Tag Archives: OECD

OPEC: Influential Oil Producing Cartel with “Diplomatic Immunity”

OPEC Cartel Logo

OPEC Cartel Logo

Fun Facts About OPEC

Members of OPEC meet

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

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

Advertisements

1 Comment

Filed under Economics, Historical Events & Figures

Toronto: Canada’s Bustling Metropolis and Jewel of the North

Toronto, Capital of Ontario Province, Canada

Toronto, Capital of Ontario Province, Canada

Fun Facts About Toronto

  • Southern Ontario
    Southern Ontario

    Toronto was founded in 1793, by the British because of its protected harbour as well as advantages of vast forests, countless river valleys and fresh water lakes in its territory.

  • Toronto (GTA) is Canada’s largest city and is home to over 5.7 million Canadians.
  • Toronto is the capital city of Ontario, and the most important city in Canada.
  • Toronto is located in Southern Ontario which has shorelines on four of the five Great Lakes.
  • Also, Southern Ontario is located, further south than parts of ten, northern states of the USA.
  • The province of Ontario (415,000 square miles, in area) is larger than the state of Texas (267,000 square miles, in area) located in the southern USA.
  • Toronto residents hold more university educations than in any other country in the world, based on percentage of the population, as referenced from the Organization for Economic Co-operation and Development (OECD) and last compiled in 2003.
  • Within an afternoon drive from Toronto, seven million, more Canadians live and prosper.
  • Ontario highways are well maintained and link with major freeways connecting Toronto with all of Canada and the USA.
  • Toronto is the largest, financial centre in Canada and the fourth largest, economic centre in all of North America. Only, Chicago, New York and Los Angeles, USA have larger economic centres.
  • Toronto is Canada’s cultual, educational, entertainment, financial, high tech, commercial and industrial centre. Toronto is also, the “Silicon Valley” of Canada, and Toronto is known as “Hollywood North”. Los Angeles and New York are larger film and television centres.
  • Toronto’s famous, theatre district is second in size only, to New York city, in the USA.
  • Award-winning, theatre productions enjoy long runs, large audiences and world premieres in the theatre and entertainment district of downtown Toronto.
  • Toronto’s Police Force is one of the most efficient, friendly and respected of all police forces in the world. Also, with respect to your safety and security, the city of Toronto is one of the most clean, safe, peaceful, large, cosmopolitan cities in the world.
  • All major federally chartered, Canadian banks have world headquarters in downtown Toronto, including, the Bank of Montreal which is located at “First Canadian” Tower, in Toronto’s financial district. As well, all foreign banks have their Canadian headquarters in Toronto.
  • Casa Loma (Home on Hill)
    Casa Loma (Home on Hill)

    Canada’s largest general, life and re-insurance companies and other financial institutions have their world headquarters in downtown Toronto. Canada’s version of “Wall Street” is called “Bay Street” in the centre of Toronto’s financial and business district.

  • Within an hour’s drive of downtown Toronto is the greatest concentration of industry and auto manufacturing in Canada. GM, Ford, Chrysler, Honda and others have Canadian head offices, and large manufacturing plants in the Toronto GTA.
  • Toronto has the only, real castle in all of North America. Most people never forget “Casa Loma” (home on hill) with vista views of the downtown skyline of Toronto, and of Great Lake Ontario.
  • Toronto has beautiful islands protecting its natural harbour. The islands are a mix of parklands, nature reserves and protected wetlands, maintained by the Parks Department responsible for this unique, natural resource. No private vehicles are permitted on the Toronto islands.
  • The Toronto Islands are reached by public ferry boats crossing the Toronto harbour.
  • On the islands, the city seems far removed, and a feeling of being in the country prevails just a mile offshore from Toronto’s exciting, vibrant downtown.
  • English is the primary, and first language spoken in Toronto and in Canada. “French-Canadian” (an old dialect) is Canada’s second, official language. Other minority groups speak over 100 languages in Toronto.
  • The laws of Toronto, and Canada are based on British law and English parliamentary system of government except for the separatist “state” of French Quebec, located three hundred miles (500 km) to the north and east from downtown Toronto.
  • Less than a two hour drive, north of Toronto is the “Muskoka Lakes” Region where beautiful lakes, rivers and forests are set in the wilderness, and as it looked, many hundreds of years ago.
  • One of the wonders of the world, Niagara Falls is just, an hour away by car from Toronto.
  • People are amazed at the great volume of water that spills over the (Canadian) Horseshoe,
  • Niagara Falls, each second, as they stand, less than 20 feet (3 meters) from the “Brink”.
Special thanks to www.personaltours.ca

Leave a comment

Filed under Travel