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Limits of OPEC pricing: OPEC profits and the nature of global oil accumulation
... 8 The Organization of Petroleum Exporting Countries (OPEC) was formed in 1960. The original founders were Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela (Bina, 1990). ...
... It also shows that, in the absence of valorized oil and a fully-developed global oil market, how the cartel had a tight grip over the control of both US domestic oil and international oil. This transitional period also saw the formation of OPEC, which personified the major rent-collecting oil producers and thus potentially revealed the tip of oil rents as a price-determined economic category in the modern oil industry (Bina, 1989a(Bina, , 1990(Bina, , 1992aBina and Vo, 2007). As a result, the struggle over the magnitude of "posted prices" became the focal point of contention between the IPC and members of OPEC for the years to come. ...
... From the 1950s through the end of the 1960s, three major developments emerged, which forcefully undermined the cartelized character of the industry and prepared the way to the unification of the oil sector across the world. First, there was sweeping socioeconomic change in the Middle East, Latin America and Africa, and thus in OPEC's relationship with the IPC; 11 this had to do with the further integration of these oil-exporting countries into the world economy (Bina, 1990;Bina, 2012d). Second, there was a steady stream of burgeoning "independent" oil companies entering this embryonic international petroleum market. ...
The modern oil industry is an outcome of a three-stage change in which the largest cartel in recent memory emerged secretly, thrived visibly, and collapsed onto itself just before the 1973-74 oil crisis. Iran was the first country in the Middle East where a colonial oil concession (D’Arcy, 1901) for the exploration and production of oil was signed. This paper focuses on Iran to unveil the toehold of the International Petroleum Cartel (1928-72) in economic/political terms, before theorizing the history of decartelization, oil rents, and the competitive globalization of the petroleum sector following the crisis of the early 1970s. This paper validates that, regardless of the ownership of deposits, the lessor is entitled to a differential oil rent and the lessee merely to a competitive profit, both of which are the effect of the globalization of oil. Oil contracts in the Islamic Republic are no exception.
... As shall be transpired below, our theoretical exposition and the nature of reality on the ground run counter to the "wisdom" of both the left and the right, which is entrenched in the deepest orthodoxies of orthodox economics. The left's unmistakable following can be seen from its blind subscription to the orthodoxy, but its rather watchful reservation on orthodoxy's policy outcomes (such as the alleged dependency on foreign oil or desire for Project Independence) can be observed from the drilling in Alaska's Arctic National Wildlife Refuge (ANWR) to the alleged cause of U.S. invasion of Iraq (Klare 2003(Klare , 2004; see Bina 2004aBina , 2004b for the response). ...
... As shall be transpired below, our theoretical exposition and the nature of reality on the ground run counter to the "wisdom" of both the left and the right, which is entrenched in the deepest orthodoxies of orthodox economics. The left's unmistakable following can be seen from its blind subscription to the orthodoxy, but its rather watchful reservation on orthodoxy's policy outcomes (such as the alleged dependency on foreign oil or desire for Project Independence) can be observed from the drilling in Alaska's Arctic National Wildlife Refuge (ANWR) to the alleged cause of U.S. invasion of Iraq (Klare 2003(Klare , 2004; see Bina 2004aBina , 2004b for the response). ...
... The latter, in turn, translated into a significant increase in the cost of U.S. domestic oil production. At this time, a close inspection of the U.S. oilfields revealed (a) considerable fragmentation of the new oil leases associated with the U.S. domestic exploration activities, (b) sizable fragmentation of oil leases (i.e., the dispersion of royalty ownership) in the producing oilfields in need of unitization and application of advanced oil recovery, (c) the veritable decline of the U.S. oil finding rate (oil reserves added per well), following the 1970 U.S. production peak, and (d) significant increase in the cost of successive capital investments in the secondary and tertiary recoveries in the aged U.S. oilfields (Bina 1985(Bina , 1988. ...
An analytic statement requires us to analyze the statement alone in order to ascertain its truth. … Synthetic statements are meaningful statements which are not analytic. The physical theories that we employ to under- stand the Universe are always synthetic. They tell us things that can only be checked by looking at the world. They are not logically necessary. They assert something about the world, whereas analytic statements do not.
... From the angle of individual sectors, though, the transnationalization of capital posits the oil and energy sector as an avant-garde of globalization (Bina 1989(Bina , 1991(Bina , 1995(Bina , 2006Bina and Vo 2007). The world oil crisis of the 1970s was but a crisis of decartelization, competitive restructuring and worldwide pricing of oil (Bina 1985(Bina , 1988(Bina , 1990(Bina , 1992(Bina , 2004a. 32 As we have seen, the overriding reason for the implosion of Pax Americana was a series of cumulative changes that eventually led to an epochal qualitative change within the global socioeconomic relations in the 1970s. ...
... From the angle of individual sectors, though, the transnationalization of capital posits the oil and energy sector as an avant-garde of globalization (Bina 1989(Bina , 1991(Bina , 1995(Bina , 2006Bina and Vo 2007). The world oil crisis of the 1970s was but a crisis of decartelization, competitive restructuring and worldwide pricing of oil (Bina 1985(Bina , 1988(Bina , 1990(Bina , 1992(Bina , 2004a. 32 As we have seen, the overriding reason for the implosion of Pax Americana was a series of cumulative changes that eventually led to an epochal qualitative change within the global socioeconomic relations in the 1970s. ...
This paper aims to combine a critique of political economy with that of transnational
polity in a unified theoretical foundation. It begins by (1) exploring the development
of capitalism into stages, (2) showing that this should necessarily lead to globalization,
and (3) validating that in the epoch of globalization no hierarchical interstate (hegemonic
or not) political order may stand a chance for survival. These highly abstract theoretical
queries, on the one hand, follow Karl Marx's critique of capitalism, and on the other
hand obtain further theoretical and historical concretization in Antonio gramsci's
hegemony, before their realization at observable levels via the rise and fall of the
postwar Pax Americana (1945–1979). Marx's “conquest of mode of production” and gramsci's
hegemony set the context for a synthetic approach to the rise and fall of American
power. Finally, the force of globalization is the arbiter of time, despite the
declining power syndrome, in this disjointed polity.
... Estos dos escenarios son como el día y la noche, sin posibilidad de conmensurabilidad, ni en la teoría ni en la práctica. La OPEP de la década de 1960 era una espina en el costado de la IPC, pero no por el hecho de que mostró algo de resistencia -eso no pasó en absoluto (Mikdashi 1972, Alnasrawi 1985, Terzian 1985, 1990Bina, Bina 2013. Más bien, eso fue debido al hecho de que la OPEP era una paradoja, una manifestación de una herramienta de diagnóstico de la casa, que mide la magnitud de las grietas y astillas que ya se estaban multiplicando en la fundación de la Achnacarry (véase Blair 1976 ). ...
p>La crisis del petróleo de 1973 fue un marcador histórico, preámbulo a la globalización competitiva del petróleo y de la decadencia y caída de la hegemonía global estadounidense. La renta petrolera alcanzó el estatuto de categoría, independiente-mente de que la OPEP haya existido o no. La renta petrolera se desembolsa al propietario del lugar donde se encuentra el petróleo, público o privado, independientemente de su pertenencia a la OPEP. Entre otros elementos marca el nacimiento de un Estado paranoico, mucho más peligroso y autodestructivo que la cacería de brujas de la era de McCarthy.</p
... In fact, the unprecedented gesture of OPEC in the early 1970s (and beyond) itself is explicable through this transformation (see Bina, 1985, Ch . 9 ;1989B) . We divide the entire history of the Middle Eastern oil and other early oil producing regions, such as Venezuela, Mexico, and Indonesia, into three episodes of (1) the early oil concessions , (2) the era of transition , and (3) the era of internationalization of production that completes the integration of oil-producing regions into the global oil structure and necessitates the formation of market values, differential oil rents, and market prices within the global industry . ...
Bina's article is both a contribution to the theory of rent and an attempt to explain the ‘oil crisis' of the 1970s. Addressing classical and modern debates, the author argues that bourgeois economics fails to theorise the specificity of rent in capitalist societies and its relation to production and the structure of property relations. By applying Marx's theory of rent to the us oil industry, Bina seeks to provide a coherent explanation of the oil price rises of the early 1970s.
... (1) the colonial oil concessions of 1901-50, (2) the transitional period of 1950-72, and (3) the globalisation (and decartelisation) of oil since 1974 (Bina 1985(Bina , 2006. Today, contrary to orthodoxy and its manifold popular presentation in the media, there is no longer a " cartel" or a "mono poly" in the presently globalised (crude) oil i ndustry (Bina 1989a, 1990, 2008aand Bina and Vo 2007. ...
Iran, a major oil producing and exporting country, also imports gasoline because of inadequate refining capacity and rising petrol consumption. This article examines the problems faced by an economy dependent on the export of crude oil and gas, that are compounded by the dilemmas of rising domestic consumption, a significant decline in productive capacity, burdensome energy subsidies and economic sanctions imposed by the United States.
p>¿Cómo pueden los precios del petróleo volverse negativos y qué significa para la economía global? Este artículo explica el nuevo giro de la economía global y el papel que juega el petróleo en ello. Se sostiene que la pandemia del COVID-19 condujo instantaneamente a una ruptura de las cadenas de suministro globales, con amplias consecuencias sobre la producción y distribución. Se muestra que esta crisis es fundamentalmente diferente de las anteriores, incluida la Gran Depresión de 1929, el colapso de la banca de ahorro y préstamo de 1987 y la crisis financiera mundial de 2008. La crisis económica de 2020 de COVID-19 se aceleró rápidamente en la medida en que llegó al corazón de la producción; interrumpió las cadenas de suministro y los centros de distribución mundiales, y paralizó los sistemas de transporte comercial en todo el mundo.</p
This study challenges and documents a case against the dominant view that post-Cold War U.S. military adventures in the Middle East, especially the recent invasion of Iraq, have been prompted mainly by oil considerations. The study suggests that although oil is indubitably a concern, and that the United States has used military force in the past for energy purposes, these precedents fail to explain the current military operations in the region. There is strong evidence that major oil companies no longer favor war in the Middle East, because they prefer stability and predictability to periodic spikes in the oil price that result from war and political convulsion. There is also strong evidence that the powerful interests vested in war and militarism might be utilizing oil as a pretext to justify military adventures in order to derive higher dividends from the business of war.
El objeto de estudio de la presente Tesis Doctoral se ubica en la economía de México durante el período de 1970 a 2003. La hipótesis de partida que se pretende contrastar radica en la caracterización de la crisis económica estructural a partir de la rentabilidad del capital. En concreto, consideramos que la crisis que subyace en el comportamiento de la economía mexicana está provocada por un descenso de la tasa de ganancia, explicada, a su vez, por el incremento de la mecanización del proceso productivo, lo que se manifiesta en una elevación de los índices de la composición del capital. Constituye, por tanto, una crisis de rentabilidad, en la cual el ámbito de la distribución del ingreso se somete a las pautas de la dimensión tecnológica, crisis que, por otra parte, emerge en toda su intensidad cuando la masa de ganancia se estanca e incluso desciende en términos constantes.
Bina's article is both a contribution to the theory of rent and an attempt to explain the ‘oil crisis' of the 1970s. Addressing classical and modern debates, the author argues that bourgeois economics fails to theorise the specificity of rent in capitalist societies and its relation to production and the structure of property relations. By applying Marx's theory of rent to the us oil industry, Bina seeks to provide a coherent explanation of the oil price rises of the early 1970s.
This paper describes the conceptual structure, properties, and solution approach of a computerized model of the international energy market. The model treats energy producers as players in a multistage, noncooperative game. The goal of each player (or cartel of players) is assumed to be maximization of discounted profit subject to technical, political, and resource constraints. The model calculates that collection of intertemporal extraction and price paths from which a player can unilaterally deviate only at a loss---the open-loop, Nash equilibrium. The model integrates the theory of exhaustible resources due to Hotelling and the theory of oligopoly due to Nash and Cournot. Although useful as a teaching device to illustrate theoretical results, its main function is to facilitate analysis of real-world resource problems. The model is flexible, allowing the user to specify not only cost, demand and reserve information but also assumptions about who belongs to what coalition. Two shortcomings deserve note. The strategies of players are restricted to time-dated (open-loop) paths. Also, lags cannot be accommodated in the current version. The restriction of the strategy space significantly increases tractability and will permit the incorporation of lags and other complications in the future. The model was built under government contract and is in the public domain.
I modify the uniform-price auction rules in allowing the seller to ration bidders. This allows me to provide a strategic foundation for underpricing when the seller has an interest in ownership dispersion. Moreover, many of the so-called "collusive-seeming" equilibria disappear.
Basing point methods of price quoting represent one form of imperfect competition in a group of industries, the underlying characteristics of which make some form of imperfect competition inevitable. They are departures from “normal” competition, by our simple inherited theoretical standard. But those who have had contact with the N.R.A. experiment in the United States must have had reason to doubt whether any industry is “normal” by such standards. Possibly the trouble was with what we had conceived as normal. In any case, this form of pricing deserves study uncontrolled by inherited preconceptions.
It appears to arise in industries having four main characteristics or predisposing conditions. The first is a standardized commodity, such that purchasers will not buy from one producer if another producer offers even a very slightly lower price. This is true of the main product of the cement industry, and approximately true of basic tonnage steel products, but less so of the higher grades of steel.
In the second place, production is localized, with a considerable number of producing points at considerable distances from one another. Some centres of production include a number of rival producers, others only one.
The recent price explosions in the world oil market result from the tardy recognition of the post-1973 consumption slowdown. Such odd results could not happen in a competitive market, but they are not at all strange in the world of the cartel. An analogy may help explain. A diver in the sea cannot go lower than the sea floor, nor higher than the water's surface. He is nearly weightless, and can float at any depth between these extremes, but the slightest impact or effort sends him up or down. Similarly, in any market, the price cannot drop below incremental cost, since such a drop would choke off supply, nor can it rise above the level that would maximize profit to a monopoly, since the monopoly would gain by putting the price back down. But in a once-competitive market, where the price has been rising toward some unknown monopoly optimum, the price can hold steady or can move drastically up or down in response to very slight impulses. In this range the price may show no response, or even a perverse response, to changes in demand. Since 1973, price response has been perverse. This was clearly the case in 1974, as the world headed into recession. It is so again in 1979. During 1973-1978, real incomes in the non-Communist indus- trialized countries rose 13 percent, but oil use nevertheless was flat at approximately 50 million barrels daily (MBD). Exports
Our choice of theoretical perspectives to apply to resource cartels seriously affects the questions we ask, the predictions we make, and the policy suggestions we draw. In this paper we examine the implications (and the limitations) of five perspectives for the analysis of resource cartels in general and the Organization of Petroleum-Exporting Countries (OPEC) in particular: the theory of cartels; the theory of depletable resources; coalition theory; internal politics approaches; and the theory of collective action. Three classes of actors are considered-exporting producers, importing consumers, and multinational resource exploitation firms. We gain in realism by proceeding from simple to more complicated situations by including political concerns, bureaucratic divisions, and the prospect of military coercion. Yet, we do so at the price of rigorous deductive frameworks with clear and coherent predictions.
This book investigates the means by which the price of oil is determined--the control of supply and markets. Today, that control is uneasily shared by a few giant oil companies (the ''seven sisters'') and about a dozen members of the Organization of Petroleum Exporting Countries. Dr. Blair traces the history of these controls, shows how they have recently been strengthened, reveals the new pricing objectives of both companies and countries, and outlines a specific program to deal with the ''energy crisis.'' Specifically, the book describes how world markets were divided up by international cartel agreements going back to the 1920's, how outsiders have been kept out of some countries, and how international supply has been limited with astonishing precision to a predetermined growth rate. The domestic supply, an amalgam of moderately high levels of concentration, interlocking directorates and direct governmental intervention in the form of prorationing laws, and a highly effective import quota. Also analyzed are the industry's principal tax preferences, which have worked to the advantage of the major companies and against their smaller nonintegrated competitors. Because the U.S. is rapidly running out of oil, Dr. Blair points out there is indeed an ''energy crisis,'' and he emphasizes the need for developing our vast deposits of oil shale and for rapidly expanding the use of existing new technologies as alternatives to petroleum or as a means of reducing its demand. To bring about a more equitable distribution of what is available, he argues that the oil industry's formidable monopoly power must either be effectively regulated in the public interest or broken up. Presenting programs to accomplish both forms of public policy, he explains his preference for the latter. Extensive references for each chapter.
The author, a former financial analyst with the treasury department of Iran, provides an analysis of the origin of the oil crisis of 1973 and reviews various alternate theories put forward to explain it. Seeing the origin of the crisis in terms of competition rather than monopoly, Bina demonstrates that with the internationalization of capital in the oil industry, a new regulating value emerged from the cost of production of relatively unproductive and declining fields in the US, and that the growing gap between this and the individual values produced in other oil regions, such as the Middle East, set the stage for the restructuring of the entire industry - leading to an unprecedented price increase. Thus, the establishment of a new, higher level of value, oil rent, market and 'posted' prices was the outcome of objective developments rather than the result of arbitrary decisions on the part of cartels like OPEC.
A comprehensive political history of the Middle East oil industry, with emphasis on developments during the last decade, is provided in order to understand the current demands of producing countries. The following chapters are included: Middle East Oil: The Beginnings; World War II and the Consolidation of American Oil Interests in the Middle East; The Bonanza Years: 1948-1960; Oil Politics and Economic Nationalism: The Background to OPEC; Middle East Oil in the 1960s; Monopoly at Home: Prelude to the Energy Crisis; The Road to Teheran Is Through Tripoli; Controlling Oil Resources: Nationalization and Participation; The Oil Weapon, the October War, and the Price Explosion; and The Nature of the Crisis. (BYB)
Professor Roncaglia sees the oil world as a multilateral oligopoly but also explores other versions in a study that is full of interesting comments and insights. The contributors to Improving U.S. Energy Security are mostly very experienced people whose common belief is that security of supply will not be provided by formulas or devices and will elude the U.S. unless it is pursued persistently. Glasner believes that government intervention creates more problems than it solves.
The study provides an independent basis for understanding the past
behavior of oil prices and for assessing future prospects: the results of the
painstaking assembly and data on the real price of oil in the past and a skillful
analysis of the underlying fundamentals of production and transportation costs
and of industry structure that will affect future prices. The international oil
industry is examined from the economic vantage point with focus on the real price
of crude oil. (MCW)
In past Outer Continental Shelf oil and gas lease sales, winners of drainage tracts have tended to realize a higher economic return than winners of wildcat tracts. This paper finds empirical support for the hypothesis that adjacent lessees have an ...
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Verleger's Recent hypothesis, that OPEC sets official crude oil prices on the basis of product values, is tested in the framework of bivariate Granger-causal ordering. The test statistics broadly support the postulate of a unidirectional causal flow from product values of OPEC's official crude prices. Selected regression estimates of the kind reported by Verleger are also presented based on monthly data covering the period from 1978 through 1982, and are seen to be fairly similar to his. Estimates for the period of rising prices differ somewhat from those relating to the period of falling prices, but the statistical significance of the differences is weak.
The hypothesis of this paper is that crude oil, like any other unfinished commodity, is valued for the products derived from it; the purpose is to offer an empirical explanation for changes in the crude price charged by the members of OPEC. The model results show that the market-clearing prices reported to prevail for petroleum products on the principal petroleum spot market at Rotterdam are the primary determinants of changes in official crude prices. A systematic relationship between offical and spot prices is argued to have prevailed since 1974. An appendix clarifies five types of data required for the model. 13 references, 4 tables.
Readers of Pediatrics are among the most effective advocates for children; as pediatricians, our primary focus is on children's health. It is evident that many of the forces that shape children's health are to be found throughout society and frequently are beyond the control of individual children or their families. The advancement of child health in the United States increasingly demands both individual effort by health professionals in the diagnosis and treatment of illness, and community activities focused on health problems, such as the prevention of vehicular accidents, that depend more on the design and function of cities than on biology and medicine.
The paper critically surveys seven recent models of the world oil market and their evaluations of the prospects for OPEC: Blitzer-Meeraus-Stoutjesdijk, Bohi-Russell, the U.S. Federal Energy Administration, Kennedy, Kalymon, Levy and Nordhaus. After a brief discussion of the basic approaches to the problem, we examine the model specifications in some detail. The principal contributions and conclusions are summarized, as are the main limitations of these models. We conclude with some suggestions of the most promising areas for future research.
The evolution of oil concessions in the Middle East and North Africa
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