Speeches by Fed policymakers may move the markets this week

Section:

12:54a ET Sunday, April 4, 2004

Dear Friend of GATA and Gold:

As you'll see from the news story and press release
appended here, last week some U.S. senators renewed
efforts to subject OPEC, the international oil cartel,
to U.S. antitrust law, and thereby attempt to break
up the cartel and reduce oil prices.

Ordinarily advocates of free markets might endorse the
legislation's intent, apart from any impracticality in
its enforcement. The problem with attacks on OPEC like
this is that the oil cartel itself is a response to a
sort of antitrust offense -- the imposition of the U.S.
dollar as the world's reserve currency. When one big
buyer can just print as much money as he wants for his
purchases, sellers may try to offset that power by
combining to fix prices.

But the oil price increases being felt in the United
States involve more than this and more than is being
reported: the sharp devaluation of the dollar. Oil
prices aren't rising as much as the dollar is falling.
Indeed, as has been reported by James Turk, editor of
The Freemarket Gold & Money Report, proprietor of
GoldMoney.com, and consultant to GATA, for three years
OPEC seems to have been holding oil prices STEADY --
in EUROS, that is:

http://goldmoney.com/en/commentary/2004-02-18.html

In any case friends of gold and silver may hope for
enactment of the anti-OPEC legislation in the United
States if only because it probably could be enforced
only by freezing or confiscating assets of OPEC
countries and their citizens held in the United
States or kept on deposit with U.S.-based financial
institutions.

That is, the closer the anti-OPEC legislation gets
to enactment, the more foreign investment may flee
the United States, U.S. treasury bonds, and the
dollar generally. As the dollar falls, precious
metals may rise, and the money fleeing the United
States and the dollar will have to go somewhere
else. Those very same metals maybe?

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Senators Want OPEC Subjected
To U.S. Anti-Trust Laws

By Peter Kaplan
Reuters
Thursday, April 1, 2004

http://www.reuters.com/newsArticle.jhtml?
type=politicsNews&storyID=4729600

WASHINGTON -- Riled by soaring U.S. gasoline prices,
a key senator on Thursday resurrected the idea of making
the Organization of Petroleum Exporting Countries (OPEC)
subject to antitrust prosecution.

Senator Mike DeWine, an Ohio Republican and chairman
of the Senate antitrust subcommittee, reintroduced a
long-languishing bill that would allow authorities to
take legal action against the oil cartel.

"The unacceptably high price of imported crude oil is a
direct result of collusive agreements among the OPEC
nations to maintain the price of oil," DeWine said in a
speech on the Senate floor.

DeWine complained that average U.S. gasoline prices
have shot up to an average of $1.80 per gallon and
blasted OPEC's decision on Wednesday to cut the
group's oil production by 4 percent.

U.S. crude oil prices, which soared to around $38 a
barrel in mid-March, were trading at $35.50 per barrel
on Thursday.

OPEC rejected pleas from the Bush administration
for a delay in any output cut due to record-high U.S.
retail gasoline prices.

The cartel has dismissed the bill in the past as an
"absurdity" that violates the most basic legal
principles.

Under U.S. law, cartel activity is a criminal offense
punishable by jail time and heavy fines. A growing
number of other countries have adopted similar
antitrust laws in recent years.

However, federal courts have held that OPEC is
immune from prosecution under the antitrust laws
because its price-setting is "governmental" rather
than "commercial."

Officials have also warned that suing OPEC nations
-- which include crucial Mideast allies such as Saudi
Arabia and Kuwait -- also could strain U.S. diplomatic
relations.

The so-called "NOPEC" bill is also being sponsored by
Sen. Herbert Kohl of Wisconsin, the ranking Democrat
on the antitrust subcommittee. DeWine said the bill has
been introduced twice before, in 2000 and 2001.

The bill was approved by the Senate Judiciary Committee
in 2000 but never reached the floor for a vote.

"It's an idea whose time has finally come," DeWine said.

* * *

Statement by U.S. Sen. Mike DeWine
Republican of Ohio
Thursday, April 1, 2004

I along with my colleagues -- Senators Kohl, Grassley,
Feingold, Specter, Schumer, Leahy -- introduce the No Oil
Producing and Exporting Cartels Act of 2004 (NOPEC).
We do so to address the long-standing problem of foreign
governments acting in the commercial arena to fix,
allocate, and establish production and price levels of
petroleum products.

Every consumer in America knows that gasoline prices
have reached record highs over the last couple of weeks.
The national average has reached a new record high for
self-serve unleaded gas -- and that is $1.80 per gallon.
But, over the last week in my home state of Ohio, gas
prices have been even higher. In Marietta, gas was at
$1.84 per gallon, in Cleveland it was at $1.86, and in
Columbus, it topped out at $1.88 at some stations!

Many analysts predict that prices could get as high as
$2 per gallon or higher by the summer. This is of
particular interest to me because Ohio and other
Midwestern states always seem to be hit especially
hard by gas price spikes. These spikes are acutely
painful to persons who commute long distances and
to those who live on fixed incomes, like the elderly.

What is the cause of these high gas prices?

Well, as we might expect, there are a number of
factors at play, but there is surprising agreement
among industry experts about the primary cause of
high gas prices -- and that is the increase in imported
crude oil prices. We also all know that the biggest
factor in setting crude oil prices is OPEC. The
unacceptably high price of imported crude oil is a
direct result of collusive agreements among the
OPEC nations to maintain the price of oil.

Despite the fact that gasoline prices are going through
the roof, OPEC members met yesterday in Vienna,
Austria, and decided to cut the output of oil even
further. We've been through this process more than enough
to know what that means for the American consumer.

When demand is high and supplies are cut, that means
higher prices. And, that is exactly what OPEC did -- it
ripped off American consumers by raising gas prices
even more. This is an outrage.

In fact, OPEC is probably the most notorious example
of an illegal cartel in the world today -- even at a
time when it is widely understood that such conduct is
counterproductive and ill-suited for a global economy.
Supreme Court Justice Scalia, in a recent case,
described collusion among competitors as "the supreme
evil of antitrust." Nation after nation has adopted
antitrust enforcement principles that recognize the
illegality of price fixing and output restrictions
among competitors.

In 1998, the Organization for Economic Cooperation and
Development, then composed of 29 member nations,
issued a formal recommendation denouncing price fixing.
OPEC's continued actions, in ongoing defiance of
American and international antitrust principles, should
not be tolerated.

Until now, however, OPEC has effectively received special
treatment under U.S. antitrust laws -- despite the fact
that oil is a commodity that touches the lives of nearly
every American consumer. It is time that we take steps to
assure that oil is subject to the principles of the free
market. The bill that we are introducing today would do
just that and help in the fight to lower gas prices.

Senator Kohl and I have introduced this bill twice before
-- in 2000 and 2001. It is an idea whose time has come.
The purpose of our NOPEC bill is simple -- it would treat
OPEC like any other cartel. If OPEC were a group of
private companies colluding on prices, the executives
could be prosecuted and sent to jail, and the firms
would pay millions of dollars in fines or maybe even
billions in fines. Unfortunately, however, for years
enforcement has been constrained by two related
court opinions.

In 1979, a federal district court found that OPEC's
price-setting decisions were "governmental" acts and
accordingly that they were given sovereignty status
and protected by the Foreign Sovereign Immunities
Act. Subsequently, in 1981, a Federal Court of Appeals
declined to consider the appeal of that antitrust case
based on the so-called "act of state" doctrine.

NOPEC would effectively reverse these decisions by
making it clear that OPEC's activities are not protected
by sovereign immunity and that the Federal courts
should not decline to hear such a case based on the
"act of state" doctrine. As a result, under NOPEC, the
Department of Justice, and the Federal Trade Commission
could bring a legal antitrust enforcement action against
foreign states engaging in the restraint of trade regarding
oil and other petroleum products.

Simply put, NOPEC assures that our U.S. antitrust
agencies have jurisdiction and authority to bring such
cases.

We don't intend to give up the fight for lower gasoline
prices. Today I want the members of OPEC to hear a
message loud and clear -- we won't quit fighting for
American consumers! When OPEC wants to do business
with America, it must abide by our antitrust laws.

----------------------------------------------------

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