The United States Senate, in a move obviously targeted at OPEC, frightened about the effects of spiralling world crude prices and the consequences for the greatest gas guzzling nation on earth, is currently pushing through a Bill to outlaw oil cartels.
Recently, there were stories of a new proposed law of the United States of America that purports to outlaw cartels in the petroleum market. One needs not be a rocket scientist to know that the target of this law is the Organisation of Petroleum Exporting Countries, OPEC.

It is reported that the proposed Bill makes it illegal for "any foreign state or instrumentality thereof to act collectively or in combination with any other state or any other person whether by cartel or any other association or form of co-operation or joint action, to limit the production or distribution of oil, natural gas, or any other petroleum product, to set or maintain the price of petroleum, when such action has a direct, substantial, and reasonably foreseeable effect on the market, supply, price, or distribution of petroleum in the United States".
We have not had the privilege of seeing the whole of this proposed bill. Hopefully, it makes adequate and effectual exceptions and exclusions for those instrumentalities of the American state that control its "strategic" reserve and inventory of oil and gas or, which enforce its environmental protection laws to such an extent that it has simply become an economic hell for American companies to produce oil profitably in the US.

Truth be told; high oil prices have not been exclusively a consequence of any action of OPEC or its members. Some of the shortages or defaults of supply that have engendered the beginning of the high prices can reasonably be traced directly or indirectly to American policies and wars in the Middle East.
These wars and policies really have contributed more to the shortage of supply and consequential rise in oil prices than OPEC, and the high prices have been fuelled and sustained thereafter by the insatiable thirst and appetites of the industrialized nations. These nations should really be grateful to OPEC for its policies, for they would otherwise have witnessed huge recessions in their economies but for the stability imposed by OPEC's actions and interventions.

The word "cartel" has also been used often to describe the criminal organizations of the largely South American drug barons. Thanks to the force of media -- and that includes all those Hollywood spy action dramas -- in influencing our lives and thoughts, there is a reflexive tendency, immediately and almost automatically, to regard anything or organization that can rightly be named or describes as a cartel, as odious and undesirable in a free world. Assuming there is anything as a "free world".
Freedom itself, these days, is no longer an unchanging law. It has become a variable, its scope, extent and definitions being based and determined largely on the perspective and interests of the person or nation propounding its attributes. So also is the notion or concept of the cartel. It has so many parts to it that it is dangerous to jump to conclusions or focus on only one aspect of its potentials.

Check several dictionaries and encyclopaedia; and that includes Wikipedia for the IT savvies. All say it in different ways and in varying lengths but the following is a summary of the different aspects of the word and its use that emerges from them. A "Cartel" is a combination in which several different firms, persons or (in the present context, nations), agree on some sort of joint action. It is recognized that Cartel agreements have commonly been made for the restriction of production and competition, joint purchase of raw materials, joint distribution of products, allocation of market quotas and price fixing, but not exclusively nor even majorly so.
One of these sources referred to above states that "cartels have been most successful in controlling production and distribution of articles of which there are nosubstitutes, especially in industries producing raw materials or processing early stages of manufactured goods. They have come to be associated with international trade organizations".

Regardless of perspective, interest or culture, it should not be hard to see some good in this latter aspect of the concept. Some companies, realizing a common interest at stake, having even sometimes formed associations designed to promote the interchange of knowledge resulting from research or other knowledge development enterprises and have even had the objective or actually preventing extreme or unfair competition.
In other words, a cartel has to be carefully studied on a case by case basis to determine if any or all of its declared ostensible objectives should be curtailed or outlawed.

There are many angles to the Organisation of Petroleum Exporting Countries, OPEC. One of the most significant of OPEC's aims and achievements is the stabilization of the petroleum market. At its current conference, for example, itsmembers have decided or greater production to try and deal with the high price of the product.
In times past, it has curtailed production to prevent a glutting and a resultant price collapse that has the potential of crippling or hurting the market and, with it, the economies of member states. And, really many others too, including the USA. This is nothing new. Same steps for same reasons and objectives have been taken in the US steel industry/market, in the European Union's agricultural subsidies, and other such instances. No one considered an uneconomic or uncompetitive practice when the Nigerian Government, since 1986, introduced its Memorandum of Understanding on Fiscal Terms, guaranteeing, among other incentives, a minimum profit margin, regardless of the crude market. So wherefore, now, the hue and cry?

In any event, OPEC really does not "fix" prices; nor does it restrain its members from dealing with their crude in anyway. It simply puts in place policies that ensure that all who have a stake inthe industry, including American entities, can make a reasonable profit from their endeavours. It demonstrates this in its meetings with empirical data and other materials, many sourced and supplied from the Developed world, including the US.
Many of those entities today, have been rescued from the brink of bankruptcy because of the stabilization achieved by these policies and practices of OPEC. Industry participants will remember how US companies groaned and suffered severely in the repressed price era of the early nineties. Those same companies are today happily pouring millions, nay, billions of dollars into the coffers of the US Inland Revenue Service, the IRS, Uncle Sam's tax collector, being tax on their resultant petroleum operations profits.

Be that as it may, one should not hasten to criticize what appears as skewed attitude of the US legislature. The potential to be skewed in view or mislead in perceptions is not the exclusive preserve of the lowly. Even statesmen and legislators are no exception. In this case, the esteemed members of the US Legislature should be encouraged to go deeper in their research into what the Organisation of Petroleum Exporting Countries, OPEC, really does.
Hopefully, given the resources available to them, they should find much that should discourage their pursuit of the objective of destroying OPEC. Indeed, on the contrary, they may even begin to see some merit in supporting it.

The little that one reads or hears about the proceedings of OPEC at its meetings and conferences justifies a conviction that OPEC members, too, are concerned, like the Honourable US legislators about America, with the crude oil price spiral and the potential instability it portends for their own members' society, polity and economy, and that of the rest of the world.
There is much more to be gained, in engaging OPEC in meaningful dialogue to find common ground in pursuing these mutual objectives, than through the introduction of some draconian legislation. Any rash action otherwise, such as the passing of this bill, could lead to further shortage or high cost of supply of crude to the US. (Let no one think that non-OPEC countries will sell crude at lower prices than OPEC members.)

The US should begin to correct the perception that it only uses its laws and forces to oppress its poorer earth neighbours, and not to help them. A perception that has long eclipsed the days of the Peace Corps and the Ford and Rockefeller foundations, etc. In this regard, we sincerely hope that the US Executive branch will remain firm in its resolve to resist this law.
Maybe the proposed law would achieve more if it compelled American companies not to pay more than a certain maximum price for their crude. After all, they also benefit from the high prices, in their revenues, profits and dividends to their American shareholders. Such a law, if enforced, given the proportion of crude sold to these companies, will affect the overall price of the product. And while we are it, they might also want to consider making it illegal for them to enforce the Memorandum of Understanding on Fiscal Terms, etc. (the "MoU") with the Nigerian government. It really is not exactly your example of a free-market model agreement.

The concerns of the US Government and its citizens over the price of oil, especially the resultant increment in the price of gasoline and heating costs, are without a doubt understandable; but let us be careful not to throw the baby out with the birth water. OPEC has been beneficial not only to its member states, but to the world economy as a whole.
More harm would be done by killing than by leaving it be. Practice of the rule of law by the US has been the standard of that practice in the democratic world. And, admirably so. However, if proper discretions are not applied where necessary, it can quickly become a tool of bullying, and instead of the rule of law, we may have the bull -- as in bullying -- of law.

Mr Akisanya is a Partner at Adesanya & Akisanya, Lagos.

Source: http://allafrica.com  / This Day