Mad Max, OPEC, Lawyers, and Politicians

Anyone who remembers the cult sci-fi film series Mad Max will be thankful that American culture offers nonviolent avenues for the resolution of grievances. Unfortunately, though, the American love affair with lawsuits has made its way to Capitol Hill, and unintended consequences could make another disturbing aspect of Mad Max’s world a reality.

In a bizarre response to the glaring unpopularity of high gasoline prices, and with a rare degree of bipartisan support, the U.S. House of Representatives passed a bill this week authorizing the Justice Department to sue member nations of OPEC over alleged price manipulation. Although this might be a purely symbolic measure, as the legal basis for any such lawsuits is highly questionable, it remains a provocative move that is likely to be met with some consternation among OPEC member nations.

Perhaps we might try addressing a few issues at home before placing the blame for high prices squarely on the shoulders of OPEC. Oil prices have risen at least partially because of the decline in value of the U.S. dollar. If we really want to reduce oil prices, perhaps it would be a more effective strategy to stop devaluing the currency with excessive spending and overly ambitious market-crisis interventions.

Second, the windfall profits enjoyed by major U.S. oil companies like ExxonMobil (NYSE: XOM  ) , Chevron (NYSE: CVX  ) , and ConocoPhillips (NYSE: COP  ) in recent years stands in glaring contrast to the notion that OPEC nations have been the sole beneficiaries of high prices. Exxon’s net profit for 2007 of roughly $41 billion is in the same ballpark as the entire 2007 GDP of Ecuador, one of the OPEC member nations.

As I see it, this indelicate example of cowboy diplomacy creates the possibility of translating the other memorable scene from the cheesy '80s flicks into reality. Do you remember Master Blaster? Like OPEC, he controlled the spigot, and when provoked, he would tighten the valve. Furthermore, OPEC has indicated an interest in denominating oil in euros, which could deal a very severe blow to an already embattled U.S. dollar.

The stated objective of this legislation is to rein in petroleum prices, but I believe it is far more likely to have the opposite effect -- injecting further uncertainty into forecasts for the price of crude.

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Fool contributor Christopher Barker captains yachts and writes about stocks. He can also be found acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns no shares in the companies mentioned. The Motley Fool has a disclosure policy.


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  • Report this Comment On May 24, 2008, at 10:48 PM, IBleedConcrete wrote:

    "The legal basis for any such lawsuits is highly questionable."

    So it's your uninformed legal opinion vs the majority of Congress.. Go read Title 15 and the relevant cases. Also read the Foreign Sovereign Immunities Act which states: "A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case ... in which the action is based upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States."

  • Report this Comment On May 29, 2008, at 4:52 PM, Blindnomore wrote:

    Concretebleeder, Congress has also passed laws dealing with the bringing of frivolous lawsuits. Congress wanting to sue the oil companies is the definition of frivolous in this case. What Congress should do is prosecute the Fed for counterfeiting our dollars and devaluing them to the point of almost worthless, and themselves for not adhering to the laws requiring a balanced budget. Those making the laws should be made entirely accountable for the laws they pass. Since they are not except through vote(and voting majority being disregarded in so many instances today), they do and act however they please and will continue to do so until they are dealt with in a way that will stop the shenanigans. Until then, vote them all out. Write-in Ron Paul to elect for president for the US dollar and sovereignty to survive. Don't listen to what you have heard about the man on the TV, go to his website and see for yourself what he stands for. I dare you to think for yourself and not just listen to the TV. Go read about the man yourself. I'll make it easy for you: www.ronpaul2008.com

  • Report this Comment On June 27, 2008, at 6:12 AM, C17goody wrote:

    OPEC is like the mean nasty, one eyed bull dog down th street. He knows he has the stuff and can give you a wirl if he only wants to. So although you despise this dog because it just took and chewd up your wallet with all the cash in side Its best to not tick off the dog becasue he then come after you. Reguarding OPEC, we are allready starting to see the consiquences with this stupid lawsuit. Libyia just proposed to cut production and other states are considerin the same. Not to mention if this case wins before the WTO then all that means is that the US GOV is leagaly able to add a tax on their product. In other words you gas that you buy at the pump will only cost considerably more.

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