“No Quick Fix”

It was a mere 26 lines of text in a two-inch-wide column, tucked inside the pages of a regional New Jersey newspaper on June 6, 2008. But it was full of meaning. In it, Henry Paulson, current U.S. Treasury Secretary, and former Chairman and CEO of Goldman Sachs, implied that oil prices will remain high, because they are a function of supply and demand. He relayed that news from Doha, Qatar, one of the oil-rich Middle East states, emphasizing that there is “no quick fix.”

It is supply and demand; but, that is not the entire question, and Mr. Paulson should know better than to put forth such a simplistic statement. The real, unstated, substantive question behind Paulson’s statement should be: Why is so much of the world’s oil supply continuing to be controlled by a cartel (the Organization of Petroleum Exporting Countries), of which Saudi Arabia is the linchpin?

OPEC continues to meet regularly at its headquarters in Vienna to set production quotas, effectively inflating prices and stimulating the current wave of speculation in the oil markets. This cartel sits on two-thirds of the world’s oil reserves, yet accounts for about only 36% of oil extraction, as of March 2008. Saudi Arabia, OPEC’s most influential and largest producer, continues to turn up its nose at recent U.S. requests for increased production, stating that supply and demand are in equilibrium.

In the United States, if executives of large companies were to conspire openly to control commodity output, as do the oil ministers of OPEC, they would be indicted, prosecuted, and put behind bars.

America’s role in winning the first Gulf War under George H.W. Bush and, thereby, preserving Saudi Arabia’s sovereignty and its monarchy means nothing . . . absolutely nothing . . . to these desert fat cats.

I acknowledge that there are many other factors contributing to the current level of oil prices, many of which are of our own making, but my focus here is to starkly underscore the lop-sided transfer of wealth to the oil cartel and its apparent I-don't-give-a-hoot attitude for the rest of the people on this planet.

Note: For an excellent account of the ascendancy of OPEC as an effective cartel, see Robert J. Samuelson’s story at http://www.washingtonpost.com/wp-dyn/content/article/2008/03/11/AR2008031102461.html