a reply from Cyrus Bina to Christian Gregory. Dear Christian: I have indicated in The Economics of the Oil Crisis that "[I]t is not always the case that the market value is the same as that of the marginal producer" (p. 52). Regulating market value in the oil industry emerges from two sources: (1) the magnitude of "normal capital" and (2) the marginal oilfields. In the case of the cost of US oil, the fact that the price of Middle Eastern oil has increased manifold during the 1973-73 left the door open for the most unproductive oilfields in the world to produce continuously, while former extracted a huge oil rent. At the same time, oil price decline of the late 1980s has led to capping of numerous oilfield in Texas, Oklahoma, etc., pointing to the fact that regulating market value of oil has changed. This later change indicates that within the least productive oil region of the world, namely US, the lesser productive ones had to be capped. I have pointed out in my oil book that "Since the effect of differential oil rent of the first type (DRI) cannot be separated from differential rent of type two (DRII), determination of the least productive oil region in conjunction with the identification of normal size of capital investment, is an impossible task.... Following Marx's method, we ere able to identify the specific oilfields upon which the social value of value was formed" (p. 52). How: whereas Marx hypothetically increased and decreased the prices of agricultural products in his scenario analysis in Volume 3 of Capital in order to show what portion of total supply determines the market value, I had before me a real case of price increase in 1973-74 period and that was ready to be corresponded with high oil exploration and development expenditures in the United States. I hope it would be satisfactory. The key here is that, before attempting to read my book, Marx's Vol. 3 (all six chapters on rent) must be mastered. Best wishes, Cyrus Bina
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