Academic

NOPEC Clarified

By University of Houston Law Center

The NOPEC Bill, which passed the House, would have repealed the Act of State Doctrine with respect to the petroleum industry. The bill was defeated in the Senate. President Bush (unrelated) threatened a veto.  

I fail to see the separation of powers argument. Can you elaborate? Are we talking about encroachment on the Executive Branch? Certainly we are not concerned about judicial interpretation of the antitrust laws (well, I’m concerned, but only because the Supreme Court seems to think the only interpretation is in the killing of the antitrust laws).

I don’t like cartels because they pervert the marketplace not only in terms of price signals and irrational investment, but also because they tend to kill innovation.   Someone asked me why antitrust laws are harsher against cartels than monopolies. Monopolies may have other reasons for their existence (superior business acumen, innovation, etc.), but cartels do not possess any purpose but to raise price and restrict output.   Note that Saudi Arabia is concerned about oil prices NOT because it is worried about our economic health, but because the price is clearly over the monopoly price and THAT is causing serious substitution away to other alternatives (of which environmentalists would approve).   In other words, the Saudis are worried that overcharging will lead to long term substitution away from petroleum, which is not in its interests.

While I’d be fine with naturally high oil prices (such that innovation would invest in environmentally friendly technologies), any investment now is under a huge cloud of uncertainty. Will OPEC increase production? What will happen with speculation (which by all accounts has been causing serious manipulation of oil prices)? In other words, we are not talking about a real market, mostly due to the existence of a cartel and what is taking place in the commodities markets.

Full post as published by University of Houston Law Center Faculty Blog on July 07, 2008 (boomark / email).