Oil and Overproduction

Julio Huato juliohuato at hotmail.com
Wed Jan 15 12:32:48 MST 2003

First, a disclaimer: I haven't read the whole exchange, but it seems to me
that David Schanoes is right.  The issue is not technical or factual -- it
is logical.  If the logic is not right, the facts are not adequately

I claim no expertise on geology or any other relevant technical matters.
I'm aware that if we do simple arithmetic, whatever finite amount of oil or
natural gas the planet may have, current consumption rates will exhaust them
in a finite period of time.  Mark Jones believes he knows which data on
reserves are reliable and which are not.  Maybe he's right, but that is NOT
the issue.

That all production (as a technical process) requires solar energy -- which
in our planet nature slowly and graciously stores in hydrocarbons -- is an
undisputed fact.  That oil packs a lot of energy is also a fact.  That the
planet has a finite size is also a fact.  That the second law of
thermodynamics applies to human production and -- more generally -- to human
life is also undisputable.  But again, this is NOT the issue.

First of all, let's clarify the term "scarcity."  The mantra of conventional
economics is that all "goods" (including physical and "human" resources) are
"scarce."  Well, of course -- to the extent that goods are not INFINITELY
available, then goods are scarce to some extent.

In other words, "scarcity" means that human productivity applied to
reproducing use values (goods) is NOT infinite.  If it were, then use values
would be freely available.  Marx did not assume otherwise -- or else his
labor theory of value would be nonsense.  For Marx, that a thing is a use
value is a necessary condition for it to be a commodity.  Commodities that
humans can produce or appropriate from nature in unlimited quantities have a
zero value.  As we all know, the labor value of a commodity is the
reciprocal of the labor productivity applied to it.

That's all there is to the tautology that the value of "goods" is a
reflection of their "relative scarcity" -- as conventional economists put
it.  Marx wouldn't disagree... EXCEPT THAT bourgeois thought focuses on the
attributes of things ("scarcity," "abundance," etc.) as a decoy to shift
attention away from social relations.  That's an aspect of what Marx called
"commodity fetishism."  So, Marx would properly emphasize that we're not
talking about goods or resources in general, but goods or resources in a
particular social setting where they are produced and exchanged as
(capitalistic) commodities.

Of course, humans care about use value regardless of the type of society in
which we live.  In all technical aspects of production, consumption, and
exchange, the use value of commodities is crucial.  And as such it is a
general precondition to grasping the concrete political economy of such
commodities.  But, as Marx said, political economy is not technology.

But if any theory of value is right (including Marx's), then we know that
oil is a "scarce" resource even without an expert knowledge of oil geology.
Simply, oil has a positive price.  Of course, the price of oil is NOT a
direct -- or always reliable -- indicator of the technical availability of
oil.  There are many intermediate influences divorcing production conditions
from exchange conditions from consumption.  Hence, the price is often turned
into a distorting scarcity-measuring device.

But, the price of oil cannot escape forever the pull of the law of value.
That's why crisis happen.  Because the law of value asserts itself sooner
rather than later.  The mechanism of fluctuating prices is the way the law
of value asserts itself, and it is such mechanism that regulates the
production and consumption of oil under capitalism.  If oil becomes "scarce"
with respect to demand, then the price goes up -- sooner or later.  A higher
oil price punishes consumption and stimulates capitalist production.  Mark
Jones needs to show how oil production makes the law of value irrelevant.

Mark Jones seems to claim that, due to the technicalities of oil extraction,
there will be a sudden fall in the availability of oil underground.  But
even if Mark Jones is right about that and oil extraction is bound to fall
suddenly, that makes NO difference.

First, How come the field owners and capitalists who are in the business
ignore the egregious technical fact that Mark has been able to uncover?  If
they know it, then the rent fetched by the field owners and the current
price of oil (fully or partially) reflect it already.  And this has nothing
to do with the shortsightedness of profit making.  The owners of the fields
cannot afford to ignore the geological data unless they want to give up
value for nothing to others.

Neither the political disputes over the rent change this.  The political
disputes only change how the rent gets redistributed, not the magnitude of
the rent itself.  (Notice that, deep down, rent is LABOR VALUE appropriated
by resource owners on the basis of (1) demand for commodities that require
oil as an input and (2) private ownership over the fields.)

For example, we can argue that sheiks or Third World governments who own
vast raw oil resources are ignorant or weak, that Western capitalists use
diplomatic or commercial tricks, military threats, or wars to steal the rent
from them OR that they all share it based on some agreed-upon political
arrangement.  Well, then, WHOEVER down the production chain gets the rent
adjusts it in accordance with the technical information about technical
availability of raw oil underground.  Then that person adds it up to the
selling price and pockets it.

If capitalists down that chain are getting a break and pocketing oil rent
gratis, then they'll be able to do it once in a while.  Never systematically
as competition will enforce profit rate equalization and they'll share the
goodies with all other capitalists.  In such case, the price reflects the
existing knowledge on oil geology.

Alternatively, suppose that all capitalists and landowners involved in the
oil business are so ignorant of the complexities of oil extraction that they
are all wrong and underprice oil.  Well, then they are the suckers and the
direct consumers are the winners.  Although not every consumer consumes the
same oil content in her/his consumption basket (rich consumers consume more
oil content), under capitalism this would probably be among the most
democratic alternatives.  It is conceivable, but not likely.  (Of course, a
more democratic alternative would be using the rent to fight poverty in the
world or at least in the nations where it is extracted.)

Notice that I'm just pondering different scenarios: Someone is pocketing the
oil rent.  If ultimate oil consumers have such clout as to appropriate the
whole oil rent, then the oil price can be artificially low and disguise the
actual geological availability of oil for a sufficiently long period of time
to mislead us all.  For how long can consumers pull this off?  In any case,
the most likely scenario is that the price of oil to the direct consumer
incorporates a hefty rent that a bunch of despots and capitalists pocket.
Therefore, the oil price to direct consumers reflect to a fair extent
information about the known geological reserves.

But suppose Mark Jones and Louis Proyect are right.  Does that really make a
drastic difference in the strategy of the workers' movement nowadays?  I
doubt that too.

Louis Proyect's argument that communists should view themselves as the
stewards of the planet is correct.  I'd extend it and say that communists
must view themselves as the stewards of human life in the multiverse.  The
complete exhaustion of oil in the planet under capitalism is not a nice
prospect to contemplate.  But we will prevent it not by alluding to the
scarcity of resources, but by focusing the attention of people on the
SOCIALLY inefficient way in which these resources are being exploited and
emphasizing that social inefficiency is conditioned by the social structure.
  We might never be able to create oil out of thin air [and then thin air
may become scarce :-)], but we can change our social relations.  An
immediate way to start this is to oppose the war on Iraq with all our


NOTE: This will be my only posting on this thread.  So, Mark, Louis, and
others will have the last word.

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