Can We Have an International Standard when there is an OPEC Cartel?

Abstract

As long as oil is one of the more important internationally traded commodities, the existence of the economic power of the OPEC Cartel threatens any proposal for the operation of a stable, efficient international monetary system. OPEC’s major goal and pre-occupation is to continually redistribute the world’s income and wealth from oil consuming nations to oil producing nations via market pricing policies. As long as the OPEC Cartel members believe it is possible to improve the distribution of world income and wealth in favour of the Cartel, then they will continually attempt to force adverse changes in the oil terms of trade of the consuming nations. To the extent that the Cartel is successful in altering the oil terms of trade in its favour, the purchasing power of any specific money under study must change in terms of the international standard, unless the degree of monopoly and/or the efficiency wage involved in the production of the other goods in an international standard market basket fortuitously decline in terms of a specific monetary unit by the exact same proportion as the increase in the price of OPEC oil (weighted by its importance in the standard). The continued existence of OPEC, therefore, makes it extremely unlikely, if not impossible, to avoid some minimum rate of inflation in terms of any major oil consuming nation’s money.