COVID,TRUMP, and the OIL CARTEL

No, a cartel is not a new-fangled phone for your car.  You knew that, right?

The dictionary tells us a cartel is "an association of manufacturers or suppliers who act together with the purpose of maintaining prices at a high level for the purpose of reducing competition."

In other words, persons and/or companies that agree to act in concert to screw you, the consumer, by forcing you to pay more than you would have had to pay if honest competition had prevailed.

For readers who are not customers of illicit products from Mexican gangsters, the cartel that costs you the most money is OPEC, the Organization of the Petroleum Export Countries. It was founded in 1960 by four mid-east countries (Iran, Iraq, Kuwait, Saudi Arabia) and Venezuela. It's mission was upfront: "To control international petroleum markets."

The group operates openly and in public. The members have formal meetings, and agree to fix production levels that will maintain the highest price for their product, being careful not to squeeze too hard and thereby precipitate an international recession.

Since its founding, OPEC has increased its membership to thirteen, all the new members being from the mid-east or Africa. OPEC controls 80% of the world's petroleum reserves.

But 80% is not 100%, and a major world producer, Russia,  goes its own way, and disrupts OPEC's effort to limit production.

The United States is not a member. United States oil companies are not sovereign powers, and cannot conspire to control production in order to raise prices without risking jail for its executives. This is because of something called the Sherman Antitrust Act, which does not beat around the bush. It is very specific:

Every contract, combination ... or conspiracy in restraint of trade among the several states or with foreign nations, is declared to be illegal.

Violators are subject to ten years in prison and a fine of one million dollars. For corporations, the fine is one hundred million dollars.

The courts have put a gloss on the statute by ruling that only "unreasonable" restraints of trade are illegal. I skip here a semester's worth of legal mumbo jumbo regarding how the courts apply what they call the "rule of reason," to decide what is an unreasonable restraint.

Bottom line: Agreements among competitors to fix prices, or to establish restraints on production to yield higher prices, are per se illegal. In other words, agree with your competitors to fix prices or production levels and you can save a lot of lawyers' fees:  Do not pass GO; go directly to jail.

But you say, wait a minute:  Didn't I hear the PRESIDENT OF THE UNITED STATES, during his nightly Covid campaign outing, say he was proud to have been the instigator and middle-man in arranging something he called OPEC PLUS? Yes I did.

What Trump was so proud of was that he persuaded Russia to join the OPEC price-fixing cartel in order to raise oil prices that have declined because of worldwide covid lockdowns. Let me repeat that: The purpose of the Trump intervention he boasted about, was to aid in creating an international agreement to more effectively reduce oil production, so that the worldwide market price of oil would be increased.

Trump told his audience that OPEC PLUS would 1) enhance the profitability of U.S. oil companies, and 2) save jobs on the U.S. oil patch. Actually, I misquote him: he didn't mention number "1".

So, the President proudly announced he aided and abetted a conspiracy to reduce international oil production with the goal of fixing higher oil prices for U.S. consumers. Did he violate the Sherman Act? Is he immune from the Sherman Act because he is president and, as he has argued in the federal courts, can do no wrong as long as he holds that office? Is there some other legal defense to this conduct -- conduct that is designed to harm U.S. consumers?

And even if there is a legal loophole that permits Trump to escape indictment for violation of the Sherman Act, is it good policy to force U.S. consumers to enrich U.S. oil companies in order to encourage them to keep their work force, while not requiring that the oil companies actually use the added cartel revenue to maintain jobs?

And finally, when testing out the legality, morality, and economic advisability of Trump using the power of his office to enhance oil company profits at the expense of its customers, is it reasonable to consider that

i) Oil companies are acknowledged to be substantial contributors to Trump's election campaigns, and

ii) Trump has been a substantial contributor, via regulation and policy, to oil company profitability, and

iii)  Increased oil company profits will doubtless shore up oil company stock prices, a treasured goal of this president who sees a high stock market as good news for his re-election campaign?

Oh yeah, did you pick up the reporters' sharp questioning of the President on this issue in his nightly press briefings?

Me neither.

A bientot.

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