fatvegan

I've been having some thinking. Or was back a bit, but forgot to blog it. I was thinking about ways OPEC could maintain it's oil monopoly. I like OPEC because it restricts oil supply, which is good for the environment and I think good for the planet's long-term political stability. It's forced us to think of oil alternatives earlier, and while there are much larger existing reserves than there would be otherwise. The other reason I think it's great is that it transfers large amounts of wealth to poor countries, and let's merry little socialist experiments like Venezuela happen. I'd probably like the DeBeer's diamond cartel too, if it didn't seem to cause such a bloody awful mess, literally and figuratively. Generally cartels aren't great things, but in our crazy screwed up world, they're sometimes a huge improvement over whatever crazy screwed up arrangement the US and Europe have negotiated.

So anyway, I was thinking. One of OPEC's big problems is that people who aren't in OPEC get to sell at the high world price for oil, but aren't subject to the production quotas. The effect is that the price drops, but only non-OPEC members get the benefit of selling large quantities. Even members of OPEC sometimes cheat the system, but I think that's less of a problem.

One possible solution would be for OPEC to start up some shell companies that attracted some investment. OPEC would have control over acquisitions, but otherwise the companies would be fairly independent. These shell companies could use small amounts of OPEC money, and large amounts of investor money to purchase non-OPEC companies. OPEC would then control them, and determine the amount they were allowed to output. It wouldn't be in charge of production, and the company management could still be replaced by the other shareholders in the companies, if they did a bad job. So you'd have some Market Rigour, but not enough independence to undermine the OPEC system. The shareholders who were actually putting up the money would be happy, because their monopoly profits would be high. Even if they only got a tiny portion of the total increase to OPEC revenues, it would still be far more than they'd get owning a normal oil company selling at the much lower non-monopoly price.

There is this huge wealth there, that is available for the poor world to take from the rich world (and, admittedly other non-oil poor countries) if only they could get the cartel structure right. The stock market is a terrific way of driving a wedge between interest groups in the West. You can use US oil money to maintain the OPEC monopoly. Try getting US investors to act together in the interests of their country by all saying "no" to monopoly oil profits. Talking up the environmental angle might be another way to get win some more support by appealing to us greenies.

OPEC probably doesn't have the money, the management capacity or the political freedom to control every major oil field in the world. But they can use financial leverage and their unique position to command oil profits by engineering the right cartel structure. Now if only OPEC could be taken over by some communist revolutionaries, maybe some of the wealth would actually get to the people. But as they say, first you need to bake a bigger oil cartel cake, so there's more cake for everyone.

I don't actually believe that last bit.