IT is a widely held precept that cartels, like cancer, are not good for your health.
The practice in most countries in the world is outlawed and unlawful, as the actions of cartels hurt consumers primarily through increased prices.
Definitions supplied by Investopedia https://www.investopedia.com/terms/o/opec.asp, list the following key takeaways
- A cartel is a collection of independent businesses or organizations that collude in order to manipulate the price of a product or service.
- Cartels are competitors in the same industry and seek to reduce that competition by controlling the price in agreement with one another.
- Tactics used by cartels include reduction of supply, price-fixing, collusive bidding, and market carving.
- In the majority of regions, cartels are considered illegal and promoters of anti-competitive practices.
- The actions of cartels hurt consumers primarily through increased prices and lack of transparency.
Cartels therefore should be regarded as abhorrent and immoral but the world has little choice but to tolerate the largest cartel, OPEC and its influential partners, known collectively as OPEC+, as they produce most of the oil and gas the world needs. Like it or lump it.
The organization was established in 1960 by its founding members Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela in response to the actions of the United States oil companies who had colluded to dominate the world’s oil supply, aided and abetted by the US Government’s support for a coup d’état to overthrow the government of Iraq, one of the major producers of oil, in an attempt to support US oil domination.
As Investopedia point out, OPEC aims to regulate the supply of oil in order to set the price on the world market.
While OPEC does ensure that there is a steady supply of oil in the global market, it has come under fire for holding considerable power in the industry, which allows it to keep prices as high as possible.
Current OPEC members are Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela.
OPEC have been bolstered with what is called OPEC+ – ‘me too’ producer countries who have joined the profit feeding frenzy. They comprise Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan.
The UK is a good example of what can happen when insufficient investment is made in gas and oil production. In 2004, the UK’s North Sea gas fields made the country self-sufficient in natural gas but output is falling, partly because too few new fields have been developed. The situation today is that these fields can only supply 50% of UK gas demand causing it to buy gas from the OPEC cartel which includes Russia. Removing Russia from the gas supply equation has sent prices soaring which in the UK resulted in a 700% increase compared to typical levels in the early part of 2021. To add to the catastrophe, the UK generates 41% of its electricity from gas fired power stations, so automatically the British public have had to endure a massive rise in the price of electricity too.
The UK and most of Europe have to ‘suck it up’ and have little option but to pay up if they want to keep the lights on and homes heated.
Being energy self-sufficient is the only way to combat what amounts to exploitation by OPEC and its cohorts and our government should take heed and be pulling out all the stops to pursue energy independence across the board.
Eish.
