The high price of gasFollow

OPEC Is No Friend of Ours
by Jerry Taylor

Jerry Taylor is director of natural resource studies at the Cato Institute.

Is the OPEC cartel a good thing for consumers? Its raison d'etre, after all, is to radically restrain production in order to jack up oil prices. Given the political and economic angst sparked by the recent spike in gasoline prices, you'd think that the answer would be rather obvious. You would, however, be wrong. Rather than come up with a plan to bust up the cartel, most Washington politicos and policy mavens are content to leave the cartel alone and, in fact, defend OPEC against those who want to tear it down.

OPEC apologists contend that the cartel assists in stabilizing oil prices. The record, however, suggests otherwise.

In the period between World War II and the formation of OPEC, the inflation-adjusted price of oil fluctuated little. Oil prices indeed jumped during the Middle East crises of 1956 and 1967, but they fell back quickly. In fact, the inflation-adjusted price of oil -- indexed by GDP -- fell by about two-thirds from 1945 to 1970.

From 1970-1980, however, the real price of oil rose by about 1,300 percent. Between 1980 and 1986, it dropped by about two-thirds. It was fairly steady between 1986-1997, fell farther in 1997-1998, and then nearly quadrupled after February 1999. This is stability?

Cartel prices fluctuate more because they are less certain than normal market prices, inviting speculation. In short, market agents are forced not only to consider global supply and demand but also to factor in OPEC's behavior and its members' fidelity to their promises. Hence, the market is less predictable and prices are accordingly more volatile.

The price spike in late 1973 is instructive. There were only trivial changes in world oil supply yet prices rocketed, a phenomenon that can only be explained by buyers' panic.

Others believe that OPEC is doing us a favor by producing oil in dribs and drabs because underproduction now postpones the end of the oil age. The widely advertised, long predicted end of the oil age, however, is like the horizon -- forever receding as we move closer to it.

How would we know if oil was indeed becoming scarcer? The only certain metric would be finding costs. If oil stocks were indeed dwindling, it would be more expensive to find and develop each additional barrel of oil. Up until about 15 years ago, however, finding and developing costs were trending downwards, not upwards.

Since then, most of the data on the matter have simply disappeared. As an alternative, economists Morry Adelman and Campbell Watkins tabulated the sales value of proved reserves in the United States, information that serves as a window on the value of oil reserves anywhere in which oil finders can go freely and invest. From 1982-2002, however, the price of existing reserves did not increase, demonstrating that the market does not believe oil in the ground is an appreciating asset.

Someday, of course, oil stocks will indeed begin to dwindle. When that might be, however, is unknowable because new technologies continue to emerge that make finding and producing oil cheaper than ever before. Regardless, we don't need OPEC to manage the future. When depletion becomes a real problem, oil prices will rise of their own accord and economies will adjust because prices today reflect expectations about prices tomorrow.

OPEC's defenders also contend that high oil prices bring political stability to the Middle East and that low oil prices bring political instability. Perhaps. But why is a stable Saudi, Iranian, or Libyan regime in our interest? While we could perhaps imagine worse regimes, we could certainly imagine better. But more to the point, the argument that these undemocratic, oppressive, ideologically bizarre, and terrorist-friendly regimes are propped-up by high oil prices is scarcely a strong argument for applauding the cartel's machinations. In fact, President Bush's program to encourage human rights, democracy, and peace in the Middle East will not succeed as long as these regimes remain in power in their current incarnations.

Let's be clear about what's at stake. If OPEC disappeared tomorrow, oil prices would drop to somewhere around $8 a barrel and gasoline prices would almost certainly be south of $1 a gallon. A price collapse of that magnitude would do more for consumer welfare and the overall health of the American economy than almost anything that's been put on the table by President Bush or his Democratic Party rivals. Accordingly, the OPEC cartel should be resisted, not embraced, and policy should aim at undermining it, not propping it up.

Is patently false and would require living in a dreamworld to belive. We are talking about CATO, though. The same people who said that electrcity de-regulation would lead to a market where energy was "essentially free".

We saw just how well "market forces" actually worked in that situation didn't we? People intentionally took power plants off line to drive the price of energy up.

Anything that comes out of CATO, AEI, or Heratige is going to be right wing fantasy crap

Opec IS WAHT YOU GET when you let "free market forces" work

Those are all libertarian ideas. I could make the same kind of list to show them being leftist.

Anti-War? Check
Pro-Drug legalization/Anti-War on Drugs? Check
Anti-Patriot Act? Check

Gee, I guess they must be liberals.

Pure and simple they are for limited government as defined by the Constitution.

That also is how one can define libertarianism. Its too bad that neither the right wing (conservatives) or the left wing (liberals) are actually interested in protecting the freedoms and liberties of the American citizen.

Say what you want about Cato but at least they are consistent and persistent in their pursuit of "Individual Liberty, Limited Government, Free Markets and Peace".

No actually it just makes you look ignorant. How would you define libertarian then? Here, let me help. http://www.self-gov.org/quiz.html

Political leanings are much more than the simple 2-dimensional left/right model that you try to make it out to be.

Maybe because what he did was unconstitutional?

Its sad and very naive of you to think that people can only be conservative, liberal or centrist.

Edit: Stok, there's no gasoline station within 5 miles of my house that is less than $1.85 a gallon (and that's the cheap 7-11 crap). Most places with decent gas (Shell, Chevron, etc) are at $1.99 a gallon for pump87 octane.
........................................
Around $1.68 in my parts. It was $0.98 when I first started driving(in California)

IMHO gas will probably level out around $1.75 as a national average.

Sometimes, howeover, it has proven willing to set aside its libertarian principles - such as supporting a Bush administration moves to restrict civil liberties as part of the “war on terror.” In 2002, a Cato news release endorsed new Justice Department guidelines giving greater latitude to FBI agents to monitor Internet sites, libraries and religious institutions. "As reported in the press, the new FBI surveillance guidelines present no serious problems," declared Cato legal affairs analyst Roger Pilon, a former Reagan administration official who writes frequent Cato commentaries defending property rights and opposing affirmative action that have appeared in publications such as the New York Times, Washington Post, Wall Street Journal, and the Los Angeles Times. Pilon added that "law enforcement monitoring of public places is simply good, pro-active police work that violates the rights of no one."[

The Cato Institute is a non-profit public policy research foundation (think tank) with strong libertarian leanings, headquartered in Washington, D.C.. It is named after Cato's Letters, a series of libertarian pamphlets that Cato's founders say helped lay the philosophical foundation for the American Revolution. Founded in 1977 by Edward H. Crane and David H. Koch, its stated mission is "to broaden the parameters of public policy debate to allow consideration of the traditional American principles of limited government, individual liberty, free markets, and peace" by seeking greater involvement of the "lay public in questions of public policy and the role of government." Because of its decidedly ideological agenda on many topics, members of the Cato Institute are often cited as non-partisan experts on news programs.
In November 2002, shortly after Cato was named the "Best Advocacy Website" by the Web Marketing Association, the Alexa ratings service issued a report saying that it was "the most popular think tank site over the past three months," receiving a total of 188,901 unique visitors during the previous month of September.[1]


Funding
Between 1985 and 2001, the Institute received $15,633,540 in 108 separate grants from only nine different foundations:


Castle Rock Foundation
Charles G. Koch Charitable Foundation
Earhart Foundation
JM Foundation
John M. Olin Foundation, Inc.
Claude R. Lambe Charitable Foundation
Lynde and Harry Bradley Foundation
Scaife Foundations (Sarah Mellon Scaife, Carthage)
Known corporate funders include ExxonMobil, who gave $30,000 during 2002 [2].

Media mogul Rupert Murdoch previously served on the board of directors of Cato, which has numerous ties to the Republican Party. Cato often differs with Republican Party positions on specific issues, such as the 2003 decision by U.S. President George W. Bush to go to war with Iraq, prosecution of the war on drugs, giving federal money to faith-based organizations, and the decision of President George H.W. Bush to fight the first Gulf war. Cato has also criticized the 1998 settlement that many U.S. states signed with the tobacco industry.[3]
Sometimes, howeover, it has proven willing to set aside its libertarian principles - such as supporting a Bush administration moves to restrict civil liberties as part of the “war on terror.” In 2002, a Cato news release endorsed new Justice Department guidelines giving greater latitude to FBI agents to monitor Internet sites, libraries and religious institutions. "As reported in the press, the new FBI surveillance guidelines present no serious problems," declared Cato legal affairs analyst Roger Pilon, a former Reagan administration official who writes frequent Cato commentaries defending property rights and opposing affirmative action that have appeared in publications such as the New York Times, Washington Post, Wall Street Journal, and the Los Angeles Times. Pilon added that "law enforcement monitoring of public places is simply good, pro-active police work that violates the rights of no one."[4]

Of course, that one release by Pilon is the rare exception, not the rule. Cato scholars such as Robert Levy and Timothy Lynch had railed against the Bush administration for its civil liberties record on, for example, the Padilla case, military tribunals, national ID cards, the creeping militarization of domestic law enforcement, border patrol, the drug war, grand jury abuse, the PATRIOT Act, federal surveilance of ordinary Americans, operation TIPS, and mandatory vaccinations against potential bioterror threats. [5]

The Libertarian Party is committed to America's heritage of freedom:
individual liberty and personal responsibility
a free-market economy of abundance and prosperity
a foreign policy of non-intervention, peace, and free trade.

Doesn't smash draw a striking resemblance to Bill O'Reilly?