Contents "The internationalist proletarian" n.17
A CAPITALIST WORLD SATURATED BY OIL
In the energy field, we will focus on oil to examine the OVERPRODUCTION that has been building up between 2024 and 2025 and that threatened to take hold in a devastating manner in 2026, as well as the processes it has determined.
Trends in Oil Supply and Demand
As we have been following in this review, oil prices have remained relatively high in the years 2021–2023 because, following the electroshock dealt to capitalism by the halt and subsequent epileptic resumption of production and circulation in 2020, oil-producing countries managed to keep production below demand (see “The Internationalist Proletarian” no. 9, April 2022, p. 14). But as can be seen in the following chart, the difference was minimal in 2024, and by 2025 the trend had already reversed, threatening to return to the situation seen in 2020 by 2026.
Relative demand for oil is declining
This imbalance between oil demand and production occurs in the context of a process not shown in the previous chart: the global bourgeoisie’s shift away from fossil fuels in general and oil in particular, which currently accounts for only 30% of the world’s energy (see “The Internationalist Proletarian,” no. 16, April 2025, pp. 9–10).
In other words, although demand appears relatively stable in the chart above – and even shows a slight upward trend – the entire increase in global energy demand is being met by other energy alternatives that will ultimately replace oil.
Overproduction of renewable energy
In this process, the industrial overproduction of Chinese solar panels and batteries plays a significant role in accelerating the trend: “China’s world-leading solar, battery and electric vehicle companies have sharply increased foreign investment plans in recent years, pledging more than $210 billion since 2022, according to new research. (…) Researchers at the lab and Brown University have tracked more than 460 overseas green manufacturing projects announced by Chinese firms since 2011, finding that (…) more than 80% of them came after 2022” (Bloomberg, 10-09-2025).
This overproduction of installation capacity results in excess installed capacity, which repeatedly and with increasing frequency leads to NEGATIVE prices (where money is paid to “sell” surplus energy): “Sub-zero electricity prices first occurred in Germany in 2008 as the nation ramped up its wind and solar capacity. (…) Finland outpaced all other European markets in 2024 with 725 negatively priced hours, up from just five in 2021 and beating Germany’s 455 hours (...) In Australia, (…) spot power prices fell below zero for a record 23% of the time in the final quarter of 2024. (...) In the US, negative power prices are becoming more frequent and severe amid increased wind and solar generation and growing grid bottlenecks. Sub-zero prices are being seen everywhere from Texas and California to the PJM grid in the east of the country that spans 13 states plus the District of Columbia” (Bloomberg, 17-02-2025).
This is the direction in which the capitalist world is rapidly moving, a world in which oil plays a lesser role and energy prices fall.
Increase in supply
It is important to note that the imbalance between supply and demand in the chart above stems primarily from an increase in production. Several factors have contributed to this increase, but the turning point has been OPEC+’s strategic decision to expand its production: “After a recent period marked by production cuts – which were particularly severe between 2016 and 2019 and in 2023 – the strategic shift has been radical. It opened the floodgates in April. It did so again in May, June, July, and August. And it did so again last Sunday, injecting 137,000 new barrels per day into the market despite increasingly weak demand growth” (El País, 14-09-2025).
OPEC+ member states have been holding back production to keep oil prices afloat, a factor determined by the cost of the least efficient oil field used to meet demand (see p. 25 for more details on how oil prices are determined). These states need to maximize their profits so they can reinvest them in other sectors and try to reduce their dependence on oil before it is too late. But as we have explained on previous occasions, revenue and profit do not depend solely on price, but rather on price multiplied by the number of barrels sold. It may be more profitable to sell a larger volume at a lower price than a smaller volume at a higher price.
Well, then by cutting back on production to keep oil prices high, they’ve allowed other oil-producing states, such as the US, to ramp up their output. In effect, they were sacrificing their own sales to maintain an oil price that benefited the US by filling the gap in the market, so they’ve decided to change their strategy.
A capitalist world saturated by oil
This surplus of supply over demand is flooding onshore and offshore storage facilities, threatening to reach a surplus of 4 million barrels per day: “the official crude oil data used as a reference by traders – which indicate a certain oversupply (2025 ended with a surplus of 1.5 million barrels per day) – are the figures for onshore stocks. But another 375 million barrels are drifting aimlessly at sea (…). The International Energy Agency forecasts a record crude oil surplus in 2026, a year in which supply will exceed demand by more than 4 million barrels of oil per day” (El País, 27-02-2026).
One might then wonder why oil prices did not fall much earlier and more sharply. The fact is that demand has remained steady, absorbing (at a discount) a significant portion of the surplus, with China playing a particularly prominent role in securing large oil reserves: “Prices held within a range above $65 for much of the summer in spite of the swelling production, as much of the oversupply ended up in storage tanks in China, far away from the pricing hubs for crude futures” (Bloomberg, 31-12-2025).
The OVERPRODUCTION resulting from PRODUCTION OVERCAPACITY at the end of February 2026 was as follows: “Global oil reserves are at their highest level since 2021, with 8.21 billion barrels of crude oil and refined products stored worldwide” (Expansión, 13-03-2026).
Who is hit hardest by the drop in oil prices?
The country most affected by the drop in oil prices is the United States, currently the world’s leading oil producer. The production cost per barrel of oil obtained through fracking is much higher than the cost in other regions, such as the Persian Gulf countries: “With shale, small price shifts matter a lot: The difference between booming production and declining output is measured in a fistful of dollars, perhaps as little as $10 to $20 a barrel. At $50, many companies are staring at financial calamity and production is in free-fall; $55 is survivable; $60 isn’t great, but money still flows and output holds; at $65, everyone is back to more drilling; and at $70 and above, the industry is printing money and output is soaring” (Bloomberg, 24-06-2025).
We have seen that oil prices have remained stable due to the accumulation of reserves in China, and temporary spikes have also been driven by threats to bomb Iran or block Venezuelan oil exports. However, these spikes were temporary due to the obvious and notorious excess of already extracted oil and refined products.
For anyone who doubts the influence of oil prices on the course of imperialism[1] and on US policy:
“From the high of $81.50 reached in mid-January, the price of a barrel of Brent crude – Europe’s benchmark – fell to $60 in early May. (…) After the bombings began on June 13, the price of a barrel of Brent rose above $77, but it quickly fell back (…) This brought us to December, with Brent prices below $60, at five-year lows after accumulating a 20% drop in 2025. (…) Brent prices fell below $59 on December 16, but that night (…) President Trump ordered ‘a total and complete blockade of all sanctioned oil tankers’ (in all caps in the original) entering and leaving Venezuela” (Expansión, 26-12-2025).
That night, when Brent stood at $58.20, WTI was at $55.27, dangerously approaching levels that were unsustainable for the US fracking industry and prices that were simply unsustainable for Venezuelan oil (see p. 17). Since then, US actions have been aimed at driving up the price of oil to counteract the trend that had clearly been taking hold since 2024 and was accelerating with the gradual but systematic increases in production by OPEC+. “When oil prices go up, US make a lot of money.” (Expansión, 14-03-2026): that is how the US president revealed the real motive behind the attack on Iran.
A combination of déjà vu moments
By the end of 2025, the situation was thus generally heading toward the same state of OVERPRODUCTION that in 2020 drove the price of WTI down to -$30 per barrel (see “The Internationalist Proletarian” no. 5, September 2020, p. 12), reminiscent of the situation in 2014 when Saudi Arabia flooded the oil market to drive down prices and make fracking unfeasible.
The US needs to keep oil prices afloat, even though it is not interested in excessively high prices that could harm its industry and domestic social cohesion. Maintaining oil prices can only be achieved by SACRIFICING a portion of the operating or installed production overcapacity. However, the fact that a portion of current overproduction must be sacrificed does not mean that the US will reduce its share, nor does it mean that other countries – and OPEC+ in particular – will continue to cede part of their market.
The following quote from Capital clearly explains the situation of productive capital and commodity capital, currently in the form of extraction facilities, refineries, and barrels of crude oil and refined petroleum products: “The competitive struggle would decide what part of it would be particularly affected. (…) The class, as such, must inevitably lose. How much the individual capitalist must bear of the loss, i.e., to what extent he must share in it at all, is decided by STRENGTH and CUNNING, and competition then becomes a fight among hostile brothers. (…) the loss is by no means equally distributed among individual capitals, its distribution being rather decided through a competitive struggle in which the loss is distributed in very different proportions and forms, depending on special advantages or previously captured positions, so that one capital is LEFT UNUSED, another is DESTROYED, and a third suffers but a relative loss, or is just temporarily depreciated, etc.
But the equilibrium would be restored under all circumstances through the withdrawal or even the DESTRUCTION of more or less capital. (…).” (Capital, Volume III, Chapter XV, K. Marx).
The sustained increase in oil production by OPEC+ is a declaration of war against the US oil industry and the plan of the faction currently in power that advocates a walled-in retreat based on oil revenues.
And the US oil industry, through its representatives in the US government, has responded to this declaration of economic war with military action, seemingly against Iran but with a scope of impact that extends far beyond this specific target, as we will see next.
[1] For those who always seek to attribute causes to the individual decisions of great men, our Party has already written, referring to the steel in that case: “Can it [the per capita steel output] have no influence on the development of world events? Isn't a cause of such magnitude, primary and significant, but certainly not the only one in the picture of the virulence of Capital, enough for the irruption of imposing effects? No, it must be the bogeyman, the bad guy, the tyrant of tragedy, the horde of barbarians that come, who knows how, from outside this magnificent world of bourgeois economy!” (Her Majesty, Steel, 1950).