On Wed 19 Feb, 2003, Doug Henwood posted an article by Cyrus Bina:
I'm really not sure I want to read any more binaprose (that was *after* you broke it up?), but where does Bina lay out this "proof" that the oil market is completely competitive? He thinks the whole quota system is an epiphenomenon?
It's one thing to say that OPEC's pricing power runs up against real constraints -- that if they push the price too high too long, they call up conservation (decreasing demand); and new exploration (increasing supply); and they endanger the value of their financial holdings if they drive down first world growth. And they also have free rider problems to contend with. But it's another to say that oil producing countries have no pricing power; that supply isn't lower than it could be, and lower than it would be, without some form of cooperation; and hence that pump head prices aren't higher than they would be a purely competitive market.
If by monopoly power he means absolute power, sure, they don't have it. If by monopoly power he means what mainstream economists mean -- i.e., any form of imperfect competition, and mainly referring to oligopoly pricing -- then I'm afraid I'd have to see more of his argument. On the surface, it just doesn't seem true.
In addition, before OPEC, there was no doubt that oil production and transportation companies, with the influential support of consuming countries, banded together to drive down prices received at the pump below their market value (as shown by the sustainability of the 1973 price quadrupling, which involved no restriction in supply after the initial, very short boycott). I'm not sure I entirely see why, if cooperation between oil producing countries was destroyed, this wouldn't be possible again.
I hasten to add that I agree with Bina that fighting war *only* to make oil cheap wouldn't make sense. If that were the overdeterming goal, it would be simpler, cheaper and risk free to just lift sanctions on Iraq, Iran and Libya. That would lower the price and make lots money for oil and oil equipment companies (like Cheney's Halliburton -- he was for lifting sanctions before he became the VP candidate).
And I agree with you that in the Great Game, oil is reckoned according to its strategic value.
Michael