Oil and overproduction 3
dmsch at attglobal.net
Sat Jan 11 12:33:32 MST 2003
If capitalism, in its origins, emerges dripping blood and dirt from every
pore, then advanced capitalism covers both the blood and dirt in a bath of
In 1973, the OPEC oil embargo came just in time to rescue the oil industry
from that hell of its own making-- the declining rate of return after a
period of expanding capital investment which, by 1972, had boosted US well
productivity to its historical peak. The real cost of production per
barrel of oil in 1972 was 25 percent below the 1949 cost. In the divergence
between the costs of production and the product price, the oil industry was
able to increase its ration of the total available profit. .
Had OPEC not existed, the US would have been forced to invent it. As it
was, OPEC did exist, and the US was still forced to invent it.
The good times didn't last too long and it took the second oil shocks of
1979-1980 to bring the rate of return back to levels equal with interest
rates. The aggrandizement of profit by this price increase drove the US and
the rest of the global capitalist economy into consecutive recessions,
precipitating the Reagan era assault on living standards of the working
class, the radical reduction in the domestic manufacturing base, and
crippling Latin America for the entire decade of the 1980s. When the price
of oil finally broke, the immediate result was the collapse of the US
savings and loan industry which had leveraged its deposits into a five
hundred billion dollar bailout.
Despite the war with Iraq, which briefly, all too briefly for some, pushed
prices to the $40 per barrel mark, the oil industry's rate of return on
investment in the first half of the 1990s averaged a paltry six percent.
Technical advances in recovery techniques reduced the price of production
per barrel of oil to half that of the 1980s. In 1996 and 1997, the
disparity between the cost of production and product price pushed the rate
of return above 10 percent. Capital expenditures for exploration and
development doubled in 1998. The real cost of production fell below the
1972 level. The market price for oil had to fall. It did, to ten dollars a
barrel. And in 1999, OPEC acting as the 51st state, raised its minimum
The OPEC price increases of 1999 were the initial presentation of capital's
defense of private property against the very productive apparatus it had
V. No single process of capital exists as a single process, or functions
without producing, embracing, its own contradiction. So the overproduction
of oil, triggering the OPEC price jumps, the attempted quotas on production,
is accompanied by the expansion and development of new fields, new reserves,
new supplies. In 2001, the Tengiz pipeline was opened in the Caspian sea
area. With three billion dollars already invested, international oil
companies intend to triple production from Kazakhstan's Tengiz field and
double production from the offshore fields before the end of the decade.
The Caspian contains the world's ninth largest field of crude reserves.
Iran has claimed the southern fields and deployed air and naval forces to
enforce its claim, to the dismay of the other countries bordering the sea,
and to the concern of the international oil companies. Aid and armament
packages are already being proposed for Turkmenistan, Azerbaijan,
Kazakhstan, and in those proposals is a portion of the real significance of
the attacks on Afghanistan-- to secure territory bordering Iran, and other
territory within the former Soviet Union, to provide a base for the shipment
of material and materiel to the Caspian area
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