[OPE-L:6232] Fwd: Re: economics of oil

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Wed Nov 28 2001 - 15:01:18 EST

X-Sender: pmason@garnet.acns.fsu.edu
Date: Tue, 27 Nov 2001 12:59:18 -0500
To: Rakesh Bhandari <rakeshb@Stanford.EDU>
From: "Patrick L. Mason" <pmason@garnet.acns.fsu.edu>
Subject: Re: economics of oil


Price fixing and rent collecting are not incompatible. Marxian rent 
theory implies that Saudi Arabia (and other low cost producers) would 
receive substantial rent even if prices were fully set by the market. 
This is certainly true. This does not imply that the oil producers 
may not attempt to set prices so as to obtain monopoly profit. It 
seems that they often try and often fail, and with the advent of 
increase energy production by the Russians OPEC may have even less 
control over oil prices. Mexico has always been a problem for OPEC 
producers because the Mexicans sell an enormous amount of oil to the 
US and they are not OPEC members.

"The correlatives to control of Arab oil rent are  the subversion of 
democracy in client regimes as well as sanctions and  aggressive 
foreign policy against wayward regimes (Iraq, Iran, Libya); in other 
words, US foreign policy contributes to the instability and the 
possibility of upheaval. That is, I tend to see US policy not as in 
fact promoting stability but rather the control over surplus profit. 
The US exercise of power is better understood as a threat to peace 
rather than as a force for stability."

Here, you've nailed the contradiction on the head. America's 
singleminded focus on stable prices and stable supply has lead to the 
support of anti-democratic governments. It's the false promise of 
facism, "security and stability" at the expense of democracy, but the 
"security and stability" of facism creates long term instability as 
hostility builds up among the oppressed.

peace, patrick

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