Sign Up

American David Versus Mideast Goliath

Can a simple gas station owner bring down mighty oil cartell OPEC?

March 21, 2002

Can a simple gas station owner bring down mighty oil cartell OPEC?

A strange little lawsuit is unfolding in federal district court in Birmingham, Alabama. A local gas station owner there named Carl Prewitt has sued the mighty Organization of Oil-Exporting Countries (OPEC), which is based in Vienna, Austria.

In his suit, which was filed in April 2000, Mr. Prewitt alleged that OPEC violates U.S. antitrust law by manipulating the production — and, thus, the price — of crude oil on the world market.

Mr. Prewitt’s lawsuit insists that his legal challenge was mounted on behalf of virtually all purchasers of oil products in the United States. In short, the odds are that any American in The Globalist’s worldwide audience who are reading this article are potential plaintiffs in Prewitt Enterprises vs. OPEC. Congratulations!

The plaintiffs in Prewitt’s action against OPEC can already claim a victory of sorts. In April 2001, U.S. District Judge Charles R. Weiner found that OPEC’s cartel did indeed violate U.S. antitrust laws.

The judge then ordered a one-year injunction against OPEC — prohibiting the organization’s members from jointly agreeing to raise or lower production.

While Mr. Prewitt’s lawsuit did not grab OPEC’s attention at first, Judge Weiner’s ruling certainly did. The cartel quickly found a different judge to toss out the injunction and start over. The case is now being heard all over again in U.S. federal court — with OPEC’s close attention.

Legally speaking, Carl Prewitt’s case is a long shot. A new judge is currently considering OPEC’s motion to dismiss the case, with a ruling expected soon.

The new ruling will likely revolve around technical issues. For instance, as a club of sovereign nations, is OPEC entitled to sovereign immunity? That concept is based in the right of sovereign governments not to be sued in their capacity as states for their sovereign activities.

OPEC argues — and past U.S. courts have held — that the regulation of oil is something that sovereigns are empowered to do. As such, regulation does not constitute the “commercial activities” that would subject it to a suit.

Even if, against the betting, the court were to find that OPEC was not immune from suit, the court would likely invoke the “act of state” doctrine. Put simply, that means that it would abstain from ruling on the merits of the case — and thus prevent a nuisance like Mr. Prewitt from upsetting the diplomatic applecart of smooth relations between the United States and OPEC.

OPEC has won on these issues in several prior lawsuits where similar allegations of production and price-fixing have been made. Unlike the first ruling, many legal scholars consider it unlikely that the court in Birmingham will upset the precedent in this area.

Yet, just the fact that a lone gasoline station owner can force OPEC into court sends a number of messages. On a symbolic level, it confirms once again the important role of the individual in American culture.

But the lawsuit — ostensibly filed on behalf of the U.S. consumer — sends an interesting message about American trade unilateralism as well. When it comes to fuel, it seems, some Americans are willing to wage battle through the courts to control prices — and keep them as low as they can go.