The OPEC cartel that meets in Vienna today has thrived in its 50-year history. First ignored, then despised for using the "oil weapon" on the West, and ultimately granted a strange legitimacy due to age, it has assumed all the trappings of an international organization. This week's meeting of Mahmoud Ahmadinejad 's Iran, Muammar Gaddafi's Libya and Hugo Chavez' Venezuela to fix quotas, for example, will take place not in Gaddafi's tent but in a sumptuous building on the Helferstorferstrase in Vienna. Press is likely to report not on why oil prices are set by a cartel of the world's worst leaders but rather on whether oil quotas are modestly adjusted to cover wells out of order since the Libyan revolt
Unfortunately, the cartel's victims have not fared as well. OPEC has over the last century engineered a massive transfer of wealth from the rest of the world to its rulers. At key junctures, it has used the "oil weapon" to destabilize the global economy as with the 1970s oil shocks, the 1980s debt crisis triggered by soaring oil bills and the 2008 financial collapse (when it cut quotas with prices over $100). Less well known is the role of oil price spikes in stoking misery and instability in developing countries. The final victims have been the people of the oil states themselves who have not shared in the wealth enjoyed by a few while seeing democracy pushed indefinitely into the future.
Adam Smith famously observed "Seldom do businessmen of the same trade get together but that it results in some detriment to the general public." Based on a long history of economic study, today cartels are illegal in virtually all developed countries. The question with OPEC, therefore, is not why it is bad but why has it survived. During the first Gulf war in 1991, the US and its allies saved Saudi Arabia, liberated Kuwait and dictated peace terms to Iraq. Yet after the war, all three countries continued as prominent OPEC members. In 2002 we invaded Iraq again, this time overthrowing Saddam Hussein. But rather than insisting that Iraq leave OPEC, the United States actually became a de facto OPEC member through the provisional Iraq authority.
The superficial answer to this question of why OPEC has persisted is it has successfully claimed sovereign immunity. Unlike a private cartel -- hundreds of which have been prosecuted by the Justice Department since 1990, OPEC is comprised of governments that happen to set quotas for oil. But this argument is weak. The 1976 Foreign Sovereign Immunity Act contains an exception to immunity in the case of governments engaging in commercial activities. The real reason that OPEC has survived is a lack of US resolve to break it up. In 2007 and 2008, the House and Senate passed legislation that would have forced the Justice Department to go after OPEC. However, a veto threat from President Bush prevented final passage of the legislation.
There is an equally strong case for trade action against OPEC, made compelling by Senator Frank Lautenberg. The WTO unequivocally prohibits quota-based cartels except in the rare case of conserving resources or national security and of the 12 OPEC members, five are WTO members and 3, observers. Yet to date, the US Trade Representative has not filed an action.
These tools alone might suffice to end OPEC. But the ratcheting up of US engagement in the region recently creates a new opportunity to break the cartel.
The Middle East -- the geographic center of OPEC -- is clearly undergoing fundamental change. Not only, of course, did the US midwife democracy in Iraq, we remain the guarantor of security of Saudi Arabia, Kuwait and the UAE, and are now also supporting the rebels in Libya. The expanded US and EU role in the region provides an opportunity to make a simple case to all parties. US and more broadly EU support must be contingent on a timeline for withdrawal from OPEC.
In short, the conditions exist to end OPEC. We only need resolve. Here is a plan forward. By July 4th, Congress should pass legislation revising the FSIA to strip OPEC of any hint of sovereign immunity. The US Trade Representative should immediately begin studying action against the OPEC countries in the WTO. The Obama Administration should make it clear to parties we aid in the Middle East they need to plan to transition out of OPEC. We can end OPEC but only if we act. Time is of the essence due to the tenuous state of the global recovery.
Sen. Bernie Sanders: Stop Oil Speculation Now
OPEC Keeps Lid on Oil Production Targets
OPEC Keeps Oil Production Unchanged
US crude dips $1 ahead of OPEC meeting
Standard Bank's De Wet Says OPEC Aiming for Oil at $90
A look at economic developments around the globe
Georgia Gas Prices Drop, OPEC to Discuss Oil Production
Market Preview: Beige Book, OPEC, Ciena
OIL FUTURES: Crude Futures Hit $100 As OPEC To Keep Output Unchanged
Huh? Didn't you just answer your own question? OPEC countries are not "developed countries".
In any case, the real solution to high oil prices is to develop competing alternative technologies.
I love alternative technologies but we need to be honest that close to 100% of cars still run on some version of oil and given slow turnover of cars, this will be true for many years. The high cost of oil is especially crushing for the poorest countries.
As purely an aside, I always find it ironic that below the earth's crust is a massive fire ball of energy. Ooo, so close. :)
The opportunity here is to invest in Renewable clean energies that can be produced domestically. Germany is on their way in doing it. We have all kinds of desert that could be used for solar production. No one lives there, and it gets plenty of sun. The Plains and the coast lines get plenty of wind.
We could produce electric vehicles like the volt, and put solar cells on the roof to aide in charging the batteries, further reducing the need for fuel.
It just takes a government not being paid off by big oil companies to continue the sucking on big oil tit, and sending money to cartels that don't have anyones interest at heart but themselves. Lets get over to stable domestic energy sources, and let china figure out what to do with the Saudi's.
OPEC holds the world hostage, which was made perfectly clear in 1973.
But within the countries that produce, the pressure of the citizenry, post the Arab Spring, to share in the wealth will likewise increase, as there is a pent-up demand for a share in profits that heretofore have largely stayed in the hands of various ruling elites. Because that same citizenry is also aware of having arrived at peak production, there will be much demand to increase prices, so as to receive the most possible value for their finite resource.
In some of the producer nations, there is presently no other export that brings in foreign currency or great wealth of any kind, as these nations are mostly desert. It would be foolish to expect producer nations in this predicament to reduce prices for any reason beyond the capacity of the consumer nations to pay, especially given the intense social pressure within those nations that more wealth be shared among the people.
And I love the phrase "Not only, of course, did the US midwife democracy in Iraq". At the cost of tens of thousand of lives, so as to oversee the the stillbirth of a monster. Does anybody really believe that democracy will outlast, by even a few years, the presence of US troops there?
The chief obstacle to this is view held by some such as GWB that OPEC actually is a good thing because it manages prices. I think negatives of OPEC--such as causing oil spikes at key junctures--greatly outweigh any role they have played in stablizing prices.
And now that the Arab Spring is upon us, my bet is that soon, the citizenry within many oil-producing nations will press for a greater share of profit and a higher price, so as to ameliorate social inequalities.
Our 'help' in the region, is and has always been self-serving, and often deadly. Nearly nobody therein wishes to see American troops on their soil for any reason whatsoever, including democracy. Don't imagine there will be much eagerness to adopt your conditions for ending membership in an organization that has been worth billions to member states despite its inconvenience to our designs.
That being said I don't like high gas prices anymore than the next person but please lets try to keep things in some sort of perspective. Also, I'm no fan of Opec piratesque tactics, but really do you think it would be better to let Iran and co? because no matter how high they jack up the prices there will be a customer, OPEC knows when and how much it can jack them up while still maintaining selling to everyone involved (US Europe, china and Russia,etc) Given individual countries proprensity for doing what they view in their favor and not everyone else's they will skyrocket the prices because they will always find a buyer. Furthermore, things are not looking good for prices especially in the US, why? because as everyone knows the chinese pay, in cash, Immediatly, a much better buisness practice than "optional trading" of oil/resources for old weapons and planes.
As for the US, you may say we are fine exporting $1 billion a day to OPEC. I don't agree.
The US has ZERO capability to make either happen.
In case you missed it, GWB ensured that the US is ignored by over 80% of the world population and Obama just made that even worse by letting Bibi humiliate him instead of publicly hitting Bibi with a metal baseball bat and telling him to kneel and do as the US says.
The US is the laughing stock of the world and has zero power to do anything.
since you actually think that OPEC has 'control' of prices, do you ever stop to ask yourself WHY they don't simply charge 10 times as much?
The fact is, their 'cartel' has minimal effectiveness because, as in all market transactions, they still only control 1/2 of the trade equation - they do NOT control the purchasing decision. OPEC still has to obey economic laws of supply and demand, and the late 70's showed why cartels are ineffective: one member will ALWAYS break ranks and undercut in an effort to garner vast profits.
The boogyman of monopolies and cartels is hogwash, built of fallacies, jealousy, and fear.
Oil is an indispensable commodity, and will be for the foreseeable future. We are free to buy oil wherever oil is sold, for the lowest price we can get, but we will be buying oil from somebody. As we have arrived at peak production, there will be no reduction in price beyond the sellers' estimation of what we can pay, which is why, whenever there's a downturn, the price of oil goes down.
The smartest vampires are not interested in bleeding their captive hosts dry-- they just want all the blood the hosts can afford to lose per session. The vampires know they will need blood tomorrow.
If oil is so 'indispensable', then why have humans existed for thousands of years before it was even discovered? I am not advocating 'cave man' living, just showing that there ARE alternatives.
And a cartel of what?
Did you think that analogy through?
"When oil prices hit a record $147 a barrel in July 2008, the Bush administration leaned on Saudi Arabia to pump more crude in hopes that a flood of new crude would drive the price down. The Saudis complied, but not before warning that oil already was plentiful and that Wall Street speculation, not a shortage of oil, was driving up prices."
Read more: http://www.mcclatchydc.com/2011/05/25/114759/wikileaks-saudis-often-warned.html#ixzz1OhI70mGB
In other words, it sounds like Wall Street is already trying to replace OPEC.