THE ECONOMICS OF OIL CRISIS: THE CAUSE OF THE WORLD OIL CRISIS OF 1973-74

The present study is an attempt to analyze the cause of the world oil crisis of 1973-1974. There are three basic theoretical formulations developed that will jointly provide the core of the analysis of an alternative theory of the oil crisis. These are: (1) the theory of the oil property relation and rent in the oil industry, (2) the theory of periodization of oil production, and (3) the theory of competition.; It is demonstrated that the oil crisis of 1973-1974 was the outcome of the increase in the value magnitude of the least productive oil region. This implies that the production and formation of value and prices have become integrated at the level of the international oil industry. It is also argued that the increasing socialization of production on the one hand, and the reciprocal relations of capitals, through intra-industry competition, on the other hand, have led to the formation of differential rates of profit at the global level. The material basis of these differential profit rates is the existence of differential productivity in the oil industry. In addition, due to the predominance of oil property relation, the resultant differential profitability tends to be transformed into differential oil rent on a permanent basis. As a result, it is due to competition, rather than monopoly, that the least and most productive oil regions can stand in reciprocal relation and lead to the formation of differential oil rent. Thus, it is the regulating capital in the least productive oil region which tends to determine the market value of oil internationally.; It is established that the United States and the Middle East are the least and most productive oil regions of the world, respectively. In addition, it is demonstrated that there has been a significant decline in the productivity of the value-determining United States oil fields since the beginning of the 1970s. At the same time, econometric tests reveal that the oil price increase and the cost increase were associated with each other during the crisis. The increase in the level and the volume of differential oil rent was not the cause but the consequence of the oil crisis. Finally, an attempt is made to compare various econometric models of oil rent associated with the United States and the Middle East.