International Cartels

November 8, 1974

Report Outline
Threat From Revival of Trade Cartels
Impact of Cartels on World Stability
Search for Ways to Ensure Competition
Special Focus

Threat From Revival of Trade Cartels

Fear of Oil Exporters Causing Economic Chaos

International Cartels, which were dissolved at American insistence at the end of World War II, have staged a comeback. The extent of their revival is most evident in oil, where a group of major producing countries have banded together and raised the price of petroleum exports fourfold in the past year. The success of the oil cartel has encouraged other nations that possess basic raw materials to set up similar cartel arrangements for their products. The purpose of the old pre-war cartels and the new ones remains the same: to reduce or eliminate competition among producers of the same product, thereby raising the price that it will bring.

The higher oil prices brought about by the 13-member Organization of Petroleum Exporting Countries (OPEC) has led to huge balance-of-payment deficits in consuming nations, an overabundance of wealth for cartel members, a lessening of free trade, and growing fears of worldwide economic collapse. In a series of recent speeches, President Ford and Secretary of State Henry A. Kissinger warned Opec that all countries faced dire consequences unless the price of oil was lowered.

In a speech to the United Nations General Assembly on Sept. 23, Kissinger said: “The world cannot sustain even the present level of [oil] prices, much less continuing increases. The price of other commodities will inevitably rise in a never-ending inflationary spiral. Nobody will benefit from such a race. The oil producers will be forced to spend more for their own imports. Many nations will not be able to withstand the pace and the poorer could be overwhelmed. The complex, fragile structure of global economic growth stands in danger of being shattered.” In an address to the World Energy Conference in Detroit the same day, Ford warned that “exorbitant” oil prices “can only distort the world economy, run the risk of worldwide depression and threaten the breakdown of world order and safety.”

ISSUE TRACKER for Related Reports
BROWSE RELATED TOPICS:
International Energy Trade and Cooperation
Oil and Natural Gas
Regional Political Affairs: Middle East and South Asia