All serious political analysis has a Marxist element. The core discovery of Karl Marx as a political philosopher was the dominance of economic change in shaping the history of political society. In the last fortnight, exciting events have been happening in Britain, including the Conservative victories in London and the local elections. Yet much more important events have been occurring in the global economy.

It is interesting that Boris Johnson has been elected Mayor of London; that is coup de théâtre for his party that will turn votes as well as heads in other political contests. But, with all respect to Boris Johnson, the peak price for West Texas Intermediate Crude Oil, which closed on Friday in London at $125.81 a barrel, is a far more important event. Boris may preside in London, but the price of oil rules the world.

The oil price has doubled in the last year; some oil traders are already betting that it will eventually reach $200 a barrel. As oil is involved in almost every economic activity, the price rise that has occurred already is the greatest shock to hit the world economy for 30 years. Obviously this changes the economic relationship of the oil-producing countries with the oil-consuming nations.

It makes the Middle Eastern oil producers as well as countries such as Russia, Nigeria and Venezuela much richer. It makes the net oil importers, particularly in the Third World, much poorer. In the 1990s, when oil was much cheaper, Russia and the Middle East were much less powerful. President Putin was able to assert himself in a rising oil market; that has changed Russian foreign policy and the balance of power in the world.

Perhaps the most damaging consequence will be the rise in the price of food. In the 20th century, global agriculture became dependent on oil, not only for transport or cultivation but also for fertilisers and the treatment of crops. Food production is a global industry based on petrochemicals.

In the 21st century this interdependence was extended, as oil prices rose, into the conversion of grain into oil. If oil prices have risen by 100 per cent in the last year, corn prices have also risen by 75 per cent. Most dealers are forecasting that corn and soya will rise further in 2008. Corn is used to make corn-based ethanol as an alternative fuel.

Corn is, of course, also used as stock-feed; if the corn price rises, the price of meat and dairy products must also rise, and those products will become more scarce. Corn stocks in the United States are low. One American analyst has said that “the situation is dangerously tight”.

The market logic runs from higher oil prices to higher grain prices, but also to lower consumer spending on commodities other than oil and grain. Competition for food will cause malnutrition in the poorest countries and threatens famine in failed states such as North Korea, Burma, Sudan and Zimbabwe. It has already led to poor countries regulating grain exports.

How does this process fit the pattern of British politics? There will be direct impacts from higher oil prices. Although North Sea oil has passed its peak production, the North Sea has become even more attractive. North Sea oil will be worth more, and higher prices may encourage the exploitation of marginal wells. The oil prices will make the Scottish National Party even more self-confident, and are a negative for the maintenance of the Union and for Gordon Brown himself.

British consumers are already paying higher prices for gas and petrol and for food in the supermarket. This is unpopular. It already accounts for part of the rising unpopularity of the Government. We do not need to explain Gordon Brown's unpopularity in terms of his gloomy face, or of his being “a son of the Manse”, when every householder is paying more at the supermarket checkout and every motorist is paying more at the petrol station.

Those of us who experienced the oil price shocks of the 1970s know that oil price inflation means that all prices rise and that interest rates rise as well. The natural consequence is that employment falls and trade unions become more militant. In the 1970s the term “stagflation” was coined to describe this combination of inflation and economic stagnation.

This process of impoverishment has begun again. For the ordinary family the prices of everything linked to oil have risen, and are likely to rise further. The easy credit of earlier years is no longer available; house prices are beginning to fall, and they too can be expected to fall further.

In the 1970s almost every democratic government at the start of the decade had been turned out by the end. That is natural enough. The higher oil price caused an inflation of voters' costs and a deflation of voters' assets. We shall pay more for petrol and bread, but our houses will be worth less. The average person is likely to express his protest in his vote.

The Labour Government enjoyed the golden scenario of its first decade when low Chinese prices meant that inflation was controlled while houses rose in value. With competitive costs and rising assets, most people had a rising net worth.

The big economic news is that this benign process has gone into reverse. The price of oil will go on rising; voters will feel poorer; governments will be turned out.

If oil does go to $200 a barrel, it will not matter who is leading the Labour Party - the Labour Government will be kaput. On this Marx was correct. Politics is based on economics. But he could not have known that the future of economics would be based on oil.

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