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The Price of Oil, OPEC and Our Laws

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OPEC just concluded its most recent meeting and graciously agreed to continue production at current levels in order not to put additional pressure on prices now hovering near $60 a barrel. Thank you OPEC!

Price fixing is illegal in the United States, isn't it? Well, yes -- except when it comes to the price charged for oil by OPEC. The cartel makes no bones about what it's up to: At its regular meetings, member quotas are set and, presto, prices are manipulated. If this isn't a conspiracy to rig markets, what is? Yet, decade after decade, OPEC has been allowed to continue its monopolistic maneuvering in a scam that has cost world consumers trillions of dollars.

As to why OPEC should be given a free pass on the Sherman Antitrust statute, that question has been kicking around Congress and the courts at least since 1978, when the International Association of Machinists and Aerospace Workers (IAM) sued the Organization of Petroleum Exporting Countries. The courts threw out the IAM suit, deciding that OPEC was protected against lawsuits by the foreign sovereign immunity doctrine. That judicial decision was misguided, though, because prevailing legal opinion holds that government-owned companies engaged in purely business activities (which aptly describes the members of the OPEC cartel) are not entitled to such protection.

Fast-forward to 2005, when zooming oil prices caused hand-wringing and rising tempers among American consumers. A bipartisan group of U.S. senators, led by Mike DeWine (R., Ohio) and Herb Kohl (D., Wisconsin), moved to enact the No Oil Producing and Exporting Cartels Act (the NOPEC bill), which was designed to give the Justice Department and the Federal Trade Commission explicit power to take legal action against OPEC for colluding to set oil prices. The Senate Judiciary Committee unanimously advanced the bill to the full Senate. Meanwhile, a companion bill was introduced in the House.

But just when it looked as if at least one branch of our government might finally stand up to the OPEC looters, the measure was killed in the August 2005 House-Senate negotiations over the administration's energy bill. (It wasn't the first time efforts to hold OPEC accountable on antitrust grounds had failed; a similar scenario played out during the Clinton Administration.)

Why the reluctance to challenge OPEC? Surely, oil-patch politics play a part. So, too, the judiciary's long-held disinclination to take up antitrust claims against foreign countries. But if the executive branch were ever to show a willingness to make OPEC play by the rules, the judicial bias would probably crumble. As it is, the United States government has yet to take the first step toward reestablishing a free market in oil.

Who suffers from the government's inaction? American consumers, of course. Since OPEC came on the scene in 1960, it has repeatedly distorted the world oil supply to line its own pockets. From the 1973 embargo to the cartel's failures to increase production in 1980 after the Iranian revolution and in 1990 after Saddam Hussein invaded Kuwait to its most recent foot-dragging in adding more production capacity in the face of increased global demand, OPEC has consistently imperiled both the U.S. and the world economy.

It's bad enough that American consumers are spending billions of dollars more than they should for gasoline and petroleum products. But what makes the larceny all the worse is that much of the money lifted from American pockets is used by the Middle Eastern oil sheiks to support radical Islamic preachers and their terrorist acolytes. These hate-filled men and women have already killed and maimed tens of thousands of innocent people, and they openly boast of their desire to kill still more while, at the same time, destroying our economy.

It's time we put a stop to both the looting of American pocketbooks and the nose-thumbing at American laws. Simply announcing that, henceforth, we will pursue such a policy would rapidly change much of the bad behavior.

As for reviving the DeWine-Kohl NOPEC bill, we can only hope that Congress, recently having remembered that the Founders made it independent of the executive branch, will summon the will to try again to protect us from OPEC's assault.