Re: oil crises

[Aldo Balardini <054652@xxxxxxxxxxxxx>]

Doug Henwood wrote:

Over the last 15 years or so, the price of oil has varied from under
$10 to over $30. It may be that the Ricardian/Marxian mechanisms you
and Bina point to determine the center of gravity around which the
market price fluctuates, but what accounts for this 300%+ range?

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Fabian:
This is the million dollar question!!!
Neoclassicals are locked into these dead-end OPEC based models of oil price volatility with a record of more than 30 years of failure.  Heterodox economists do not even attempt at a possible answer.  Bina's framework is one of the few (the only one probably) exceptions but the model still is to be applied to the experince of the 1970-present period.  
A major problem to deal with in the theorizing of any oil model is to explain oil price declines rather than oil price increases.  If we agree with Jim that OPEC determines the price of oil during contractions when demand is low, then how do we explain the way OPEC countries lost complety control of the international price of oil during 1984-85 and again in 1998 when they were suppossed to be in more control than ever.  
A similar critique applies to heterodox models like Bina's, how do we reconcile the fact that during oil price declines, regulating capitals in the US not only stop regulating but they get wiped out altogether!

Hard questions and not many alternatives.  

My take: Let's break with the cartel paradigm syndrome and try something new.  Let's try to explain the workings of the oil industry within a competitive framework a la Marx, something different than perfect competition.  Since all economists accept that the US oil industry is competitive, let's try to understand the determinants of the price of oil in the US and only then open the analysis to OPEC and the rest of the international industry.  OPEC does have an impact on prices but empirically and theoretically more and more analysts are agreeing that its influence is decreasing.    

What do you think should be the best way to go about it?