Posted: 2/23/2005 10:42:22 AM EDT
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I think we should seriously consider creating an organization to counter the strangle hold OPEC has on our economy. OFEC Organization of Food Exporting Countries OPEC wants to sell oil for $50 a barrel, fine. Let them buy wheat from OFEC at $50 a bushel. Would it work? What would the unintended consequences be? |
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That was my idea too. The reason few countries can export is due to the low cost and economies of scale. Driving the price up will only force others to enter the market. Now on OPEC, they are becoming more irrelevant with the development of deepwater. OPEC can no longer dictate the price by controling supply, they only limit their sales. Russia, Equitoral Africa, Indonesia and GoM have the capacity to bridge any cutback in production. When was the last time you waited 3 hours for gasoline, only to be limited to 5 gallons? |
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Why? Because the media would say it's evil. Evil to have a food cartel, but not evil to have an oil cartel. Even I might agree, ...reluctantly Right now the demand for oil is only getting greater with China on the rise. It may be a good thing in the long run as it will make new power technology more attractive, especially if it is competitive. |
The idea behind any cartel is to maximize the profits on a commodity. Any country with significant agriculture output would make more money by joining the cartel. There wouldn't be much incentive in NOT joining.
Actually, many countries have some oil. However, as long as it's cheaper to import oil, there's no incentive to tap the local resources. The analogy to food is a good one: America can produce and export food for less that it costs many countries to grow it locally. |
How can you be SURE Ukraine, Brazil, Argentina would not join OFEC? After all Venezuela joined OPEC. Considering the "global economy", it matters not how geographically dispersed the food exporting countries are. If OPEC cuts export production to drive the price of oil up, then OFEC could cut the amount food available to be exported to OPEC countries. Let those bastards eat their oil. |
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Hm... well I don't know if US companies would be able to participate... Unless there was some sort of way that there was still a free market within the US borders, but the OFEC would be with other countries and the parts of US food corporations that deal internationally... Even then I don't know if it would work. There is a lot of US government controls to prevent that from happening inside the US, I don't know how that would apply to US companies dealing with international customers. I'm only an economics student, not an expert  .
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Gasoline in Saudi Arabia is like what... 10 cents a gallon?? Of course THEY don't pay $50 a barrel for oil either. Like wise, we wouldn't pay $5 for a loaf of bread here... But they would. |
