I think we should ask the question; or, rather, bring it out into the open: is there a left-wing case to favour high oil prices?
Okay, well let’s lay out the left-wing case against high oil prices first. This should be a cinch. Higher oil prices lead to an erosion of real income through price inflation. When oil prices are high working folks pay more at the pump; they also pay more for their heating and electricity and so on. This makes them poorer — and it makes Big Oil and Wall Street speculators richer. What’s more, since more of peoples’ real income is being drained off into the coffers of Big Oil and Wall Street this means they have less purchasing power to spend on other goods and services. This means lower aggregate demand in the economy as a whole and this affects employment. Lower employment means lower wages, and so on. We all know this story.
So, what is the left-wing case for high oil prices? Well, first of all, we have two simple words: global warming. If oil prices are high due to scarcity, as the Peak Oil crowd and their allies would have us believe, then eventually there is going to be a Day of Reckoning where we’re all going to have to stop driving cars and go out and farm vegetables on the back of solar-powered horses… or something. Okay, I’m being facetious, but you get the point: if oil is running out then we can assume that there will be some forced transition to some post-carbon society.
To me, that’s a pretty fantastic thought — which is not to say that some don’t think it. But let’s go for something more reasonable. Even if we don’t get some global hippy commune situation, if oil prices rise then green technologies will become a more attractive investment. So too will technology that uses less oil. Cars will become more efficient. Home insulation will become more effective. This is not conjecture. Where do you think all those first generation micro-cars came from in the late-70s and early-80s? Japan, of course, but they were in response to the oil price hikes of the 1970s.
See? That’s actually a pretty attractive option for someone interested in the environment, isn’t it? A person with a green thumb and a big heart might actually reasonably make the argument that in the long-run we’re better off with high oil prices even if these are coming from speculators who are stuffing wads of working peoples’ hard earned money into Big Oil in order to prop up oppressive regimes in the Middle East. Perish the thought!
There’s another reason too. Many on the left have a bit of a love affair with the more left-wing leaders in Latin America. But everyone know that these guys can’t survive without high oil prices. That’s effectively what is paying for their social programs. So, in today’s world — and everyone should note the irony here — the Revolution may well be being fueled (literally) by speculators on Wall Street. If the oil price came down for any lengthy period countries like Venezuela and Bolivia (natural gas prices are tied to oil prices) would run out of excess foreign exchange reserves and massive inflation would either pick up or worsen as imports rose in price.
A couple of things here before I sign off. First of all, I am sympathetic to both environmentalism and, to some extent at least, the revolutionary left in Latin America. However, I don’t think we should delude ourselves. Both of these causes are being propped up by high oil prices. That makes it tempting to believe that these oil prices are natural — and even that they are going to rise even higher in the future. I am not saying that people on the left are lying here and hiding behind spurious arguments. I have no doubt that they are being genuine — even though I find their arguments highly spurious. I just ask people to consider that there is a deep political contradiction at the heart of high oil prices: what is good for the environment and the revolutionary left is bad for working and poor people trying to earn a living the world over. We should not forget that.