Wednesday, March 6, 2013

Against OPEC: Why OPEC is so detrimental to international commerce.

In my last post, I touched on the act of state doctrine, and OPEC. In a previous post, I discussed the court's rationale for affording OPEC the benefit of the act of state doctrine.

In 1981, OPEC was afforded the benefit of the act of state doctrine. The court's reasoning for applying the doctrine was sound, but the doctrine should not have applied. It is time for a change in the applicability of the act of state doctrine. I have no issue with applying the doctrine to conduct of a single country when it has minimal or minor effects on international commerce. But the doctrine causes substantial problems and consumer harm when individual countries cartelize to affect international commerce.

Now, it is not likely that the Vitamin C litigation will be OPEC's undoing. But OPEC's time is limited, because its constituent countries will be unlikely to adapt to compete with and invent alternate methods of energy. So as alternative energy becomes more economical to produce and use, the more difficult it will be for OPEC to compete.

To get an idea of how detrimental OPEC is to international commerce, consider an alternate scenario: The U.S. and other Western nations cartelize and form an Organization for Technology Exporting Countries (OTEC). OTEC fixes and strives to stabilize prices for technology-based products like computers, smartphones and tablets. Companies in OTEC countries must conspire to fix prices for technology-based products, despite the fact that consumers throughout the world are harmed by having to pay higher prices.

Simply because a foreign government chooses to act in a certain way does not mean that it should be afforded any exemption when it affects the global market in such a detrimental way. OTEC would have that effect. There are two reasons that OPEC is tolerated. First, it has been historically accepted. Organizations that have existed for a long time become accepted no matter how detrimental they are to society or commerce. Second, the U.S. does not want to cause any more international friction in the Middle East and North Africa than there is already. Six of the 12 OPEC members are in the Middle East. Two of the 12 OPEC members are located in North Africa, and another two are located elsewhere in Africa.

Some may argue that my opinion on OPEC is myopic and typical of an American. But there are about 200 countries in the world, and only about six percent of those are members of OPEC. The other 94 percent or so use oil, and only a small number of them can handle increased oil prices and maintain a high standard of living. OPEC affects all countries, but the really detrimental effects are felt in second and third-world nations that either cannot afford oil due to OPEC's cartelization of the oil market, or only a small number of people in those countries can afford oil. So my opinion is not just an American one.

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