Monday, January 15, 2007
De Beers is able to create an artificial scarcity of diamonds
through its wholly-owned Central Selling Organization (CSO), thus
keeping all prices high.
A cartel is a group of formally independent producers whose goal
is to increase their collective profits by means of price fixing,
limiting supply, or other restrictive practices.
The US oil and gasoline markets work the same way seeking to
restrict the flow of IRAQI oil for example.
Now hold on a minute: Why is our government in a “difficult”
position if Iraq is a “swing producer” of oil?
The answer was that Saddam was jerking the oil market up and
down. One week, without notice, the man in the moustache suddenly
announces he’s going to “support the Palestinian intifada”
and cuts off all oil shipments. The result: Worldwide oil prices
jump up. The next week, Saddam forgets about the Palestinians
and pumps to the maximum allowed under the Oil-for-Food Program.
The result: Oil prices suddenly dive-bomb. Up, down, up, down.
Saddam was out of control.
“Control is what it’s all about,” one oilman
told me. “It’s not about getting the oil, it’s
about controlling oil’s price.”