Weber & Semieniuk: An Oil Buyers' Club for the NIEO

The US blockade of maritime traffic through the Strait of Hormuz—compounding Iran's own restrictions on passage—has triggered a global energy crisis of the first order. If Iran's seaborne exports are interdicted on top of those of Gulf states, nearly 25% of the pre-war volume of globally traded crude oil will be absent from world markets. The effects are already being felt: countries across Asia and Africa face worsening energy shortages, and with them the threat of cascading disruptions to food systems, transport, and industrial production.

In a crisis of this magnitude, allowing market prices to ration scarce supply would lead to perilous economic outcomes. High-income countries will outbid low-income ones. The wealthy will maintain their energy use; the poor will be priced out. This prediction does not stem from speculation. Rather, it is precisely what happened with critical medical supplies during the Covid-19 pandemic, and with energy markets in 2022. Volatile prices driven by speculation and geopolitical anxiety are the raw expression of animal spirits, and they punish the vulnerable.

But this crisis also creates an opportunity. The fracturing of the old international economic order has opened space for the Global South to act collectively and constructively. The proposal set out here is an Oil Buyers' Club: a multilateral coordination mechanism to cap oil prices, allocate scarce supply equitably, and prevent the most devastating economic fallout from the current energy shock. It is, at the same time, a contribution to the broader project of a New International Economic Order: a concrete institution through which Southern governments can exercise collective power in global commodity markets.

What the Market Will Do — and Why That Is Unacceptable

Under market allocation, the shortfall of roughly 12% of produced crude oil (and nearly a quarter or usually traded crude) will fall overwhelmingly on those least able to pay. Several dynamics compound the basic supply shock.

Refineries cannot operate below approximately 60% capacity utilization. If import-dependent refiners sustain losses above that threshold—and their on-site reserves run out—the supply of refined products will collapse to zero, halting transport and petrochemical production. The consequences cascade rapidly: an economy that lacks fuel cannot harvest, process, or deliver food—or any other goods for that matter. Several developing countries currently hold less than a month of refined product reserves.

Not all countries have refineries. As major exporters impose restrictions on refined product exports—Russia suspended gasoline exports in April, for example—import-dependent economies face a cliff. The human consequences of market-driven allocation under these conditions are a matter of life and death, and they will fall hardest on those who bear least responsibility for the crisis.

The Proposal: An Oil Buyers' Club

Instead of allowing market panic to dictate distribution and pricing, the world needs multilateral coordination: a price ceiling on global oil markets, combined with a fair allocation mechanism that protects the most vulnerable countries. The institutional vehicle for this is an Oil Buyers' Club: a coalition of net oil-importing nations that collectively exercises its market power to set and defend a capped price.

The arithmetic is straightforward. In 2023, net importers purchased slightly more than 80% of globally traded crude oil. Together, they constitute a monopsony—the demand-side equivalent of a monopoly. A sufficiently inclusive buyers' club can effectively set the price at which oil trades. The EU+UK alone accounts for 23% of global crude imports and has demonstrated its capacity for emergency market intervention—as with the European gas price cap of 2022. China, the world's largest single oil importer at 23% of global imports, would make the mechanism near-comprehensive. But even without China, a coalition including the EU, major Asian importers, and the countries of the Global South would command substantial market power.

The club's price cap should be set at a level that remains attractive to exporters—say, $100 per barrel—well above production costs for most exporters, but far below the crisis prices already being paid (Sri Lanka recently paid $286 per barrel; European buyers paid $150 for North Sea crude). Allocation among members would follow a simple principle: low-income countries maintain pre-war import levels; the remaining pool of imports is allocated to countries in proportion to their prewar imports, i.e. at the current product shortfalls all members would reduce imports by nearly 25%). No country suffers disproportionately; similarly, no country captures windfall advantage; and all members benefit from elevated but predictable prices.

Refiners within the club would be prohibited from windfall profiteering, required to sell refined products—diesel, liquefied petroleum gas, and others—at margins prevailing before the crisis as long as they sell to other club members. Club members would commit to maintaining pre-war levels of refined product exports to one another. The buyers' club could also be extended to cover refined oil products imported from non-member producers, subject to product-by-product analysis.

Extending the Club: Why Exporters Should Join

The buyers' club is not only for importers. Several categories of exporting countries have compelling reasons to participate.

Many net exporters of crude oil are simultaneously net importers of refined products. Angola and Ecuador, for example, export crude but depend on imported refined fuel. If they are already subject to the price cap through their imports, they lose little by joining formally — and gain supply security and price predictability for refined products. Countries already exporting to club members at the capped price could be offered preferential access to refined product allocations in return for maintaining export quotas to the club.

More broadly, exporters face domestic price pressures even when they are net exporters. The United States is currently experiencing high gasoline and diesel prices despite being a net exporter, because its domestic prices are linked to global markets. Anchoring to the club price provides domestic price stability.

The club should also introduce a price floor—say, $65 per barrel—giving exporters that join greater revenue predictability and planning security. This floor could be embedded in long-term supply contracts, providing exporters with the stable revenue base that is essential for managing the energy transition on their own terms.

The Oil Buyers' Club as NIEO Institution

The immediate crisis demands an emergency response. But the Oil Buyers' Club is more than that. It is also a template for the kind of institution-building that a New International Economic Order requires.

The Program of Action on the Construction of a New International Economic Order — developed over two years of deliberation by the Havana Group and launched at the 50th anniversary of the original NIEO — identifies Resource Sellers' Clubs as a key instrument of Southern power: organizations for economic coordination between natural resource exporters that could stabilize prices, improve bargaining power, and redirect the gains of resource wealth toward human development. The Oil Buyers' Club is the complement: a Resource Buyers' Club that exercises collective monopsony power in the interest of equitable distribution rather than market hierarchy.

More fundamentally, the buyers' club embodies one of the NIEO's animating principles: that of multilateral international assistance that can overcome the destructive divide between north and south and create a win-win case. Thanks to the collective organization or importers from north and south, it replaces the law of the jungle with a principle of solidarity: that the costs of a crisis manufactured by geopolitical conflict and fossil fuel dependency should be shared according to capacity, not ability to outbid.

The buyers' club also advances the NIEO objective of Commodity Buffer Stocks: a multilateral system for stabilizing essential commodity prices, protecting producers and consumers alike from the volatility that devastates Southern economies. The coordination required for the price floor-and-ceiling mechanism of the buyers' club could prepare the ground for precisely such a multilateral buffer stock.

The fiscal savings generated by the buyers' club—relative to crisis market prices—should be reinvested in the swift expansion of low-cost, low-carbon alternatives. Renewable energy deployment and electrification should be accelerated. Public transportation should be made free or sharply subsidized. Domestic energy-saving schemes, democratically designed to guarantee basic needs and industrial viability, should be implemented. The crisis is a compressed version of the broader transition challenge: the buyers' club is a mechanism for spreading the cost of scarcity equitably while building the institutional basis for a different energy future.

A Call to Act Collectively

A similar scheme for allocating raw materials was implemented for allied countries during the First World War. The idea therefore has precedent. The EU should take the lead among high-income countries. But it is the countries of the Global South—whose peoples are most exposed to the consequences of market allocation, and whose collective import volume is decisive—that have the greatest stake in the buyers' club's success, and therefore all the reasons to pursue it.

Colombia and the broader coalition gathering in Bogotá for the Economy for Life conference are precisely positioned to issue this call. The buyers' club is a concrete proposal that can be negotiated and constructed as an emergency response that leads the way for a new economic multilateralism.

Isabella M. Weber is Associate Professor of Economics at the University of Massachusetts Amherst.

Gregor Semieniuk is Associate Professor of Economics and Public Policy at the University of Massachusetts Amherst.

This paper draws on their column 'The World Needs an Oil Buyers' Club' first published in Project Syndicate.