SUING OPEC….A trio of law professors take to the pages of the LA Times today to argue in favor of a bill allowing the government to sue OPEC for antitrust violations:
The cartel’s economic effect on the U.S. has been devastating, dating from the oil embargo in the 1970s, which led to the first U.S. fuel shortage since World War II, to today’s unstoppable escalation of pump prices. Just in the last three years, crude prices rose from $54 to nearly $140 a barrel — which means U.S. spending on imported oil has gone from about $185 billion a year to an expected $440 billion this year.
….Imagine suing OPEC members for the amount they overcharged for petroleum products the U.S. government purchased. Then triple that amount….Imagine criminal charges filed against key cartel individuals when they come to the U.S.
Imagine! For starters, imagine just how popular this would make us in the Arab world. If we believe in truth-in-advertising, we really ought to rename this the “Al-Qaeda Recuitment Act of 2008.” Or maybe “Smoot-Hawley II.”
Snark aside, what’s ironic is that this proposal has gained currency at precisely the time that OPEC’s cartel power is pretty much gone. Cartels are designed to artificially reduce supply and keep cartel members from competing against each other and driving prices into the ground. Today, though, demand for oil is so high that no collusion is needed. OPEC members are pumping at full capacity and prices are skyrocketing anyway.
Plus there’s this: at the risk of being needlessly contrarian, it’s worth remembering that OPEC’s history includes more than just production limits. Saudi Arabia and others opened their taps and overproduced in 1979-80, keeping the price spike caused by the Iranian revolution from being even more devastating than it was. They did the same in the mid-80s, driving oil prices into the ground. This helped ruin the Soviet economy and helped the West win the Cold War. Ditto again during the Gulf War and after 9/11. OPEC hasn’t exactly been America’s best friend or anything, but those triple damages might be a wee bit harder to calculate than OPEC’s detractors think.
There just aren’t any quick fixes here. Speculation may be playing a role in the recent runup of oil prices, but it’s probably a small role and has nothing to do with OPEC in any case. Basically, the problem is just supply and demand: supply is maxed out while demand keeps going up. Result: high prices. Suing OPEC won’t change that.