AS commercial fishermen, bus companies, hauliers, the Irish Small and Medium Enterprise Association and British Airways yesterday reacted to soaring fuel costs by either demanding government intervention or increasing prices, America’s leading commodities regulator launched an unprecedented investigation into possible market manipulation.
The American Commodities Future Trading Commission (CFTC) investigation into the workings of the US crude oil market comes as record prices cripple parts of the global economy.
The concerns around energy costs deepened when stockbrokers Merrion predicted that Ryanair and Aer Lingus will ground aircraft next winter to avoid losses provoked by soaring fuel prices. Merrion expects Aer Lingus to ground 10% of its capacity during the next two winters.
The CFTC is focusing on hedge fund speculators and investment houses who have bet that the price of oil will increase over the coming months.
The CFTC contention is supported by financier George Soros, who believes the crisis is man-made. Mr Soros dismisses the notion of peak oil, points to growing demand, the impact of speculation and the reluctance of oil producers to convert an appreciating asset — oil — into a weakening asset — currency — as the real reasons behind soaring cost. There is more than a ring of truth to three of Mr Soros’ four contentions but the considerable weight of evidence supporting peak oil theory indicates that there are more than human or economic factors at play.
At the moment, price is the defining characteristic of oil but it is still readily available as long as you are willing to pay for it. That, no matter what Mr Soros argues, is not a long-term likelihood.
That is why it is so very important that the tremendous price hikes do not distract us from what should be our priority. We import about 90% of our energy and must become far more independent. If we waste too much time arguing about something over which we have very little control — the price of oil — and do not confront the real issue of the future we will look back on the days of the Celtic Tiger as a golden age.
The soaring prices have triggered protests across Europe. In Britain, truck drivers converged on London on Tuesday. Similar protests took place in Wales. French farmers and fishermen are continuing their protests. Fishermen from La Rochelle temporarily lifted blockades in hopes the EU will cushion high diesel prices.
It is natural to have sympathy for all of these protesters, after all we are all in the same boat to a greater or lesser degree but what is it we expect government to do? Cut fuel taxes? Offer a subsidy? These can only be short-term fixes and will not make fuel any more readily available. It will just move the cost point to a different place in the process and mean a cut in government services elsewhere.
We have had our head in the sand about energy dependence for far too long. We have been neglectful and allowed ourselves become far more vulnerable than we should be. These price rises may just be the opening salvoes in the scramble for decreasing fossil energy reserves. We cannot say that we have not been warned.
We can blame government if we wish but in reality we have a deep-seated cultural resistance to preparing for an oil-scarce future that will destroy all of our economic and social progress unless we confront it.
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