September 14, 2010

OPEC pleased with itself on its 50th anniversary

Today is OPEC's 50th anniversary - it even established a 50th anniversary web page to celebrate its achievements. The cartel brags about "Supporting stability, fueling prosperity" while providing "Goodwill Messages" and a list of six achievements.

It also provides a 50 years in photos section. Absent from those photos, of course, are the long gas lines from the early 1970s, gobs of pollution or the destruction of Nigeria. No photos suggesting any sacrifices by the U.S. military, either.

To help boil down some of OPEC's achievements, I've included them below with a few comments.

1. Secure and steady supply of oil

No, that's right. OPEC actually says "secure".

OPEC member countries.
A bastion of peace and freedom?
Interestingly enough, OPEC is proud of the fact that its first resolution "aims to achieve stable oil prices, 'with a view to eliminating harmful and unnecessary fluctuations'; a steady income for producing nations; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on their capital to investors."

In other words, "We will do our best to control the price and you will pay it because your addicted. Period."

2. Fifty years old – a success in itself

OPEC was organized in Baghdad in 1960, and it's safe to say that OPEC countries have not  always the most stable. But when you control things with an iron fist and barrels of cash, it gets easier to keep the fringe countries in line. OPEC actually argues that it has saved the world from "established industrialized powers" who controlled the oil markets before it set out on its "brave act, a pioneering act".

That makes me feel so much better. The oil cartel saved us all from Big Oil (pot meet kettle).

3. Sustainable development

Do I really need to comment here? Sustainable development? Riiiiiight.

OPEC attempts to spin this by saying it formed a special fund to care for the poor, aid developing countries and help others in need to "realize their economic and social development goals."

While I'm sure OPEC feels it is doing something, it's claim of providing $11.7 billion ($230 million a year) to this do good fund is a pathetic attempt at spin. In 2008, the oil cartel had profits of more than $640 billion in six months. Even if you figure oil prices are half the level they were then, we're talking significant amounts of cash flowing from the rest of the world to the cartel. But all that is OK because they give $230 million a year to developing countries.

4. OPEC and the environment

"The oil industry through human ingenuity and technological development has a long history of successfully improving the environmental credentials of oil, in both production and use."

Yes, that's a direct quote. And yes, it is complete B.S.

5. Encouraging dialogue and cooperation

While formed around "the premise of cooperation," certainly that cooperation can only go so far. More than on President has gone to OPEC to encourage the cartel to place more oil on the market. Remember $140 a barrel oil? The answer was, of course no.

While that answer may have affirmed the cartel's "commitment to safeguard the interests of its Member Countries" it certainly didn't "ensure order and stability in the international oil market." And who paid the oil piper?

And remember what got blamed for the high prices? OPEC's president at the time blamed the intrusion of ethanol onto the market place.

OPEC then when on to communicate it's panic when oil prices started falling – to $103, then $70, when OPEC was begging for some stability. When oil dropped to $50, the cartel was worried about its credibility. It said $80 was its goal. Two readers astutely pointed out that

A. In 2003, OPEC thought $25 oil was a good level where they could be profitable. (Greed changes ones point of view, I guess.), and

B. At the beginning of the 2007-08 crisis, oil was at $37 a barrel. Once countries like Venezuela were not "making the windfalls profits they have enjoyed at the expense of the American people," they want to cut production and try to hold the price near $100 a barrel. 

6. Strengthening of National Oil Companies

To me this means: "Big International Oil companies controlled us. Now we control them via our national oil companies."

See #2 above.

I guess we're all better with OPEC running the oil show. OPEC says so.

Does that mean we can forget this whole Renewable Fuels Standard? Ethanol from all (and every) source? Biodiesel? Wind power? Conservation?

What would OPEC say?

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