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April 1981

A Bushel of Wheat for a Barrel of Oil: Can We Offset OPEC's Gain With a Grain Cartel

by Clifton B. Luttrell

Organization of Petroleum Exporting Countries (OPEC) actions in raising oil prices and restricting production have given rise to numerous proposals designed to offset the higher petroleum costs. One widely discussed proposal has been for the United States to organize a grain cartel that would significantly raise grain prices to the OPEC nations. Many suggest that the terms of trade between the two cartels should be a bushel of wheat for a barrel of oil, i.e., about the same terms that prevailed in early 1973 when wheat sold for about $2 per bushel and imported oil sold for about $2 per barrel. This article assesses the potential success of such a grain cartel. It describes the attributes of a cartel and shows why a grain cartel could not succeed. It argues that OPEC’s success in influencing petroleum prices results from certain economic conditions in the market for oil that do not exist in the market for grain.