OPEC: Influential Oil Producing Cartel with “Diplomatic Immunity”

OPEC Cartel Logo

Fun Facts About OPEC

Members of OPEC meet

 

 

Current Members: Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela

Cartel: By definition, OPEC is a cartel — a group of producers which tries to restrict output in an effort to keep prices higher than the competitive level.

It no longer sets crude oil prices: OPEC admits to setting crude oil prices in the ‘70s and’ 80s — they would look ridiculous to try and deny it. However, the oil market underwent a transformation in the 1990s and today, prices for crude oil are established according to three markets: 1) The New York Mercantile Exchange; 2) The International Petroleum Exchange in London; and, 3) The Singapore International Monetary Exchange.

This isn’t to suggest that OPEC has no influence on prices; quite the contrary. Prices established by the exchanges are based on supply and demand; therefore any decision OPEC makes concerning restricting production, for example, will have some effect on prices. These decisions, however, can have a direct consequence on profit margin, so it isn’t always in their best interests.

Its practices are considered to be illegal: Simply put: Cartels are illegal in many countries. In the U.S., for example, OPEC is in direct violation of antitrust laws, such as the Sherman Antitrust Act of 1890 — the same act that broke up Standard Oil, American Tobacco and Ma Bell. Antitrust laws don’t criminalize monopolies per se, only if the monopoly is used to eliminate its competition through methods of production or price-fixing.

Ordinarily, U.S. antitrust laws explicitly prohibit dealing with cartels. What makes OPEC so special? Simple: Congress grants OPEC diplomatic immunity from prosecution and in essence treats it as though it were a sovereign nation, even though this is not remotely the case. This status was tested in 1978, when the International Association of Machinists and Aerospace Workers (IAM), a non-profit labor organization in the U.S., filed suit against OPEC under the Sherman Act. In 1981, the U.S. Ninth Circuit Court of Appeals rejected the case, claiming OPEC was protected by its sovereign immunity status.

In 2007, a pair of controversial bills were introduced in Congress designed to amend antitrust laws to include OPEC. If the measures are approved in both houses and the president doesn’t veto it, individuals harmed by OPEC in the U.S. can begin to sue the organization. If this were to happen, few expect OPEC to continue doing business with the U.S.

It isn’t the only game in town: If one only paid passing attention to the media, you might get the impression that OPEC is the only oil game in town. Granted, its member countries control anywhere from two-thirds to three-quarters of the world’s proven oil reserves and over 40% of the globe’s oil production; however, there are other sets of somewhat substantial oil-producing groups.

Originally formed as an agent of the Marshall Plan following World War II, the Organization for Economic Co-operation and Development (OECD) is a vast and all-encompassing organization with all sorts of arms and legs. Of its 30 member countries, a minority are oil producers, including the USA, Canada, Mexico, and the UK. Together they account for about 23% of the world’s oil production.

Additionally, the Russian Federation and a handful of former-Soviet states, such as Kazakhstan and Uzbekistan, are responsible for about 15% of global oil production.

OPEC Member Nations

It was formed to fight the “Seven Sisters”: The world’s wealthy oil barons have not always resided in the Middle East. In fact, for most of the 20th century, the member nations of OPEC were at the mercy of the so-called “Seven Sisters,” a non-organizational set of oil producers and distributors which, perhaps due to that non-organizational status, somehow eluded antitrust prosecution. The Seven Sisters was composed of Standard Oil of New Jersey, Royal Dutch Shell, Anglo-Persian Oil, Standard Oil of New York, Standard Oil of California, Gulf Oil, and Texaco.

By 1960, Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela had grown tired of exporting their oil and then having to buy it back at higher prices. They formed OPEC to assert their “legitimate rights in an international oil market,” and by the 1970s, thanks in part to strategic maneuvers such as the Arab oil embargo, began to dominate the market.

It’s “customers” see bigger oil prices than its members: Oil taxes by countries that regularly import oil from OPEC, such as the U.S., the UK, Japan, and Italy, are often as much to blame for high oil prices as OPEC. Such taxes allow some countries to see oil-related revenues that are three or four times higher than some OPEC members see from exports. In addition, the production and development of oil requires huge investments, a fact that further chips away at OPEC-member profit margins.

As gasoline prices soar, more and more attention gets paid to OPEC. In the Western press its easily vilified and is a common ”fall guy“ for every issue related to oil and oil prices — not always unjustifiably so.

More than a few people would be pleased to see OPEC’s influence reduced or even made moribund. However, proven oil reserves are defined in the industry as the amount of oil that can be recovered and produced using today’s technologies, and as of 2006, the world total was 1,195,318 million barrels of crude oil; OPEC’s share of that amount was 922,482 million barrels or 77.2% (if you accept OPEC’s figures; hardly everyone does). Thus, unless a drastic change occurs in the energy-consumption habits of much of the world’s oil-hungry population, interest in OPEC is unlikely to recede for some time.

Special thanks to www.askmen.com

The Attack on Pearl Harbor, December 7, 1941: Living in Infamy

The Pearl Harbor Memorial rests atop the sunken USS. Arizona

Facts About the Attack on Pearl Harbor

• 

  Japanese attack routes on Pearl Harbor, Oahu, Hawaii

  Although the aerial attack was very successful, the submarines failed to finish off any wounded ship inside the harbour.

• The attack’s success surprised the Japanese as much as the Americans.
• The last part of the decoded Japanese message stated that U.S. relations were to be severed.
• The Japanese attack force was under the command of Admiral Nagumo.
• Japansese force consisted of six carriers with 423 planes.
• At 6 a.m. the first Japanese attack wave of 83 planes took off.
• Nickname for Pearl Harbor is “Gibraltar of the Pacific.”
• Eighteen U.S. ships were hit.

• 

  Franklin Delano Roosevelt

  President Franklin D. Roosevelt said, “December 7, 1941, a date which will live in infamy,” in reference to the attack.

• Three prime targets escaped damage, the U.S. Pacific Fleet aircraft carriers, the Lexington, Enterprise and Saratoga. They were not in the port when the attack took place.
• Another target, the base fuel tanks also escaped damage.
• Casualties included 2,335 servicemen and 68 civilians.
• 1178 people were wounded.
• The day after the attack the U.S. and Britain declared war on Japan.
• Pearl Harbor is the Naval Base for the U.S. Pacific Fleet.
• Pearl Harbor is the headquarters of the U.S. Pacific Fleet.
• Pearl Harbor has 10 square miles of navigable water.
• The harbour is on the southern coast of Oahu.

• 

  Naval vessel placement at Pearl Harbor during the attack

  The harbour is artificially improved.

• The attack was the climax of a decade of worsening relations between the U.S. and militaristic Japan.
• A U.S. embargo on necessary supplies for war prompted the attack on Pearl Harbor.
• The Japanese Admiral Yamamoto Isoroku planned the attack with great care.
• All of the planes on the Japanese ships were fully fueled and armed.
• The Japanese planes took off about 90 minutes from Pearl Harbor.
• The president at the time of the attack was Franklin D. Rooselvelt.
• The attack brought the United States into World War II.
• The Japanese fleet had 30 ships.

• The Japanese were interested in the Hawaiian islands since the islands were annexed by the U.S. in 1898.
• An admiral said, “leaving aside the unspeakable treachery of it, the Japanese did a fine job.”
• Japanese suffered just small losses.
• The attack crippled the United States fleet.
• The Japanese deceived the U.S. by saying false statements and expressed interest in continued peace.
• Americans think of the attack as very dishonorable.
• The attack was planned weeks in advance.
• The main reason for the attack was over economic issues.

• Because of the unpreparedness of the U.S. military, Admiral Husband Kimmel and General Walter Short were relieved of duty.
• The attack severely crippled the U.S. naval and air strength in the Pacific.
• Of the eight battleships, all but the Arizona and Oklahoma were eventually repaired and returned to service.
• On December 8, 1941, Congress declared war on Japan with only one vote against it. The vote against it was of Represenative Jeannette Rankin of Montana, who had also voted against U.S. entry into World War I.
• Once the fleet was out of action, Japan would be able to conquest a great area.
• A U.S. Army private who noticed the large flight of planes on his radar screen was told to ignore them because a flight of B-17s from the continental U.S. was expected at the time.
• More than 180 U.S. aircraft were destroyed.

• 

  Pearl Harbor Memorial

  During the attack the USS Arizona sank with a loss of more than 1,100 men.

• A white concrete and steel structure now spans the hull of the sunken ship as a memorial.
• The memorial was dedicated on May 30, 1962.
• U.S. officials had been aware that an attack by Japan was probable, but did not know the time or place it would occur.
• Pearl Harbor was not in the state of high alert when the attack started, Anti-Aircraft guns were left unmanned.
• The Americans were taken completely by surprise.
• The main targets for the first wave was the airfield and battleships.
• The second wave targets were other ships and shipyard facilities.
• The air raid lasted until about 9:45 a.m.

 

 

 

Special thanks to  www.bigsiteofamazingfacts.com and www.absoluteastronomy.com