Where neither Diamonds nor Cartels are Forever

I'm a little skeptical that oil prices are high because of cartels. I get the sense that because of chronic underinvestment (or for some who do not include myself who suspect peak oil), the despots of the world being the greedy buggers that most of them are, are being limited in trying to game the system and "cheat" in every way possible but with still little impact to global oil prices.

Without a doubt in my mind though the prices as they are now and for as long as they have been around, are more than sufficient to result in longer term alternatives that will result in substantial demand destruction in oil. But oil being a somewhat inelastic commodity, might only need a small amount of demand deterioration to result in significant price drops.

There's an interesting comparision in the Tierney Lab (NYTimes) comparing the oil cartel with the Debeers Diamond Cartel that appears to finally be unravelling. None too soon I think. Notes Tierney on oil:

In the first half of the twentieth century, the precursors to today’s prophets of energy doom worried that economic growth would be crippled by the pending exhaustion of copper reserves — and how could any modern economy survive without copper telephone wires? Sure enough, there were attempts to form copper cartels, but so many substitutes for copper were discovered (like fiber-optic cables for communication) that the cartels couldn’t control prices. Same thing happened to the tin cartel.

So how long do you give OPEC?