I don't know how I got on some guy's mailing list, but he sent me a copy of this opinion article. Save the political flames and try this fun activity: substitute "RIAA" for "OPEC" throughout the article. It's amazing how well it holds together!
Extra bonus: find my favorite paragraph hidden in the article. Then include an appropriately modified version of it to your senator!
THE REAL WORLD
One Purely Evil Cartel
Iraq's liberation is the perfect opportunity to smash OPEC.
BY CLAUDIA ROSETT
Talking straight about the twisted tyranny of Saudi Arabia is a terrific trend. We need to do it more. So, while the clamor goes on for the release of the classified Saudi-linked material in last week's congressional report on Sept. 11, let's check out another Saudi-led affront to the free world--this one known as OPEC, the 43-year-old Organization of Petroleum Exporting Countries.
Meeting tomorrow at the cartel's Vienna headquarters, OPEC's members are currently fussed that a rehabilitated, free and oil-pumping Iraq, with reserves second only to Saudi Arabia's, might ultimately bust OPEC, which jacks up prices by limiting supply. The OPEC hope, therefore, is that once the American-led coalition is gone, it can chivy Iraq back into the OPEC price-fixing fold. So, while Iraq under American sway is reportedly unwelcome at OPEC, the cartel plans to send a delegation to Baghdad this September, on what OPEC's Secretary-General Alvaro Silva-Calderon hopes will be "a very fruitful trip."
Beware. Though there are many polite ways in which OPEC is usually described, it would be accurate to sum up this outfit's activities as follows: a gang of price-fixing, oil-rich thug regimes that meet to reinforce assorted terrorist-sponsoring tyrants and gouge consumers.
Blaming Riyadh alone for OPEC isn't entirely fair, since the cartel has 10 other members, most of them almost as unsavory as the Saudis. An excellent description of this crew turned up this past April in the New York Post, where a London-based oil reporter, Nicole Gelinas, labeled OPEC "an eternal summit of failed states--Algeria, Nigeria, Libya, Iran, Venezuela and Saudi Arabia are among the worst."
But at its core, OPEC is a creature of the royal family of Saudi Arabia, who have enthroned themselves atop the world's largest oil reserves, estimated at more than 20% of the global total, and among the cheapest by far to produce. The Saudis control the capacity to flood the market if they want to, and for decades have used their clout to keep the cartel glued together.
The great myth, heard even in some parts of the West, is that OPEC is doing us a favor with its self-avowed mission to "achieve stable oil prices, which are fair and reasonable for producers and consumers." OPEC's notion of what's fair and reasonable has less to do consumer interests than with OPEC's basic problem, classic for any cartel, that above a certain price, it becomes so profitable for members to cheat (and for nonmember high-cost producers to increase supply) that the cartel falls apart.
The Saudis are, of course, entitled to offer oil at any price they want, including the OPEC target price of $22 to $28 a barrel for oil that costs them $1 to $2 a barrel to produce. But the Saudi-led collusion that goes into keeping world oil prices high enough to command prices that OPEC deems "fair and reasonable" is the kind of stuff that would get private capitalists in the U.S. fried on prime-time TV and thrown in prison.
For a rough sense of where oil prices might head in a world without OPEC-led collusion, a Department of Energy analyst suggests recalling what happened in 1998, in the wake of the Asian economic crisis. For a while, OPEC lost control, and oil prices plunged to about $10 a barrel. As for the notion that OPEC's club of dictators is the best guarantor of "stability" in the world oil market--in this era of global markets and sophisticated financial instruments, with all the accompanying opportunities to trade, hedge and diversify risk, are we really supposed to buy OPEC's club of thugs as the best answer?
Unfortunately, high prices are only part of OPEC's cost to the world. The deeper damage is political. It consists of OPEC's reinforcement of state oil monopolies--OPEC itself being basically a club of despots who wield highly undemocratic control over their respective countries' oil wealth. That provides a degree of centralized power that makes OPEC quotas easier to enforce, certainly easier than trying to curb the production of private companies. At the extremes, this setup helps support such terrorist-breeding regimes as those of Saudi Arabia, Iran, Libya and preliberation Iraq. OPEC, in turn, confers unearned dignity and respect on its select bunch of oil despots by way of being a rich, established institution, with a regular place on the calendar of world events, and an address in Vienna.
Even in nonmember nations, OPEC's presence serves to shore up state meddling in the oil business, since OPEC fosters a system in which states, not private businesses, cut the major deals. In yesterday's Wall Street Journal, Bhushan Bahree chronicled how even the U.S.-led International Energy Agency, created in 1974 to help offset OPEC, is now cozying up to OPEC in ways that may actually help the cartel keep oil prices high.
Oil in any nation is a perilous treasure, but especially so when it is entirely owned or controlled by the state. In government hands, in large quantities, oil wealth helps rulers consolidate control to a degree that in Saudi Arabia today funds the totalitarian state--with its export of its Wahhabi terrorist creed. In Iraq, the state oil monopoly sustained Saddam Hussein. Huge oil revenues relieve the rulers of the need to negotiate with their subjects any sort of mutually acceptable tax system.
Instead, oil tyrants are in a position to govern chiefly by bribe and threat. The result is stunted development, both political and economic. Saudi Arabia's per capita income, despite the country's vast oil wealth, has been shrinking for years. OPEC's overall rate of economic growth this year is estimated by its own analysts at 1.4%, or less than half the world average of 2.9%.
This is the scene into which the Saudis and their fellow OPEC members would like to beckon back the people of Iraq. There is a historic hook here that might make it tempting for Iraqis, which is that OPEC back in 1960 held its founding conference in Baghdad. The idea at the time was to throw off Western big oil interests. But what followed was a wave of oil nationalizations in the 1970s that, along with giving OPEC teeth in the oil trade, helped make it synonymous with dictatorship.
Ultimately, it should be left to the Iraqis to decide whether to proceed with OPEC, or make history in Baghdad a second time by renouncing OPEC as a ghastly old mistake. Privatization of the Iraqi oil industry, with ownership dispersed among the people, would be the healthiest form of protection against some new Iraqi oil czar joining the gang in Vienna. And right now, as we ponder the Saudi rot and other oil-related problems of the Middle East, it might be a help not only to Iraqis, but to the rest of us, to stop treating OPEC as just another legitimate multilateral institution, and get back to the truth of how ugly an outfit it really is--OPEC, the Outrageously Predatory Energy Cartel.
Ms. Rosett is a columnist for OpinionJournal.com and The Wall Street Journal Europe. Her column appears alternate Wednesdays.
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