From: Michael S. Lorrey (mike@datamann.com)
Date: Thu Apr 13 2000 - 10:56:41 MDT
Charlie Stross wrote:
> On Thu, Apr 13, 2000 at 08:40:50AM -0400, Michael S. Lorrey wrote:
> > Ok, point taken. Now counterpoint: OPEC. OPEC is a monopoly.
>
> No it isn't; OPEC is a cartel. There's a fundamental difference. In
> principle any of the members can quit whenever they feel it's in their
> best interests to do so. Moreover, OPEC adjusts its prices down as well
> as up, in reaction to variations in demand. What OPEC does is allow
> the oil producing nations to avoid getting into a cut-throat price war.
> Which will rapidly turn into a shooting war, in case you hadn't throught
> about the determinants of conflict in the Gulf War of 1981-88.
Which is the only reason we were able to convince the Kuwaitis and Saudis to
support an increase in production.
> > It is
> > outside the US, and it exercises quite a bit of control over pricing in
> > many nations, but not in the US, however those prices have significant
> > effects on prices in the US. The US does nothing about this monopoly.
> > Looks like capricious enforcement to me..
>
> No; looks like you've got your definition wrong. Consumers in the USA
> are free to buy oil from non-OPEC producers like the UK (world's sixth
> largest oil exporter at one point) or Nigeria or Venezuela or Russia.
> In fact, they do. The reason OPEC decisions affect the price at the pump
> in the USA is because (a) the US government has sod-all by way of energy
> taxes (which is why your cars, domestic appliances, and so on are so
> inefficient -- there's no incentive to improve them) so minor tweaks in
> the price of crude get passed on directly to the consumer, and (b) OPEC
> countries amount to a large proportion of global oil production, so the
> non-OPEC producers shadow their pricing.
Which fits the definition of monopoly control distorting the marketplace. I
don't care if its a cartel or a quilting club. Its still a monopoly.
And you are saying that more taxes and government controls are a good thing?
> If you remove OPEC, bad things happen:
>
> Firstly, the price of oil crashes. Each oil producer in the middle east will
> start pumping like crazy in an attempt to maximize revenue, because everyone
> will be trying to undercut their neighbour and when you cut your prices you
> have to make it up on volume.
Outstanding. This is NOT a bad thing. This is a very good thing.
> Secondly, not long thereafter there'll be a horrendous oil
> shortage. Because of the price crash, oil will stop being a profitable
> business. Tankers will be laid up because it is too expensive to operate
> them. Wells will close; places like the North Sea/Shetland fields will
> be mothballed.
There won't be a shortage, this is bull. The market will finally meet the demand
at a market determined price, not a producer determined price. If the british
oil unions go out of work, well, I won't cry for them.
> Basically, prices will yo-yo violently. The whole process will be aggravated
> by the diminishing reserves -- wildly fluctuating prices will discourage
> oil companies from exploring for new fields, too.
Fine. We already have plenty of fields as it is, most of which are not being
explored only because of governments setting these areas aside in order to
maintain an artificially high oil price.
> Basically, OPEC stabilizes the marketplace. It's not a monopoly, so it
> is forced to take market forces into account -- that's why oil prices
> are currently lower (in real terms) than they were before the OPEC price
> hike of 1973.
So how is OPEC stabilizing the oil market any different from Microsoft
stabilizing the software market?
> For a Microsoft analogy, to give you a feel for how Microsoft looks to
> the outside world -- meaning, anyone not native to the USA -- imagine
> Microsoft was based in Saudi Arabia. Microsoft has 90% of the operating
> system market. Your country is at their mercy. They behave weirdly at
> times, adding the Bible and other un-Islamic texts to the files deleted
> by their built-in virus checker. They hike their prices whenever they
> feel like it and swear at you if you protest. And their government thumbs
> it's nose at you. Not exactly the world's best neighbours, no?
However, that IS how OPEC behaves, which by your example, is significantly worse
than how MS actually behaves.
Mike Lorrey
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