Column: Busting up the cartel

By Elie Dvorin

By now Americans should be aware of the exorbitant gas prices in the United States, but most have no idea why or what can be done to bring those prices back down to reasonable levels. While the truth is that there’s quite a lot our government can do to alleviate this, there’s nothing of significance we will do. That’s just the way the government works.

Although several factors influence gas prices, the number one factor is the Organization of the Petroleum Exporting Countries, the mafia of the oil world. Composed of 11 mostly backwards countries (Libya, Iran, Saudi Arabia, etc.), OPEC artificially inflates global oil prices by limiting production, increasing the worldwide demand. But you wouldn’t know that based on their mission statement that reads, “One of (our) primary missions is to achieve stable oil prices, which are fair and reasonable for producers and consumers.” This begs the question of whether it is fair and reasonable for OPEC to sell a barrel of oil to the United States for $70 that it costs less than $4 to produce.

The United States is left with two options: continue to prop up these terrorist regimes by paying artificially inflated oil prices or do everything in its power to break up the cartel and leave those nations gasping for economic breath. It is in the best interest of the United States, both economically and for security reasons, not to be dependant on the likes of Iran for oil.

As the most prominent economic power in the world, the United States has the ability to throw its weight around, but so far has chosen not to. OPEC can inflate oil prices because it controls the majority of the world’s supplies. The United States should step up to the plate and take down OPEC simply because it can.

There are several options the United States can take to bust up the cartel. First, it can look to strike a deal with Iraq and privatize the Iraqi oil sector. If the Iraqis felt secure enough with the United States’ offer (or if the U.S. put enough pressure on the new Iraqi government), Iraq could possibly leave OPEC and sell its reserves to the United States at decreased prices (possibly in the $25-40 per barrel range.) This wouldn’t be a long-term solution to the OPEC problem, but in the short-term it would start to economically choke off OPEC as it would lose a major percentage of its business. This isn’t horribly realistic, however, as Bush is trying to avoid the perception that the Iraq war was about oil. A dollar decrease on the price of gas would help people forget about their anger rather quickly.

The more realistic option is to look elsewhere for oil, even though the market is extremely limited. Russia is the biggest non-OPEC oil exporter, but much of Russia’s prominence as an exporter has gone under the radar. In 2001, when OPEC began cutting its production to keep prices high, Russia kicked up its production by about 500,000 barrels per day, alleviating some of the damages OPEC created. Canada, Norway and Mexico have substantial oil reserves, as well. If the United States were to team up with those four nations and form its own conglomerate of sorts, the end of OPEC would be upon us. This idea of a competing cartel is not a new idea by any means, but recent oil price hikes have given it more momentum.

People died in New Orleans because they couldn’t afford gas. Although OPEC bears much responsibility for the high prices, our government should also be blamed for not doing enough to fix the problem. It is preposterous that we’re paying the Shahs and the Ayatollahs exorbitant prices for oil, then use the money to destroy our country. The only way to bring down the costs and keep money out of terrorists’ hands is to bust up the cartel. OPEC has to go. And we have to do it.

Elie Dvorin is a Senior in LAS. His column appears every Monday. He can be reached at [email protected]