Aren't some rises in oil prices actually due to OPEC restricting production rather than short term inability of producers to supply the market? At least OPEC is a factor in the rise of prices. Isnt that the case at present? Perhaps the situation in Venezuela and the slow pace of restoration of oil production in Iraq are also relevant. But it O:PEC did not restrict production these factors would not themselves raise prices.
Also I thought Iraq was a low cost oil producer. Its invasion of Kuwait was based upon claims that Kuwait was extracting oil from Iraqi fields over the border and simply to extend Iraqi influence when Hussein wrongly thought the US didnt much care. Cheers, Ken Hanly ----- Original Message ----- From: "Devine, James" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Monday, March 08, 2004 3:44 PM Subject: oil crises. FWIW, I have a very simple Marxian-flavored theory of "energy crises" that alas I haven't filled out or illustrated with lotza data. (I'm not an energy expert. The theory is part of my Marxian-style crisis theory.) But it helps get us beyond "natural scarcity"/"overproduction" dichotomies. Here, talk about oil rather than energy in general. The idea is that capitalism is a system that tends to over-accumulate capital, where "over-accumulation" means going beyond the (hypothetical) "optimal" rate of accumulation that allows steady capitalist growth at the highest possible profit rate given objective conditions (such as the state of class relations). In the context of "energy crises," accumulation goes too far to preserve the (hypothetical) oil price that preserves systemic stability. (That this price is unknown is part of the problem. Elites in favor of stabilizing the system seek to find it. Then they have to figure how to achieve it politically. Maybe this contributed to the BushMasters' attempt to take over the Oil World via Iraq.) Accumulation pulls up demand for energy and thus oil prices, as in the 1970s. This is not due to OPEC, etc., except to the extent that OPEC and the like take advantage of high demand conditions to try to grab a bigger chunk of the scarcity rents. This is not due to long-term "natural" scarcity of oil as much as due to the short-term inability to expand the quantity of oil supplied, given existing wells, pipelines, etc. and the short-term inability to conserve on oil use. (In jargon, both supply and demand are inelastic.) All else constant, an oil crisis hurts the profits of manufacturing and similar industries, which are largely based in the richest capitalist countries. The division between oil-producing and oil-using countries encourages the main reactions to the crisis. This crisis doesn't simply encourage longer-term exploration of new oil fields and a move toward greater conservation (as in neoclassical stories). It also encourages recession and other attacks on the working class in order to restore profitability. The problem with the latter is that it prevents full adjustment of the oil market, i.e. adjustment of supply and demand. The defense of old wasteful ways of using oil -- as personified by the Bush administration -- also prevents demand-side adjustment (conservation). In the period after an oil crisis, the various reactions combine to create over-production of oil, of the sort that encouraged the oil "un-crisis" of 1986 (rapid fall in the real price of energy). This is encouraged by the coming on-line of oil that was discovered and/or exploited starting during the "crisis" period. (There's a bit of a corn/hogs cycle here.) As noted, low oil prices discourage conservation (as with the renaissance of gas-guzzling cars in the US). It also encourages the high-cost producers of oil to seek ways of restoring their fortunes (e.g, Iraq's invasion of Kuwait). It also encourages the eventual recovery of accumulation, which sends the system into another "energy crisis." BTW, I don't believe in a long-term "oil crisis" as a result of natural limits. Instead, the natural limit comes from the pollution associated with the use of oil and other hydrocarbons. Capitalism has a strong tendency to encourage the dumping of costs on the environment and the avoidance of conservation. This is encouraged by the cyclical crisis theory sketched above. Jim Devine
