The recent oil price rise comes as a shot in the arm for the US as it continues to allege the growing economies of China and India for the rise in price of oil. Rising to $142 per barrel, the oil price hit the highest level for the previous season. One of the reason for this price rise is Libya’s proposed cut in crude oil production as a response to the bill before the US Congress that would empower Washington to sue OPEC members for cutting supplies*.
As I mentioned in a previous post, China & India constitute 9% and 3% of the world oil consumption as against 25% of US. Despite the fact that the growth in these countries is pulling millions out of poverty, US wants these countries to curb their demand. Oil not only gets consumed as a final product, it is also an essential ingredient in many production processes. Thus, higher oil consumption is an inevitable outcome of growth. By asking China and India to curb their demand, we are indirectly asking that they slow their growth. And all this so that we can continue with our high levels of consumption!
I think its high time the government stopped using power to control actions of other nations just because they threaten our comfort zones. Will it really hurt if next time we want to take a vacation, we hop on a Peter Pan or a Greyhound, instead of driving the gas guzzling SUV? Let trade be really free and hence, refrain from using political power to change the terms of trade in our favor.
Its indeed true that OPEC benefits a lot from hoarding supplies. But if we take a step back and think about it a bit harder, then this monopoly may not be all that inefficient. It keeps our already high level of oil consumption from shooting up and in the process allows other growing countries some leeway. It forces us to develop cleaner technologies and thereby reduce our oil dependence. So, in the process of ensuring reserves for their future generations, the OPEC countries may be actually ensuring sustainable development for all countries!
And then if US is indeed able to sue the OPEC countries for cutting oil supplies, it might turn out to be a stab in the back of all future generations.
*See this article from the Financial Times for other possible reasons and related news analysis.
I have to admit that I stumbled on this book just recently, though it was published in 2001. But it is so disturbing that I had to write something about it. Eric Schlosser does a wonderful job in bringing out the implications of the way we eat food today in US. It is not only the story of the quality of food, but it is also one of the unfettered greed of giant corporations and hence of the murky side of market forces.
It gives a lot of other information along with the story of greedy corporations determining what you eat and how will it be made. For example, I did not know that one of the American car companies bought the rail network in the west and destroyed it completely to create demand for their cars. These companies were later tried for monopolistic practices but the damage was already done. It was also interesting to know how various corporations use the state to grow. For example, many franchisees of a well known fast food chain have been developed through concessional state financing meant for small business development. Corporations have threatened to leave a particular state and bargained for reduction in taxes. They have lobbied for least regulations by financing election campaigns and in the process have taken consumers for a ride.
If all this is not enough, some of them have been regularly hiring illegal immigrants as they are cheaper than US citizens. They also do not have any legal standing and hence the hiring companies do not have to worry about insurance and other legal benefits. Much of the description of how they handle the poor immigrants reminds us of barbaric industrial towns of Europe from the earlier times that reeked of anarchy, disease and filth. It is hard to believe that a significant number of workers here in US have to face such hardships amidst all the glitter and sanitized psycho babble of violation of human rights in the rest of the world.
Even more disgusting are the details of how the meat packing industry functions. The scale and speed with which it currently functions is overwhelming and I leave it to the readers to discover the details. Suffice here to note that the meat packing industry not only has resisted any food safety regulation up till now but is also responsible for mindless perversions and meddling with course of nature. Cattle which is by nature is meant to be herbivorous has been fed for decades with dead cattle, cats, dogs, horses, pigs and chicken. Even chicken is fed with dead cattle and of course dead chicken.
I do not have enough scientific knowledge to comment on the biological and environmental implications of these actions, but it certainly does not feel right. At least I know for sure that our bodies are designed to digest certain types of food and that’s certainly the case with animals. In a normal course will a dog or chicken eat beef? Will a cow eat a horse or a pig? More importantly will a cow eat cow or chicken eat chicken? If this is taken to its logical end will we ever consider it normal to eat dead humans? I am inclined to answer in negative but you are entitled to your opinion. At least after reading the description of what all goes in that burger patty, I am happy to recommend a glass of orange juice for lunch. With it you will only starve for a while but definitely not die!
The development of American capitalism thus raises far more fundamental questions than just the selfishness of corporations as evident in the brutal denial of basic human courtesy to fellow human beings. Corporations built to serve human beings seem to have grown so larger than life that they deem some human beings completely expendable. And this disease is spreading to other countries as well, as these corporations open shops there and more and more people around the world yearn for a fast life style.
What do I say more here? Read it for yourself. After all some body aptly said- read and be wiser!
There has been a lot of talk recently about how everything from world food prices to world oil prices is caused by increased consumption by China and India. For example, see this article. This is a good example of flawed economic but mass appeal reasoning and the government as well as the media seem to be more than happy to cling to it.
A closer look at the consumption of oil statistics (CIA factbook), is an eye opener. Oil consumption of US is 26% of the world oil consumption whereas Chinese consumption is 9% and that of India 3%. With such small numbers, oil consumption of India and China will have to grow more than 100% to compete with US consumption and significantly affect world oil prices. This also makes the question of reducing the oil subsidy by these countries a non issue.
Comparison of per capita consumption figures is even more revealing. US consumes 11 liters of oil per capita per day while China and India consume 0.8 and 0.3 per capita per day. Given this, one could easily argue that reduction of US consumption will contribute more to reduced oil prices than that by China and India.
Coauthor: Devayani Tirthali
There has long been an arguement that since US’ trade with poor countries like China has increased, demand for domestic low skill jobs has reduced. This is because imports from poor countries displace goods produced in US by the low skilled workers. In effect the wage gap between the skilled and unskilled workers has gone up and trade is obviously to be blamed for that.
The evidence is at best mixed. This article in The Economist gives a good summary of what economists have to say on the issue.