The collapsing commodity prices across the globe after an explosive increase to record levels shows how closely linked all national economies are to events that happen outside the home countries. It also highlights the increasing economic pressure on individual countries and companies to join cartels to manipulate through antitrust behavior the prices of commodities and services in which they have a production advantage.
The best known of these cartels is the Organization of Petroleum Exporting Countries, which accounts for more than two-thirds of the world’s oil reserves, 40% of global oil production and 70% of all oil traded internationally. OPEC currently is trying to recruit Russia for membership, which would raise its control over world oil output to over 50%. Unhindered, it now is preparing to push up the price of petroleum by orchestrating a massive cut in production, perhaps worsening the global economic downturn.
It is time that consuming nations take legislative action to allow lawsuits against nations whose antitrust behavior would be illegal in the consuming country if OPEC nations were individuals or companies.
In the U.S., such lawsuits currently are prohibited by the Foreign Sovereign Immunities Act. In Congress, there have been repeated efforts to modify U.S. law to strip away legal protection for OPEC and other nations to the extent those governments are engaged in price fixing and other noncompetitive activities. Under the No Oil Producing and Exporting Cartels Act (NOPEC), such nations would be treated as “persons” subject to suit under antitrust laws. If these nations and their captive companies want to do business in the U.S., they would have to comply with American law.
The NOPEC bill was included in both the House’s and Senate’s energy packages last year, but it was not included in the final energy bill because of a threatened veto by President George W. Bush, who coincidentally has strong ties to the petroleum industry.
The prices of petroleum and other commodities have plummeted recently, but this should not reduce U.S. vigilance for illegal and unjust antitrust activity. Friend or foe is not the test but rather results from the kind of close business scrutiny that has brought many companies before the bar. When countries act as companies, they should be held to the same antitrust standard.
The nation also should amplify efforts to find alternative energy sources to break the petroleum monopoly. The U.S. has failed to maintain momentum in such efforts in previous boom-bust cycles, but this cycle is fresh enough to learn from painful mistakes.