Wednesday, July 11, 2007

NOPEC

I usually agree with Slate, but I don't think this article shows a lot of sophistication.

Basically, it's supporting the notion that the US ought to censure OPEC somehow for their collusion in supporting oil prices. This may have been a legitimate complaint ten years ago, or even five, but no longer. As folks at the Oil Drum would be
happy to argue, this simply is no longer true.

As they point out, Saudi Arabia made several valiant attempts to hold down the price of oil, fully aware that higher prices lead to increased use of substitutes. However, they were unable to sufficiently increase production to stabilize the prices at a lower level. The article makes an extremely convincing argument that Saudi Arabia simply does not have any substantial, long-term amount of excess capacity with which to alleviate our oil demand.

But Saudi Arabia is generally cited as the main source of spare capacity in OPEC. Which would imply (this is not new) that OPEC has effectively lost control of the world oil price. Ergo, attacking OPEC for being a cartel is no longer really valid. It hasn't been suggested, to the best of my knowledge, that their are OPEC nations out there itching to place extra supply on the market and being withheld from doing so.

This is not news. What I find more interesting is how the US intends to enforce a Sherman verdict against OPEC. I am unsure how much "commercial property may be levied upon", since does OPEC own much in the States? Sure, people who profit from OPEC have holdings (e.g. Saudi princes), but I'm fairly sure (though no lawyer) that those could be chased after. Not honouring OPEC-held US treasuries is not really an option. I would also be hesitant about getting really uppity with OPEC, since they, uh, do sell a fair bit of oil. I've heard people talking about how they like that stuff.

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