DEFLATION ran amok yesterday as Tullow Oil wrote off $2.2bn (£1.45bn), a direct result of the oil price collapse after the World Bank warned of a two-year slowdown in the world economy.
Bank of England Governor Carney warned that the Scottish economy was heading for a ‘negative shock’.
This turned out to mean that if the oil price continues to fall from $50 a barrel, all North Sea oilfields will be shut down as uneconomic!
Tullow Oil also slashed its exploration budget for next year to $200m from around $1bn at the start of 2014.
After the oil price fell below $50 a barrel, BP said it was shedding 200 staff jobs and 100 contractors in its North Sea operations and 11,000 elsewhere in the UK.
On Wednesday, Shell said it was dropping plans to build one of the world’s biggest petrochemical plants, a $6.5bn project, with Qatar Petroleum.
Premier Oil announced it was reducing its exploration spending in 2015 by 40% and writing off $300m. Tullow expects to write off $400m in its Norwegian, Mauritanian and Ethiopian exploration businesses, and $1.2bn relating to drilling and licensing costs going back several years.
Global capitalist markets were further thrown into panic on Thursday after a shock move by the Swiss Central Bank to abandon its three-year cap on the franc sent the currency soaring and Europe’s shares and bond yields tumbling in a race to the bottom.
The Swiss franc has soared some 30% in chaotic trade as the central bank abandoned the country’s cap on the currency’s price against the euro. At the same time it reduced a key interest rate from
-0.25% to -0.75%, increasing the amount investors have to pay to hold Swiss deposits.
Following the Swiss move, the Swiss franc went from 1.20 to the euro to 0.8052.
Swiss shares fell some 6% and stock markets around Europe fell with investors buying ‘safe haven’ assets such as gold and German bonds.
One trader described trading after the unexpected announcement as ‘carnage’.
Speculators believe the euro will nosedive if the European Central Bank (ECB) starts its promised one trillion euro of quantitative easing, buying bonds to push cash into the eurozone banking system to try to stimulate a recovery.
The speculators’ bet is that this tactic will sink the euro for ever, and with it a number of the major EU banks, unless Merkel says ‘No’ and threatens to split the EU.
Chris Beauchamp, market analyst at IG commented: ‘It’s not every day that a central bank pulls the rug out from underneath something in such a massive way, and clearly people are worried that there’s something bigger afoot.’
‘This is extremely violent and totally unexpected. The Swiss central bank didn’t prepare the market for it,’ said Alexandre Baradez, chief market analyst at IG in France. It’s sparking panic across all asset classes.’
Almost overnight the working class is faced with the task of putting an end to capitalism and its crisis if jobs, wages and living standards are to be preserved.
The RMT said yesterday of the oil collapse: ‘The announcement from BP is a devastating blow to hundreds of workers in the UK energy industry and we are being warned that there is much worse to come.
‘RMT believes that the industry is making offshore workers carry the can for their failure to plan for lean times such as these. Instead they have gone for a short-term “slash-and-burn” approach that will have long-term implications for the future of the entire industry and the security of the UK’s energy supplies.
‘RMT, along with our sister unions, is meeting with Oil and Gas UK tomorrow where we will be pushing for a halt to the job cuts programme and an emergency package of measures to stave off the destruction of both jobs and infrastructure . The union is also continuing to lobby politicians for incentives to allow exploration, maintenance, safety and engineering development works to take place during this emergency period for the industry.’
Much more is required than this. The RMT and its allied unions must demand an emergency meeting of the general council of the TUC, and that the TUC must call a general strike to bring down the coalition and bring in a workers government that will expropriate the bosses and the bankers and bring in a planned socialist economy. This is the only realistic policy for this crisis situation!
