This is nothing new, yet it is absorbing! History is documented. OPEC has been at the receiving end, at least since the early 70s, of a lot of criticism. Despite efforts to clear the air, OPEC continues to receive bad press. Little has changed since. While walking back to the hotel with Saudi Arabia’s Minister of Petroleum and Mineral Resources Ali Al-Naimi after last week’s OPEC Vienna moot, when CNBC’s Melissa Francis was dubbed by Larry Kudlow “The Empress of Energy,” the co-host of the program “The Call” termed the OPEC, “a cartel.”
Al-Naimi took exception to the term. “You have to be careful calling OPEC a ‘cartel’. I resent that. ‘Cartel’ does not apply to OPEC. I know the press uses cartel in a derogatory manner, but it shouldn’t.”
Instead the ‘old, wise man’ — as Al-Naimi is at times referred to in the industry-suggested using the term ‘organization.’ Al-Naimi reportedly went on to complain that the press doesn’t call the G-8 and other such organizations (like the auto companies)-which also incidentally endeavor to protect their interests-cartels.
And this small conversation on the sidelines of a recent OPEC ministerial meet has once again led to an outrage with many insisting to call the OPEC a cartel. And for argument sake, references are being made to the Merriam-Webster Collegiate Dictionary that defines a cartel as “a combination of independent commercial or industrial enterprises designed to limit competition or fix prices.”
As the debate raged, some referred to OPEC’s vowed objective of stabilizing oil markets, as described on its website: “OPEC’s mission is to coordinate and unify the petroleum policies of member countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital to those investing in the petroleum industry.”
Daniel Indiviglio in The Atlantic monthly cited Michael Parkin’s well-known book on economics titled “Microeconomics” to define a cartel as: “A group of firms that has entered into a collusive agreement to restrict output and increase prices and profits.”
Let me at the outset concede that I am no linguist. Furthermore, let me also confess that I have myself used the term “cartel” a number of times in reference to OPEC. But let me also underscore that I have used the term in an innocuous manner.
Technically speaking, there does not appear to be anything sinister in using the term “cartel” for OPEC, yet, journalistically speaking, the word definitely carries a negative, rather derogatory connotation. One cannot deny this.
OPEC sensitivity is definitely not without a background. In the Western media, OPEC has often been portrayed as a cartel, the gang bent upon destroying global economic prosperity. By endeavoring for a fair price, some accuse OPEC of masterminding the derailment of attempts at global economic recovery.
Yes, OPEC endeavors to defend its interests. But what is wrong with that? What organization doesn’t? Diamond producers do the same. Gold producers control output. Even the IMF, the controlling body of global finance, with enormous gold holdings, markets the metal only in a way that it does not disturb market balance. When OPEC does the same, attempting to balance the markets, it is accused of being a cartel.
One could definitely argue that gold and diamonds, referred to above, are of little concern to the poor masses of the world. In a similar vein, it is no secret that exporters of F-16s, continue to endeavor to maximize their returns. If one wants, one has to pay the asking price.
However, the above products are not a must for keeping this civilization moving. Crude is definitely so and therefore needs to be discussed under a different framework.
What about food products? Aren’t they essential to everyone in this world, whether poor or rich? Aren’t they a must for every one on this globe? Could there be anything more essential for survival to mankind than grain and dairy products?
The fact remains that while there are millions and millions in this world who are starving. And yet food is made available at the asking price. In fact there have been instances in past when food is destroyed, pushed into the open sea, apparently with the intention of keeping the markets balanced. Indeed no cup of tea is a free cup of tea in this world. This is pure economics, complete with the specter of supply and demand. And indeed people endeavor to insure that markets do not get inundated. That torpedoes the prospects of fair return.
The problem with OPEC is that-as per the Almighty’s justice-regions bestowed with crude are those that don’t control the world. And thus the fact remains, not withstanding the sensitivities of “old, wise” Al-Naimi, self-professed pundits will continue to call OPEC a cartel. No way out, minister!