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The Role Of The Oil Cartel In Globalization And Change

by Nichole Cunningham

The question of the oil cartel is one which is important in globalization today. Many say that it still exists and is a barrier to free trade. Others say that it does not exist and is merely a product of a very highly regulated market. Black gold is industry's lubricant and thus it's supply is essential for economic progress.

A cartel is properly defined as a formal agreement among competing firms to set the prices of a certain good or service. This will mean that, in economic terms, they will act as a single entity, effectively making the market structure a monopoly. This means that they can artificially inflate prices by suppressing the supply or by undercutting smaller firms with their clout. This will give larger profits to each of the participating companies than if they acted alone. However, this extra cost and inefficiency shall be borne by the consumer.

The OPEC, or the Organization of the Petroleum Exporting Countries is the main example of this. They have had a stranglehold over the prices of petroleum in recent history. This power was demonstrated when they singlehandedly threw the world into crisis in 1973 by refusing to export more oil. This threw in doubt the real supply of oil and acted as an impetus for further exploration in other parts of the world.

The reason that the OPEC did this, however, was due to Cold War politics. This was seen as a reaction to the Western World's support of Israel during the Yom Kippur War. During this time, the OPEC was made up exclusively by Arab countries and by the Soviet Union. Thus, their political interests clashed with the West, particularly that of America.

With the end of the Cold War came other places where oil is supplied. This lessened the OPEC member's hold on the price. Non-OPEC members who produce oil include the United States, Canada, Mexico, Malaysia and Indonesia. Their output is also more than enough to compensate for the OPEC members' output. In addition, a newly democratized Russia's interests is already aligned with free trade.

At the local level, however, prices continue to be dictated by oligarchs. This oligarchy is made up of gasoline distribution companies and conglomerates. This is very true for oil importing countries, since they rely on a single source: overseas. These companies tend to include every part of the supply chain, from import to refining to the pump itself. They are protected by a high barrier to the entry of new competitors.

Small players act as a moderating factor for this. Although they can be undercut by the oligarchs, they are protected by law, keeping prices within market levels. However, in light of the scarcity of oil in today's world, this remains to be seen. In addition, piracy and political instability add to the speculation of the prices, keeping it inflated.

It can be said that there are no more cartels in oil production. However, in the distribution of petroleum, the <A href="http://www.petersavagenovels.com">oil cartel</A> still flourishes. This puts the control of the oil supply closer to the pump, since it is they who control the prices. Thus, refining and distribution are the names of today's game.



You can visit the website <a href="http://www.petersavagenovels.com">www.petersavagenovels.com</a> for more helpful information about The Oil Cartel In Our Ever Changing And Globalizing World

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New Unique Article!

Title: The Role Of The Oil Cartel In Globalization And Change
Author: Nichole Cunningham
Email: nathanwebster335@live.com
Keywords: reviews, books, consumer reviews, opinions, books
Word Count: 537
Category: Book Reviews
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