[PEN-L:34181] RE: Re: the oil thing/overproduction

["Devine, James" <jdevine@xxxxxxx>]

Cyrus Bina has written a lot on this stuff. I haven't read it, so I don't know if I agree with him or not.

 

My feeling is that when talking about the price of any one item, the simple supply + demand + institutions framework is sufficient. In the case of oil, the owners of the oil fields typically get a scarcity (Ricardian) rent, unless they're stuck with zero-rent (hard to produce) oil. This rent goes up with demand (sliding up the supply curve). Of course, it's the scarcity rents that the oil people are fighting for, because it's "something for nothing," a veritable free lunch. The rent can also go up due to monopolistic restriction of supply.

 

Value, as Carrol notes, is talking about the societal level. What happens with a surge of demand (or a monopolistic or accidental cut-back in supply) is that the price of oil rises relative to its value. This implies a redistribution of value and surplus-value toward the oil-owners and away from other recipients of surplus-value. This is the societal basis for the scarcity rent. The oil-owners are able to claim a bigger chunk of the societal surplus-value because their item is scarce (perhaps artificially so).

 

Of course, if other recipients of surplus-value find themselves losing, they try to make the workers pay for it, by intensifying exploitation (etc.) Whether or not they get away with this depends on the depth of workers' ability to resist.

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine

-----Original Message-----
From: soula avramidis [mailto:soulaavramidis2002@xxxxxxxxx]
Sent: Tuesday, January 28, 2003 12:49 AM
To: pen-l@xxxxxxxxxxxxxxxxxxx
Subject: [PEN-L:34173] Re: the oil thing/overproduction

 some opec economist argue that there may be a Hicksian income hypotheis holding in oil and that is oil producers are monetasing their resources. others argue that it would still have to be taken out and therefore the law of value should apply. i can think of how production kicks in when prices rise in old gold mines. maybe that is an analogy with oil. so long as something is produced for social use than the law of value holds, however, does the fact that the resource is depletable not make certain qualifications necessary, maybe in light of marginal magnitudes and high rents. in other words aren't we too general by simply stating that the law of value holds? or should we be saying that it holds because when prices rose the high cost tarsands of northern canada came into production.

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